Indexing Health Insurance Premiums to Marginal Health Status: A Spoonful of Economics Helps the Premiums Go Down
DePaul Journal of Health Care Law, Vol. 12, No. 1, pp. 43-66, 2009
Posted: 29 Jul 2010 Last revised: 5 Aug 2010
Date Written: July 28, 2010
This Article suggests a model for health insurance that embraces both Solidarity and Actuarial principles. This model indexes insurance premiums to the insured’s efforts to maintain his health – his Marginal Health Status – rather than his actual health status. Historically, health insurance premiums have been indexed to the expected cost of providing care to a person or pool of people of presumably typical “health responsibility” but with an assessed set of existing conditions. Under the proposed model, premiums would be indexed to the expected costs of providing care to a person of a presumably typical set of existing conditions and of an assessed level of “health responsibility.” Thus, the normative understanding of the proposed model is that two equally health-responsible individuals – people who take equally good care of themselves – ought to pay equal premiums and have equal access to health care, no matter their respective health statuses. The individual with chronic and expensive conditions, but who treats them well, would face the same insurance burden as the healthy individual who takes care of himself. Indeed, the well-treated but chronically ill individual might have lower premiums and greater access to care than a healthy individual who does not take an active role in maintaining this health. Such an approach is compatible with the Solidarity Principle's understanding that everyone should have reasonable access to health care no matter his ability to pay. At the same time, it is responsive to the actuarially fair idea that costs should be borne by those expected to incur them. This approach minimizes the forces that cause the oscillation between current health insurance models.
[NB: This version may contain non-substantive differences from the version as published]
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