Friday, October 31, 2008

From the Mailbag: Liz E Weighs In

Got an email today from a gentleman at American Progress, touting Elizabeth Edwards' most recent "insight" into health insurance. According to the email, Liz thinks it's a scandal that women often pay more than men for health insurance. Of course, there's a very good reason for this: biologically, there's at least one kind of major claim that many women will make that no man ever will.
And senior citizens generally have more health issues than 20-somethings, which is one of the primary reasons why Medicare is going broke.
But of course, when the playing field is leveled, that won't be a problem:
"I have often argued that buying health insurance is not the same as purchasing a refrigerator or a microwave. Health insurance is not another consumer good for which everyone pays the same price. Sick people are more expensive to insure than healthy people, the old accrue more cost than the young. For this reason, Senator John McCain’s belief in the dysfunctional and discriminatory individual market is fundamentally at odds with the point of health insurance, which requires that we share risks and pool costs."
As I replied to our correspondent, this dramatically illustrates the problem with the idea that health insurance should be community rated; i.e everyone should pay the same premium. Risk is all about probability, and insurance is about asessing and pricing for those probabilities. It is most assuredly not about "sharing" risks, which would imply that we all pay the same.
As Bob has pointed out, this way of thinking leads to the conclusion that folks with poor credit should pay the same interest rate as those with good credit (credit worthiness is, after all, simply another expression of risk).
Come to think of it, that's exactly what the Democratic congress just did.
Fancy that.
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