Monday, January 07, 2013

Best Defense from Adverse Selection.... fair rates.

The brilliant minds at NAIC are concerned about adverse selection, as they should be.

"State insurance regulators remain concerned about “rate shock” from the younger and healthier portion of the population leaving the health insurance marketplace and skewering it by taking the penalties in the first years when they are low."

 It won't be just the first years, at that rate of subsidy they are expecting the young to contribute they would need to triple the current tax for it to make sense for a young, healthy person to buy coverage. Before we toss young healthy males in with the 1% and blame them for everything that is wrong, though, let's look at their situation.
  • Just out of High School or college and making entry level wages
  • Auto Insurance is not community rated or age subsidized costing them many times what older drivers pay.
  • Medicare and SS taxes already increased and sure to increase far more for the acturially excessive benefits seniors have already been promised.

A very specific segment of the population is going to bear the brunt of healthcare reform, and that is young males. If politicians really felt it was in the public interest to subsidize the premiums of sick and older individuals then the public as a whole should do so. Allow insurers to charge rates actuarially derived for the risk they are taking and subsidize them on the back end.

Instead of driving people out of the system and encouraging fraud, you would attract far more, eliminating most of the problems before they happen. We need to remember insurance is already guaranteed renewable 99% of the time, the key is to get people insured before they get sick, healthcare reform so far does the exact opposite.
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