Discrimination in Health Insurance Premiums Necessary?

27 Jun

John Stossel has a good recent essay called “In Praise of Discrimination”, in which he makes the case for discriminating between insurance rates for low-risk vs high-risk policy holders.  Thought provoking.  The entire essay can be found at

 http://www.rasmussenreports.com/public_content/political_commentary/commentary_by_john_stossel/in_praise_of_discrimination

 Here is a piece of that essay:  [Bolding is mine]

 Even Bill O’Reilly lectures me that government should ban discrimination against those with pre-existing conditions. Most Americans agree with him. Who likes discrimination? Racial discrimination was one of the ugliest parts of American history. None of us wants to be discriminated against. But discrimination is part of freedom. We discriminate when we choose our friends or our spouse, or when we choose what we do with our time.

Above all, discrimination is what makes insurance work. An insurance regime where everyone pays the same amount is called “community rating.” That sounds fair. No more cruel discrimination against the obese or people with cancer. But community rating is as destructive as ordering flood insurance companies to charge me nothing extra to insure my very vulnerable beach house, or ordering car insurance companies to charge Lindsay Lohan no more than they charge you. Such one-size-fits-all rules take away insurance companies’ best tool: risk-based pricing. Risk-based pricing encourages us to take better care of ourselves.

Car insurance works because companies reward good drivers and charge the Lindsay Lohans more. If the state forces insurance companies to stop discriminating, that kills the business model.

No-discrimination insurance isn’t insurance. It’s welfare. If the politicians’ plan was to create another government welfare program, they ought to own up to that instead of hiding the cost.

Obama — and the Clintons before him — expressed outrage that insurance companies charged people different rates based on their risk profiles. They want everyone covered for the same “fair” price.

The health insurance industry was happy to play along. They even offered to give up on gender differences. Women go to the doctor more often than men and spend more on medicines. Their lifetime medical costs are much higher, and so it makes all the sense in the world to charge women higher premiums. But Sen. John Kerry pandered, saying, “The disparity between women and men in the individual insurance market is just plain wrong, and it has to change!” The industry caved.

[End of Excerpt]

I have wondered since day one who was going to pay for the decree that insurance companies can’t base insurability on pre-existing conditions.  Stossel assumes, or knows, that this means insurance companies can’t charge more for the higher risk inherent in taking on a pre-existent condition.  God help us, if this is true – in that case, Stossel is right – all we will have is a taxpayer supported welfare system, only this time the taxes will go directly to the insurance companies.

You have feelings about this?

 

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