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February 05, 2008

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I dunno, should drivers with increased risk factors for wrecks have to pay more for car insurance?

Should people with increased risk factors for death (i.e. age) have to pay more for life insurance?

Should a house in California have a higher earthquake insurance premium than a house in, say, Georgia?

This is the same question to me -- should people with increased risk factors for expensive health care have to pay a higher health care insurance premium? Group health insurance is not intrinsically more logical than group car insurance or group home insurance or group life insurance, it just happens to be the way our system has traditionally worked. It is simply logical and efficient to allow insurance companies to charge insurance premiums that are related to the risk of paying out on an insurance contract.

Jake, funny you say that, because in those cases, those people do pay more. Of course, you can't simply narrow it down to people with unhealthy habits. There are a number of people with conditions that weren't brought about by bad habits. I have a dear friend with severe Krohn's and my husband had a kidney disease that required a kidney transplant. They aren't healthy by medical standards, but they couldn't help their conditions. So, should people in those situations be thrown into the same lot as those who, by choice, are unhealthy? I don't think so.

The insurance industry is all about the bottom line. Period. A dollar bill can't tell the difference between a person who brought on their problem intentionally and those who were just unlucky.

Taking the comparison to auto insurance a bit further, I just turned 27 and spent the last 8 or 9 years paying higher car insurance rates, solely because of my age and my gender. It's not my fault I'm a guy, and it's not my fault I'm male. How's that any different than someone with Crohn's disease?

Two differences are obvious, auto rates don't differ as much as health insurance rates would if they were truly based on risk. And it's an easier choice to not drive than it is to not use health care. Health insurance is vital in my opinion. But there ought to be at least some difference in premiums between those of low risk and those of high. There needs to be a balance of personal responsibility and group-subsidized rates.

Incidentally, this week I spent $600 on a treadmill, too bad my employer doesn't reward me for trying to save them money.

I think they should do this especially to people that smoke and/or are over weight. Maybe the premium cuts would help us healthier people better afford outrageously priced organic food and vitamins!

Expanding further on Jake's comments:

Should people who play sports pay more? They're certainly at more risk for injury than those that just jog on a treadmill. What about people who do their own auto repair? They're also at risk for injury. What about skydivers? They're inherently more risky. What about desk jobs vs. construction work? There's certainly varying levels of risk there.

Using your own words: "These are choices and if people make them, they should have to pay in my opinion."

This seems like a pretty slippery slope. Where do you draw the line?

There's a new contrary study out that says unhealthy people are more likely to die younger, and therefore cost LESS than healthy people.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/02/05/nhealth105.xml

I thought the whole point of group plans was to lower the cost for most people by spreading the risk across many participants. My company is small, so our health insurance plan underwrites every employee individually, but a big company like IBM just underwrites their employees as a whole. If your company is going to start individualizing your insurance based on your own habits, then maybe you'd be better off just getting individual insurance anyway? At least you could shop around then.

That said, if my company was going to penalize me for not exercising, then I'd also like them to do something like give me time off to exercise. There are many factors that play into a person exercising or not (such as long commutes, lack of good gyms in the area, lack of reasonably priced gyms in the area, etc.) Besides, how are they going to determine that I've "exercised." Do I have to clock in and out of the gym?

It's sort of funny, but if you go to a health insurance website like Blue Cross/Blue Shield and inquire about rates for private medical insurance, you pay more if you are a smoker. Yet, it's okay for me to pay more for someone else being a smoker because of the "law of averages."

Yes, group plans help spread the risk and provide a lower health insurance cost to some, but other of us who are healthy and rarely use their insurance get major penalties and pay more. As more of us switch to our own plans (I'm now on an HSA account) that leaves only higher risk and higher expense people on the group plans.

Personally, I detest that politicians are trying to get affordable health insurance for every American. I don't want affordable health insurance, I want affordable health care. I want to be able to visit my doctor and not have to deal with 10 different layers of beaurocracy that triples my cost. I'm all for catastrophic coverage and paying my own way for routine things.

