From: mccall@mksol.dseg.ti.com (fred j mccall 575-3539)
Subject: Re: Forbes on health insurance
Organization: Texas Instruments, Inc
Distribution: tx
Date: Fri, 22 Jan 1993 14:48:08 GMT

In article <C160M8.23AM@austin.ibm.com> moller@austin.ibm.com writes:
>In article <1993Jan19.150054.17906@mksol.dseg.ti.com>, mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>> 
>> Uh, John, this is what insurance is all about.  Spreading the risks
>> and costs around among a large number of people.  The people in the
>> group are 'subsidizing' the people who get sick or need care.  This is
>> considered a FEATURE, not a bug.  You can't do away with the subsidy
>> part and still have insurance work (unless you expect the insurance
>> company to simply print money somehow).
>
>"Insurance" is fine as long as it spreads the risk among people of
>approximately the same risk potential.  I don't smoke, don't drink an
>awful lot, take precautions with sex, etc.;  I really don't want to
>share risks with people who do smoke, drink too much, or have sex with
>passing strangers.  (Not that it's any of my business if they do any of
>this stuff, it's just that I don't want to share their risks.)

Well, it's all a matter of just how broad those 'risk categories' can
be and still be called 'aproximately the same risk potential'.  You
do, by the way, share all those risks (at least if you're in the kind
of group coverage that I am).  The only exception made to rates is for
smoking (which they charge an extra $10/month for).  My drinking or
non-drinking habits, sexual proclivities, participation in dangerous
sports, or any other risk effects of lifestyle are simply discounted. 

>
>Car insurance works more or less this way: your rates depend a lot on
>which "group" you belong to, the groups being in theory more or less
>homogenous with respect to risk potential, and your rate being more or
>less proportional to that potential.  Ideally, you ought to, over time,
>get back from insurance just what you put into it, minus insurance
>company profits, of course.  It doesn't work this way real well, but
>that's the theory.

Well, that USED to be the theory.  Seems to me that the way it works
now is that if the insurance company has to pay out on your policy,
they raise your rates to try to recover that money from you,
personally, rather than from the 'risk pool', which is how insurance
is SUPPOSED to work.

>
>If you don't compensate for the fact that some people are at greater
>risk than others, insurance does become a subsidy system.  The usual
>way this compensation is effected is by adjusting how much you pay for
>a given amount of insurance.  The Forbes system seems to assume that
>your risk potential is proportional to your income, which I doubt is
>true.

While I agree with you, an argument could be made for some
correlation.  After all, more educated people are more likely to use
medical care for minor things (because they're used to that), more
likely to be involved in sports (which increases their non-work injury
rate), etc.  They are also more likely to be paid more.  Of course,
this correlation certainly isn't 100% and vanishes after a certain
point (where age becomes one of the major factors in the earning
distribution -- all that upper management, you know).

-- 
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
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Fred.McCall@dseg.ti.com - I don't speak for others and they don't speak for me.