Yes, I understand insurance contracts are already highly regulated, especially now under ACA. I’m arguing for a way to make that regulation better. “Better” it terms of helping people with pre-existing conditions to get coverage at a reasonable rate, which the ACA does, while still allowing insurance companies to charge more for people who choose risky or unhealthy lifestyles, which the ACA does not allow.

I don’t know if I’m misunderstanding you or you’re misunderstanding me, but I don’t feel like I’m disagreeing with you. Yes, an insurance contract is a commercial contract. My point is that it needs to be smartly regulated such that consumers are treated fairly and insurers and not defrauded, and to the extent possible we minimize that gray area in between.

Insurance is just a business, and most people have very little knowledge of the basics, and certainly not the complicated aspects. That doesn’t mean it is good, or evil; it is just a fantastic tool.

Firstly, this conversation, partly due to my own comments, has turned in the “people doing stupid things causes our healthcare problems” direction. I fully admit this is a gross oversimplification. I think the bigger problem lies in the more subtle every-day decisions we make, such as what to eat and how much to exercise, that are much more difficult to measure and control. As I said, much care would have to be taken in constructing legislation that allows insurance companies to take such things into account.

But to answer your question, there would still only be two types of acts: legal and illegal. But like any legal act, it can be restricted by private contracts. Insurance coverage that is allowed to discriminate on behavior is a private contract that says “we’ll cover your healthcare expenses at rate R as long as you agree to not do risky/stupid things X, Y, and Z, and agree to allowing us to ensure that you aren’t, and agree to see the doctor once a year for your blood pressure problem, etc.”

No one’s creating a “lesser person” here. People are free to say no to that arrangement and opt for a slightly more expensive option that doesn’t require any restrictions on behavior or additional testing (insurers should be required to offer it and the difference in price should be regulated so that smokers and others are not priced out of the market.)

When it comes to weight or alcohol or cigarette consumption, why should those who are doing perfectly legal acts be branded as lesser persons? Are we now going to have three types of acts: 1) legal 2) illegal 3) legal but you lose societal benefits?

Dduck, we actually have a great deal of doctors, many of whom are looking for work because the AMA gets to arbitrarily set limits on the # of licenses that get handed out. Where they get this power is beyond me, but we have LOTS of trained doctors out there that can’t get certified as a result. And when I say the AMA “arbitrarily” decides the # of licenses what I really mean is they reduce the ones for the specialties they feel should make more money so they are rarer. Its pretty much a scam. The AMA is an unregulated non government agency that really should be looked into more.

My point is that I’d consider someone who didn’t commit fraud, which implies intentional deceit, being denied critical benefits to be a worst-case scenario. With that in mind, in order for an insurance company to deny benefits, they must prove that the person committed fraud, and the burden of proof should be very high. It’s not enough, in my view, just to show that someone did something they said they wouldn’t do. Maybe they misunderstood the agreement, or maybe they forgot that they had agreed to something years earlier.

Since it may be difficult to prove fraud after-the-fact, there would be an incentive for insurance companies to ensure compliance *before* illness or accident happens, through testing, frequent re-commitments, voluntary behavior-limiting devices (the seat belt enforcer), database crosschecking (such as for motorcycle licenses), etc. And there may be certain behaviors that just can’t be checked for compliance, which would just have to be left out.

The more difficult problem, I think, is how to account for behavior that is not a “yes or no” question. You can’t prevent people from drinking sugary soda or eating french fries, or from watching TV instead of running. You could monitor weight and blood pressure and other indicators, but then you have to account for natural variability. I wouldn’t be in favor of charging someone more for being heavy, for example, unless perhaps it were stipulated that the person can pay the lesser rate if they agree have a yearly checkup where weight it specifically discussed. Of course, the person is free to ignore the advice of the doctor, so the free-rider problem still exists (as I mentioned, I don’t think it’s possible to get rid of it entirely), but partly mitigated at least, without the government dictating individual behavior.

This is possible, but I wonder if this will actually happen for two reasons. One, like my doctor, physicians have a limit on the number of patients they can see and once that limit is attained, they stop accepting additional new patients. So when some of these newly insured begin calling for appointments, many doctors will nto accept them as a new patient. And two, limited reimbursement will keep other physicians from accepting these new patients that are insured by the exchanges. Exchanges will reimburse at about the same levels as Medicaid and many physicians will not accept that low reimbursement rate. That is why so many Medicaid patients end up in the emergency rooms today.

I said *could* be done, not *would* be done.

Yes, there are two sides. The position that insurance companies should be able to discriminate implies that they do have some ability to deny benefits and/or pursue those that commit fraud. But there needs to be some limits placed on their power in order to protect innocent consumers. Here’s an borderline example:

If a person agrees not to smoke, and then gets lung cancer. Should the insurance company be able to go back and look for evidence that they smoked and then deny them coverage if they can prove it? It’s a tough call. Certainly, from a purely “personal responsibility” perspective, the answer is Yes. But, considering the moral dilemma this raises, I’m inclined to err on the side of the consumer and not allow such retroactive cancellation when compliance is testable. To enforce the smoking rule, the insurance company should be required to conduct tests to ensure the consumer is not smoking, which would allow them to cancel the policy or raise premiums *before* the person gets sick. This would also serve as a motivator to stop smoking, because you are incurring a penalty whether or not you actually get sick, instead of rolling the dice.

That only works for testable behavior though. If I agree to always wear a seat belt, and I don’t and I crash, what is to be done then? Maybe insurance companies can only apply this rule if the consumer agrees to install a device in the car that requires that seat belts are used for the car to function. If they consumer will not install the device, they will be charged as if they had not made the commitment.

There are lots of cases like this which would need to be categorized: Testable vs. untestable. Entirely within the person’s control vs. not (such as weight or blood pressure). Which means the regulation needs to be carefully and smartly written. Another case of could vs. would.

As far as weaseling out, there are two sides to that. Yes, some claims departments are weaselly, but there are plenty of people out there committing fraud on insurance companies and government programs also.
Someone once said, trust but verify

In my view, a policy that creates a moral hazard does not justify other policies that restrict individual liberty in order to minimize the cost of the first policy.

I’m in favor of allowing insurance companies to discriminate on behavior (not medical conditions). We would need some good regulation to ensure rates correspond to the predicted cost of certain behaviors, and to ensure companies don’t devise schemes to try to weasel out of paying for things due to technicalities. But I think it could be done in a few hundred pages or so.

As to the gamblers, they do raise the cost for everyone, due to adverse selection (the unhealthy try to get insured, the healthy sometimes don’t) in that famous pool.

That’s why a single payer plan is the only one to capture the most insureds. And, yes, the quality of care might go down, as it already has. Why because some doctors are now trying to keep their incomes up by increasing volume and decreasing face time. Come December it could get worse and since their is a shortage of primary care docs, get even worse when the 20-30 million uninsureds hit their offices and clinics.

We also should be working on subsidizing doctor’s schooling, as other countries do, so we can increase the doctor supply.