Everyone has unhealthy habits! If you start limiting insurance based on unhealthy habits, where is this going to stop? Let's just keep insurance under a huge umbrella. Now you have supplemental insurance, cancer insurance, the list is huge!
Look at HomeOwners Insurance....Started out as a good idea, now you have to get accidental, fire, flood, natural disaster, mudslide, earthquake (I'm being sarcastic) but if we let the insurance companies start doing this, where's it going to stop?
Back to the topic, I run, control my eating and am healthy by MBI but I drink coffee (a lot of coffee).
When's the new study going to come out saying coffee has adverse effects on your body? Companies will start charging me for drinking coffee now?

You are on a very slippery slope with this one.

There are lots of activities that raise your risk of disease or injury.

What about the folks who drink?

Who drive too fast?

Who ride around on their motorcycle on their days off?

Who skateboard?

Who practice unsafe sexual activities?

Who mountain-climb/parachute/sky-dive/travel to exotic locales on vacation?

What about women who don't give birth?

And how will you monitor those who claim to engage in healthy activities? Will you be following them home or to the gym? If you rely on self-reporting, you'll just open the door to chronic fraud.


I don't disagree with the policy, but I also agree with Suze it is a very slippery slope. Certainly there should be different rules for inherited problems (like the Krohn's disease mentioned above) vs. smoking.

Maybe the employers are ultimately trying to ensure the employees' health so they are not missing work so much and are more effective while there? If so, maybe there is a different way to reward that rather than the negative of paying more for health insurance if you're deemed "unhealthy".

maybe the unhealthy should pay more like high risk drivers and I am sure health insur is going this way but my question is how does this help the fact that ~70% of health costs occur in the first and last year of a persons life? anyone?

I am with Curtis on this one, the whole concept of Health Insurance is flawed when it is designed to cover routine visits. You insure for things that you cannot pay for yourself, that could cripple you financially, hence catastrophic in nature. That's why you want to buy Term life and not Whole life insurance. If you include employer's cost of health insurance, you pay several thousands of dollars per employee even in group plans. I think we need to revert to the true reason for insurance and that would be to cover for catastrophic illness/losses and thereby by definition should not have any exclusions. If the insurance companies can eliminate all risk by excluding the risky class than what is the purpose of insurance anyway.

Also, I agree 100% that we need affordable health care and not affordable health insurance. In my opinion insuring for small losses is just bad financial reasoning and the emotional loss aversion human behaviour at play. I can't understand, when it comes to health insurance how we are willing to pay several hundred dollars (including employer cost) a month to insure for the certainty that someone else will pay for our routine doctor visit which costs a couple hundred bucks and the probablity that we might fall sick and have to spend another couple hundred. In my opinion that's just wasted money. I campaigned hard at my employer to introduce HSA option in our health offerings and when it became available, I have swithced to an HDHP with an HSA option as well. The biggest pushback I received was that no one will sign-up for this, I was pleasantly surprised to see that almost 30% of the employees chose this option.

I see this as a slippery slope.

The original idea of insurance is a sort of contract that acknowledges: "Hey, we're all going to get sick sometime, so I'll help you when you are down if you help me when I'm down".

If you live long enough, regardless of your lifestyle choices, you ARE going to get sick at some point and need to utilize health insurance.

Do we punish aggressive drivers by upping their insurance- because their risk of being in an accident is much higher than mine, I assure you. Where does it end? Do we punish the person who likes to eat a lot of fast food because obviously that person will be much less healthy than someone who eats only organic food (or so we assume). I could go on and on with so called "risk factors".

Sometimes bad things just happen and they are not anyone's fault really. Life IS risk and when we buy an insurance policy we are implicitly recognizing that, and we are making a contract with others to help them if they will help us when something bad inevitably happens.

If you're a company you could implement a plan like Scotts - simply refuse to hire smokers b/c of the higher health risks. And fire those who don't/can't quit.

This is a very slippery slope. My wife has arthritis, and has to get medicine every month, and it's very expensive, and basically needs it to walk. Because of this, I wouldn't mind paying more for her insurance b/c I know that she more than gets back our premiums when she gets her treatments. But where does it stop? If employers start customizing so much, we could be presented with the possibility that we will have to pay so much that we can no longer afford the insurance, and thus can't afford her treatments. We could also be faced w/the possibility that an employer would say "I'm sorry, but you'll cost us too much on our insurance, you don't get the job", leaving her or me unemployable?

