16.10.09

RISK MANAGEMENT. Milton Friedman objected to some arguments in favor of safety regulations by noting that people did not have "Property of the United States Government" stamped on their foreheads. I wonder what he would make of the details of the health insurance legislation.

Get in shape or pay a price.

That's a message more Americans could hear if the health care reform bills passed by the Senate Finance and Health committees become law.

By more than doubling the maximum rewards and penalties that companies can apply to employees who flunk medical evaluations, the bills could put workers under intense financial pressure to lose weight, stop smoking or even lower their cholesterol.

The opening paragraphs of the article do not make the naked taxpayers-bear-the-cost-thus-it's-a-public-interest argument, although that's probably in reserve somewhere.
Some employers offer lower premiums to people who complete personal health assessments; others offer only limited benefit packages to smokers.
I think that's called risk management. Individuals can perform their own risk management also. I think that includes choosing not to buy health insurance, but I digress.

President Obama and members of Congress have declared that they are trying to create a system in which no one can be denied coverage or charged higher premiums based on their health status. The health insurance lobby has said it shares that goal. However, so-called wellness incentives could introduce a colossal loophole. In effect, they would permit insurers and employers to make coverage less affordable for people exhibiting risk factors for problems like diabetes, heart disease and stroke.

"Everybody said that we're going to be ending discrimination based on preexisting conditions. But this is in effect discrimination again based on preexisting conditions," said Ann Kempski of the Service Employees International Union.

The word discrimination is overworked here. A national newspaper that hires only graduates of the most highly regarded journalism programs discriminates. The behavior is legal, and possibly rational. A local business owner who hires only people that looks like him discriminates. The behavior is illegal, and possibly irrational. An insurer that raises rates on the basis of risk discriminates. The behavior is rational: to declare it illegal, spell out your loss function.
The incentives could attack a national epidemic of obesity. They also cut to a philosophical core of the health care debate. Should health insurance be like auto insurance, in which good drivers earn discounts and reckless ones pay a price, thereby encouraging better habits? Or should it be a safety net in which the young and healthy support the old and sick with the understanding that youth and good health are transitory?
I suspect, given the general reluctance of politicians to confront tradeoffs, that Congress will attempt to enact both.
Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the Health and Finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent.
Given that young people who view themselves as healthy do not currently have to buy any health insurance at all, even a 50 percent discount might be insufficient inducement, suggesting resistance to any mandatory purchase requirement.

However, state employees might already have that "Property Of" stamped on their foreheads.

North Carolina has angered some state employees by introducing a wellness program that would limit the most generous benefits package to those who meet body mass targets and don't smoke. The state would allow employees to satisfy the requirement by enrolling in weight management or smoking cessation programs.

When fully implemented, the program is projected to reduce the state health plan's medical expenses by 1.2 percent, spokeswoman Linda McCrudden said by e-mail.

That's a lot of induced demand for health clubs and patent medicine for a relatively small payoff. The article doesn't spell out other options the state considered.

No comments: