Monday, September 12, 2016

9/12 Election Update and Health Care Economics

Not too many new polls today. Clinton ticked down slightly on that FL poll.

If her current bout with walking pneumonia impacts her polling, that'll take a while to come through in new polls, and it'll take a while longer to reflect in the model. That's not because the model is "too slow" to move but more because most new cycles come and go and turn out to be a much smaller deal than we think when we're in the moment. If they stick though, we'll learn that slowly as the new cycle around pneumonia drags on and her polling continues to reflect that.
  • Really Good for Trump
    • Trump +4 in FL
  • Neutral
    • LA Times/USC tracking tied
    • Clinton +5 in MI
    • Trump +15 in UT 

If you've ever thought "getting rid of employer-based health insurance is the silver bullet" then read on.

De-coupling employment from insurance might be a good idea, and it might be a bad idea, but it's not a silver bullet. The reason it's not a silver bullet is that employer-provided health insurance solves a critical problem in health insurance: antiselection.

In order for insurance (of any kind) to work you need to have some people for whom premiums exceed claims, have some people for whom claims exceed premiums, then hope you wind up roughly even. The problem is if people are fairly confident insurance is going to be a losing proposition for them, they won't buy it, this is the problem of antiselection. For some kinds of insurance (e.g. earthquake insurance) that's not a problem, because no one has a great idea what their expected earthquake related claims will be. For health insurance though, it is a problem. 

I bet you have a pretty good idea what your health care costs will be this year (barring some catastrophic event) right? So do most people. If you sell insurance to everyone individually, the people for whom insurance is a good bet will likely buy it, and the people for whom it's a bad bet will likely not. If that happens insurance doesn't work for what should be obvious reasons (claims exceed premiums and insurance companies all go bankrupt).

There are solutions to this problem. Here are some examples:

-Sell insurance to a whole group of people at once, getting both the low and high risk customers
-Screening on the part of the insurance company (e.g. excluding pre-existing conditions, refusing coverage)
-Sell individually with a strong mandate (everyone has to buy it)
-Refusing to cover more predictable costs (e.g. well visits, babies)
-Single payer

So while de-coupling health insurance from employment might be a bad idea, doing so un-solves a huge problem that we would need to re-solve, or health insurance wouldn't work.


  1. But the ACA exchanges deal with anti-selection. If employers were required to purchase exchange plans for their employees, the risk pool of the exchanges would get better (I'm assuming the sickest people don't work) and the insurance companies wouldn't be able to pick and choose whether to offer exchange plans because they would have to give up their employer business too.

    I realize this isn't on the table politically since neither the employees want their plans changed nor the healthcare companies want the extra requirements.

    1. As they currently are the exchanges kind of deal with anti-selection in the form on the individual mandate. The problem is the individual mandate is way too weak. In 2016 it was $695 / adult, which sounds like a lot but isn't when put next to a $300-$400 exchange plan you don't intend to use. Add to that there's no enforcement mechanism for the penalty, other than withholding tax refunds.

  2. For those of us who can afford to buy our own insurance I do not recommend paying for insurance which covers normal predictable items. This is why I self "insure" my dental expenses. Many dental policies do not cover major expenses adequately as they commonly have a maximum amount they will pay out a year. I don't consider dental "insurance" true insurance as it does not actually cover expenses one can't afford. It is sort of like buying insurance which covers the cost of painting ones home but doesn't cover major damage to the home which is silly and only drives the cost up. I learned this one year when I needed two crowns and basically the 2nd crown was not covered at all.

    The difficult question in my mind is how to deal with those who cannot afford to "self insure." I do believe they do need and deserve "insurance" to pay for "predictable costs (e.g. well visits, babies)."

    Dave Ehrenkranz

    1. That's a good rule for all insurance. Only insure things you can't afford to replace (e.g. your house, your car, your liver) or against liability.

      I agree about helping people who can't afford to self-insure. I want to live in a society that doesn't leave poor people behind to get sick and die.