Thursday, November 20, 2008

Interesting: Health Insurance deabate

Insurance companies seem to have figured out that Americans are sick of going bankrupt over medical bills, and that they want a change. They know Obama is serious about getting it done. And with 58 Dems in the Senate and Tom Daschle running Health and Human Services, they see that Congress might actually get it passed. So they are floating a compromise.

This passage, from Ezra Klein, starts it off:

Health insurance is fundamentally a collision of information. We know whether or not we're sick. The insurers do not. If the game stopped there, the economically rational act would be to wait until we were sick to purchase health care coverage. But then the insurance pool would be solely composed of the ill (and, arguably, the stupid), and it would [be] inaffordable for everyone, and unprofitable for the insurers, and that would be the end of that.

But insurers are perfectly aware of this. So they run the opposite play: They gather data on whether or not we're sick, or likely to get sick, and then use that to refuse to sell us care. The individual health insurance market, fundamentally, is incoherent: Insurers try to deny coverage to those who want it and to sell to those who don't. That's because the most profitable customer for an insurer is one that never gets sick, and the least profitable is one who falls very ill. But that's not how you want your health insurance market to work. We want sick people to get care. That's the point.

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