Should someone in a high-stress job, who overeats to self-medicate, pay more?

Oh, and would you like some FairTax with that extra payment?

Also, the science connecting many so-called "unhealthy habits" to illness is actually pretty damn weak. I was shocked to realize, for instance, just how poorly the connection between being overweight (by BMI, already an incredibly crude measure that effectively penalizes you for developing muscles!) and any of the illnesses it is routinely blamed for is. Conversely, many habits that epidemiological studies initially suggested are healthy have not proven so in more targeted studies. But, of course, it's easy to play a round of "hate the fatties."

This is one of the cases where I think the public gets suckered. People may analyze this proposal out of some sense of fair play, whereas the insurance companies/employers will be damned eager to reduce their costs under this rubric as much as possible, and will do their best to make every excuse under the sun, whether at all documented, to jack up your rates. Suddenly we'll be hearing that nose-picking causes an unacceptable risk of brain cancer.

I'm with you Paul. Working parents with long commutes and long hours on the job, doesn't leave a whole lot of time for sleep let alone exercise. If employers gave incentives like on-site gyms and exercise equipment, then I could support the cause.

Let's keep giving insures/employeers excuses to hike up/deny insurability. Before we know we all (but a chosen perfect few), we'll either be priced out. Or getting a letter saying that they herd us cough, thus we have been denied insurance for life.

If it is fair to pick on those that are overweight or smoke - whether they are currently costing the company more money or not, then why not other people that make choices that increase their health care costs. Families that are trying to have children for example - one extremely premature baby can cost more than 10 fat slobs with heart attacks. So should families with women over a certain age or that are taking fertility drugs be charged more? People that run that far more likely to damage their knee joints than a couch potato- leading to surgery later in life. Should they be charged more? How about people with chronic conditions that don't do everything they can to manage their conditions, such as the diabetic that just can't say no to that piece of pie. Should we charge him more?

You really want to be fair? Take the amount of money that your care cost the insurance company the previous year, and base the premium on that.

I have to agree with JBM that this is a very slippery and tricky slope you are on. Also agree with the point of how to report people. Also just because someone smokes doesn't necessarily mean they will get Lung Cancer or related diseases, they are simply at a higher risk for it than other people. But what about those people who are naturally at a higher risk for certain diseases because of their genetics. Will we need to get a DNA test done before being approved for health insurance? If/When this happens no one will be able to get health insurance. At what point are companies simply providing not health insurance for dealing with problems and instead only providing for you to visit the doctor every once in awhile. Everyone acknowledges that the health insurance system needs to change, and no at this time I don't have an opinion for what needs to be done.

Nice paper out this week in PLoS on health care costs:

http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050029

Over a lifetime, smokers cost the least for health care. So maybe they should get a discount.

Personally, I'm fine with charging more to people who smoke, overeat and fail to exercise. These are choices and if people make them, they should have to pay in my opinion. On the other hand, if a person has an existing medical condition for which they are not responsible, I'm not sure how to resolve that.

This is where I agree but remain conflicted at the same time. I feel they should pay but I dont feel that someone with an existing condition should pay extra. Sure, smoking, overweight due to not exercising etc etc should all pay the price...but I get weary because this might be a slippery slope.

Employer-provided health insurance is a destructively-addictive racket to begin with. Any policy that pushes more people toward saying "HELL NO!" to employer-provided coverage and taking responsibility for their own healthcare is a good one, in my book.

Why are we still, to this day, depending as a nation on a crazy hack invented during WW2 to get around wartime tax and wage laws that are themselves no longer in force?

"Health insurance" isn't insurance at all...it's a prepayment scam where you lose your accumulated payments at the end of every year. Insurance is for hedging against the risks of unlikely-but-catastrophic cases. Insurance that meets this definition is relatively cheap. "Insurance" that covers the cost of things that for a substantial number of consumers are near-certainties is going to be overpriced to the consumer and horribly market-distorting.

