When it comes to health insurance, what do you think of health pooling? There were arguments on both sides. Many young people are unwilling to even think about this option, because most young people don't think that they will be at a point in their life where they'll have to use health insurance.
A form of risk-pooling
Unstable? Yes. Insurance is fundamentally a form of risk-pooling. We all pay in, we all get the peace of mind of knowing we have insurance, and the person who gets cancer gets a lot of the benefit. Naturally, if there are only a few of us, our insurance payments will go up if somebody gets cancer. But if there are many of us, our insurance payments won’t go up much at all. Private, competitive insurance companies fragment risk pools. Each company competes for the most lucrative risk pool, which means the richest and healthiest people. The result is a natural state of instability in private insurance markets. Each company tries to avoid what Americans call the “death spiral” of high premiums and sick clients. Insurers solve this with some obvious tools. One is to just discourage sick or prospectively sick people such as smokers from joining. Another is “actuarial” rate-setting in which they try to match insurance premiums with likely expenditures. Actuarial rate setting is a good deal for healthy people who have an unexpected event, but a very bad deal for people in ill health, who might find insurance entirely unaffordable. If you have diabetes and your insurance premiums reflect the costs of insulin and perhaps other related procedures such as kidney failure, and the risks of related ailments such as heart disease, then it’s not an insurance policy. It’s a very expensive prepaid health plan.
Unstable? Yes. Insurance is fundamentally a form of risk-pooling. We all pay in, we all get the peace of mind of knowing we have insurance, and the person who gets cancer gets a lot of the benefit. Naturally, if there are only a few of us, our insurance payments will go up if somebody gets cancer. But if there are many of us, our insurance payments won’t go up much at all. Private, competitive insurance companies fragment risk pools. Each company competes for the most lucrative risk pool, which means the richest and healthiest people. The result is a natural state of instability in private insurance markets. Each company tries to avoid what Americans call the “death spiral” of high premiums and sick clients. Insurers solve this with some obvious tools. One is to just discourage sick or prospectively sick people such as smokers from joining. Another is “actuarial” rate-setting in which they try to match insurance premiums with likely expenditures. Actuarial rate setting is a good deal for healthy people who have an unexpected event, but a very bad deal for people in ill health, who might find insurance entirely unaffordable. If you have diabetes and your insurance premiums reflect the costs of insulin and perhaps other related procedures such as kidney failure, and the risks of related ailments such as heart disease, then it’s not an insurance policy. It’s a very expensive prepaid health plan.
Either way, insurance companies achieve stability by making healthcare less accessible to the people who need it most. And even the healthy people who benefit will not continue to benefit, since insurance rates would spike after a diagnosis of cancer or diabetes, or just go up with age.
Private insurance advocates say we can regulate these problems away. We can require insurers to take all comers, regardless of their state of health. We can regulate in detail their profit margins, lists of treatments, payments by patients, and procedures. We can encourage cooperation and subsidise from lucky insurance companies with healthy people to unlucky companies with sick people. But why create a big regulatory framework that will tie everybody up in games and court cases when we can just avoid the whole problem and have a big, simple risk pool?
http://www.thehindu.com/opinion/op-ed/private-health-insurance-cant-heal-all/article8663472.ece
Latest government figures confirm more than 13 million people, or more than half the Australian population, has some level of private health insurance. Recent research shows that 80 per cent of health fund members value their insurance because it gives them security: confidence they can access medical treatment when and where they need it. With healthcare a hot election issue, health insurance will be at the forefront of many voters' minds.
However health costs continue to rise and premium affordability is the major issue for health fund members. Almost half of all Australians with private health insurance have an annual income of less than $50,000. They are not wealthy.
The problem is that health funds' input costs are not within their control, and premium increases are much higher than our industry would like to see. Health costs, including medical device prices, medical specialist gap payments, hospital accommodation costs and allied health costs are rising on average 8 to 9 per cent each year, compared with an average 6 per cent increase in premiums and household incomes (CPI) of 1.8 per cent.
There is a solution. Health funds are willing to do their part to ensure the sustainability of the industry. Health funds have been urging the government to fast-track regulatory reform, they have also committed to pass on any savings from reform to their members through reductions in premium increases
http://www.afr.com/opinion/five-reforms-to-make-private-health-insurance-cheaper-20160529-gp6e6aWe hear and health insurance quotes wants to hear from you today. Please give us your feedback and let us know anything that you like us to have on our blog for further discussion in regards to health insurance.
