NySiai - A Medical MRI Scan Resource

WhiteCoat kindly responded to my comment in his original blog post on Tier 4 drug plans. My original comment was:

When insurers are forced by the government to accept any individual into its risk pool without discriminating individual policy holders with risk-adjusted premiums, individuals

who use more than their “fair share” of the insurance assets will hurt lower-risk individuals in that same risk pool when they need services. There is a finite limit of resources that an insurance provider can give out; without charging higher premiums for higher risk individuals, the insurance company will need to compensate in other ways, and they have just started with increasing copayments/coinsurance for tier 4 drugs. It does seem inhumane, but limited resources prevent all patients from getting every expensive treatment out there.

WhiteCoat’s response essentially proves my point while claiming that he disagrees with me, though there might have been misunderstanding on his part.

Beginning with his car insurance analogy: car insurance indeed should cover catastrophic accidents in which the insured is involved. How do car insurance companies discriminate higher-risk individuals from lower-risk individuals in regards to monthly premiums? They look at the “genetics” of the individual: 16-21 year olds are higher risk than 35-50 year olds, singles are higher risk than marrieds, red-car owners are higher risk than green-car owners, 2-door car owners are higher risk than 4-door minivan owners, child-less marrieds are higher risk than married parents, individuals who have already caused accidents are higher risk than the accident-less individuals, et cetera.

When the car insurance companies create their risk pools, the premiums have been adjusted so that when accidents do occur in a timeframe, they are in proper proportion to the the risk-adjusted premiums. In other words, the company’s predictions of the risk of individual policy-holders are accurate enough to allow the company to be profitable when catastrophic accidents occur. Individuals get what they individually pay for when the need arises (they get their “fair share”).

How this relates to health insurance: In terms of risk, health insurance companies do not and are not allowed by the government to discriminate fully between higher-risk and lower-risk individuals. Whereas car insurance companies are able to charge a higher risk-adjusted premium to an 18 year-old unmarried male who drives a red sports car, health insurance companies are unable to charge a higher risk-adjusted premium to an individual who is genetically predisposed to cardiovascular disease, diabetes, obesity, multiple sclerosis, or cancer. Ethical or not, car insurance companies already use “genetics” to risk-adjust premiums. Why is it frowned upon when health insurance companies use an individual’s family history (parents both had lung cancer) or social history (individual has already smoked 80 pack-years) to charge a higher monthly premium?

If an insurance company were able to risk-adjust the premiums of all individuals in its risk pool, then the insurance company would never need to institute a Tier 4 coinsurance rate of 80%/20%. Higher-risk individuals would already be paying more money into the risk pool, and when they need to get the benefits from the company, they would be getting their “fair share” (as happens already with car insurance). As it is currently in healthcare, insurance companies are not allowed to risk-adjust premiums; instead, either they are forced to charge every policy-holder a very high risk-unadjusted premium and begin using coinsurance, or they are forced to go bankrupt because they run out of resources paying for 1000 policy holders who need drugs costing $100,000 per month.

WhiteCoat’s comment, “I pay into the program all my life and use little if any resources then when I develop cancer 20 years from now, suddenly I get discriminated against because I have become an “overutilizer.” That’s a bunch of horsepuckey,” misses the point. WhiteCoat, if you were properly risk-adjusted as I mentioned previously, you would be paying considerably more in health insurance premiums per month; when cancer finally does happen and you need $100,000 per month in drugs, you sure as hell ought to be getting what you paid into the system (getting your “fair share”), and you sure as hell ought not to be discriminated against when that happens. The question is, how would you feel about being risk-adjusted in the mean time, just as you are with car insurance, and end up paying $5000 per month for 20 years in health insurance premiums?

On the one hand it is easy for you to say that all those smokers and morbidly obese people deserve to pay more in premiums because they will cost more in the future, yet when you personally have a predisposition to cancer, you don’t deserve to pay more in premiums for your future health costs. In your situation, you would gladly let the other 99,999 policy holders in your insurance pool pay for your high-cost treatment. I do not think that is fair.