Imagine how much car insurance would cost if it were required by law to cover gasoline and oil changes. But (unless you want to faint in terror) don't imagine how much gasoline and oil changes would cost if most people got them "free" from their insurance company. ("$90/gal for regular unleaded? Sure, no problem...I don't need to drive less or shop around for a discount, since my insurance pays for it!")

Want to know why health care is so bloody expensive in this country? If you're using an employer-provided plan to pay for it for your family, look in the mirror, bub.

Here's a plan, why don't we make people get a physical before they can get group health insurance (or alternatively charge them higher premiums until their physical proves they are healthy) and then base their rates on how healthy they are. That's like health insurance. Then, like auto insurance, at the next billing cycle after they end up in the hospital or with a chronic illness, we'll raise their rates through the roof. Also, like auto insurance, we'll monitor their credit card bills (like driver's license points) to see if they are spending too much of their money at McDonald's (high cholesterol foods, like speeding tickets), and thus their risk of making the insurance pay any of those premiums back is higher.

Obviously, applying the logic of life and auto insurance to health insurance doesn't work. It's just patently ridiculous.

No. I don't think it's fair.

It's true there is definate causality between smoking and lung cancer, and smoking is a voluntary act. So in that case I understand why there is a special tier in life insurance for smokers.

However, smoking in itself doesn't guarantee an individual will get cancer. Even more importantly, being overweight doesn't guarantee that other health issues will ensue. There is a certain degree of causality between overweight and certain health conditions, but like another reader pointed out the correlation there isn't nearly as strong as public perception makes it out to be. On the other hand, there are other studies out there that make the case that an overweight person may well remain just as healthy as a non-overweight person. It is not true in all cases, but it is also not true that in all cases a person is overweight simply because they overeat or don't exercise.

However, society thinks its cool to stigmatize overweight people, and so the lie is perpetuated that every fat person is a fast-food hog and a coach potato. Frankly, the mentality towards fat people in this country disgusts me. It is one of the last ways in which people feel they have free license to be deliberately cruel to an entire group of people.

I think a far better plan would be to have a real plan within the insurance coverage to cover the cost of preventative care, which could include encouragement of smoking cessation programs and coverage for doctor-supervised weight loss programs (NOT surgery).

This is a very thought provoking post, so much so that I blogged about it on my site. Dealing with soaring healthcare costs is imperative... but tricky. I'm concerned about punishing people for so-called "bad" behavior when what's "bad" often changes. Instead, I'd advocate for a healthier workplace overall.

So effectively giving people with high metabolisms a break in price? I know people who eat like a horse and don't exercise but are rail thin, and people who exercise and eat a healthier diet yet are overweight. How do you measure someone who "overeats and doesn't exercise"? By weight, or do you go into their personal lives and weigh all their foods and monitor their exercise?

>

Thank you for saying this, Matt!!!!!!!!!!!!!!!!!!

I've been saying this forever, but it usually falls on deaf ears. I'm glad I'm not the only one!

How would you classify me?

I'm 39.
I smoke.
I'm a vegetarian (lacto-ova; 16 years).
I drink 1-2 times per week (not to excess, but not a single beer either)
I exercise regularly (2-3 times a day, 15 minutes each).
I drink coffee (about 6-8 cups a day).
I never eat fast food and make it a point to eat a healthy, balanced diet.
I am moderately overweight (that middle-aged sort of overweight; I can still see my feet)
I come from a long-lived, usually-die-from-old-age-or-accident genetic pool.
I have never had a broken bone, major illness or disease. I still have my tonsils, appendix and all of my teeth. I have never been admitted to a hospital, and have only visited one 4 times in my life, all due to accident.

So - am I healthy or not for insurance principles?

Mixer --

That's a question for your health insurance company.

FMF - I know, I'm just responding to the "what's healthy and what's not" discussion. I do pay a higher premium for being a smoker, but get no discount for being a vegetarian or having a healthy diet (although I'd imagine I'm not penalized). The truth is, insurance companies calculate these risk figures based on actuarial tables and it's a lot easier and less costly to measure risk for a couple of bullet points then to try and get the "total wellness potential" of a client. And, I'd also imagine, if they can limit the number of "healthy" deductions while expand the "unhealthy" penalties they'd do it. They are a for-profit industry, after all.

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