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MattDavisRatnerSecondPaper 4 - 26 Jun 2009 - Main.EbenMoglen
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Health Insurance and the Net | | | This is a minor point, but insurance companies aren't just betting that insurance premiums will be higher than payouts. They are also taking advantage of the ability to invest the premiums at high rates in large amounts.
-- KateVershov - 30 May 2009 | |
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- I think you need to reconsider a premise here. Most people still have employer-provided health insurance, and they buy insurance from insurers who know nothing whatever about them as individuals. Group health insurance rates for large employers (and also for very small employers, as I know being a very small employer) are related only to the numbers of employees, and are not the result of experience-rating. So the insurer can't make ratings use of any information it can buy about my employees, or IBM's employees for that matter. And for medium-sized businesses, whose plans are experience-rated, it's the experience, that makes the rate, not a prediction.
- This is related to Kate's point, which is right in asking us to look at insurers as they are, and unfortunately not quite right in thinking of health insurers as economically closely related to life and casualty insurers, who collect premiums inorder to reserve against low-probability risks with high payouts, and invest their premiums in a diversified, lower-risk portfolio. Health insurers are essentially profit-making health care managers, running an unbelievably poorly coordinated system in which they and other parties in a badly-organized market purchase too many services from providers who are not exposed to actual market incentives, and sell the too many services to a poorly-defined collection of public and private buyers who are not allowed to make decisions based on actual real-time information about costs and benefits. Everyplace this horrendous system contains inefficiencies, the insurers try to be one of the consortium of thieves that goes rent-seeking. Understanding their economics is difficult because they aren't transparent, and because the complexity of our system inhibits incremental policy design. You're on the right track to consider how changes in the cost and distribution of information affect their business, but I think you might have more success considering how their vulnerabilities might be affected, instead of their powers.
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