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health insurance premiums and lifestyle(23 posts)

health insurance premiums and lifestyleBecky
Jun 17, 2003 6:38 AM
I know this topic has been debated many times at RBR, but I just read an article in today's Wall Street Journal about this very subject and it raised some questions in my mind.
Presumably, the employee who doesn't smoke, drinks moderately, eats moderately and rides his bike 100 miles a week should pay less in premiums than the employee who smokes, drinks like a fish, eats fast food everyday and is a self-proclaimed couch potato. But what if the employee with good habits is chronically ill (say, insulin-dependent diabetes) while the employee with bad habits has no health-related issues? Should the diabetic employee pay more even though he takes care of himself and keeps his diabetes under control? Should the employee who eats poorly pay more in anticipation of future heart disease?
In short, is it possible to fairly base health insurance premiums on health or habits? Could this be considered discrimination?
I'm interested to hear what you all think....

Becky
insuranceDougSloan
Jun 17, 2003 6:48 AM
The primary purpose of insurance is to spread risk. Now, that concept gets modified to account for significant risk factors that might make it unfair or unwise marketing if people were lumped in together. A 70 year old doesn't pay the same for life insurance as a 20 year old, because A) the risk of the 70 year old dying soon is far greater; and B) the 20 year old would never pay the premium required if they were the same.

Just how far we go in spreading or limiting risk is the issue. Typically, I think people accept as fair limiting risk when some people engage in intentional activities that increase risk, like smoking, and to a lesser extent, have pre-existing conditions that increase risk, like obesity, ailments, or age.

Of course, any differentiating is "discrimination." The issue is whether it's illegal discrimination. Probably not, unless the differentiation is based upon race or similar factor.

So, there will always be a public policy or industry debate about how for you go in limiting risk when risk factors are known. The insurance companies can do a pretty good job of that on a large scale, but that doesn't mean the public will accept it.

As for me, I'd be in favor of limiting risk by either denying insurance or increasing premiums to those who engage in activities that increase risk, such as smoking, reckless driving, etc.

Doug
RiskPiedmontRider
Jun 17, 2003 6:58 AM
I am not sure if I understand the idea of "spreading risk." I would think that a person who engages in "risky" behaviour, whether it be drving recklessly or the "all-donut" diet, and suffers an ailment as a result is actually spreading responsiblity. If as a person who is insured through the same company as the risk taker, premiums will go up over time.
The return for taking care of yourself and behaving in manner that preserves life is the knowledge that you have provided for someone that refuses to take responsibility for themselves.
Just my $.02

PR
Disagree a littlemoneyman
Jun 17, 2003 7:51 AM
The purpose of insurance is to transfer risk, not just spread it around. With my premium dollars, I pay you to accept my risk. The life insurance company accepts the financial risk of me dieing before that magic number on the mortality tables. They have bet with their acceptance that I will live to be 75 years old. Their hope is that I stop paying my premiums before I die, so that they will never have to pay a benefit while keeping all my premium dollars.

Health care insurance no longer works under this principle. At one time, one would pay premiums to the health insurance company to accept the financial risk of catastrophic illness. The chances of a $1 million hospital bill were pretty slim, so health premiums were affordable. When tax laws changed making it more favorable to provide health insurance as a benefit of employment, the concept of me paying directly to the insurance company to accept my financial risk was subordinated to that of the insurance company becoming the transferor of money, rather than the acceptor of risk. Now when I go to the doctor for a checkup or treatment of a minor illness, I pay the insurance company my premium dollars, and they in turn pay the doctor, whereas it used to be that I would pay the doctor directly. The doctor still gets my money for services provided, but it has to travel a circuitous and expensive route to get there, thereby increasing the cost of my health care dramatically.

If we were to return to the idea that insurance is to cover catastrophic illness or injuy, and not to pay the office visit, we would see a dramatic decrease in the cost of providing health care. Also, if we removed health care insurance as a benefit in the workplace and made it available to individuals (like auto insurance), it would reduce costs as well. Unfortunately, the system has become so complex and so lucrative for the doctors, the insurers, the drug companies and the health care providing agencies, as well as deeply embedded in governmental bureaucracy, that I doubt serious reform will ever happen. It's a big problem, and we need some very strong - and politically unfavorable - decisions to be made.

Congress is working on a medicare prescription plan right now. It just goes to show how big the money is in this area, when the world's greatest deliberative body is trying to decide if seniors should have a $250 or a $300 deductible on their drug plan.

$$
Disagree a littleJon Billheimer
Jun 18, 2003 7:08 AM
On the subject of healthcare dollars I read somewhere that over 90% of a person's healthcare costs are incurred in his last two or three years of life, in other words during his period of senescence. If this is true, then insuring routine medical visits for most people would not be the primary factor driving costs. The costs related to high-tech medical interventions in one's later years would seem to be the biggies. But then I'm certainly no expert on the subject.
I think you are rightDougSloan
Jun 18, 2003 7:58 AM
I have heard that as well.

I don't understand why insurance should pay routine visits, any more than auto insurance should pay for your oil changes. Sounds goofy, not what insurance should be.

I guess traditional insurers are trying to act like HMOs. The idea behind HMOs is that everything is included, so that, supposedly, you'll visit the doctor more often and catch problems before they become big ones. Rather than that, I think it's turned into merely an expectation of "free" health care from employers.

Doug
ps: old people are expensiveDougSloan
Jun 18, 2003 8:04 AM
Made me think. Man, old people are really expensive. Between social security, medicare, health insurance, and typically paying less real estate tax (if assessed years ago), we really to shell out a bundle to keep them around, and it's only going to get worse as we get old. Maybe soylent green wasn't such a bad idea?

Doug

ps: old people are expensiveJon Billheimer
Jun 18, 2003 8:30 AM
Okay, here's the solution according to one's political stripe: all us liberals who are 50 or over have to commit suicide instantly, in order to benefit our fellow man and increase the general good; the libertarians can do whatever they want, but they have to pay full freight for everything; and the conservatives will go ahead and increase payroll taxes on the poor, and totally exempt everyone making 100K from ANY taxes in order to finance their old-age healthcare!!:)- Hmm, let's see, that'll leave Doug, Steam, Dubya, Cheney, and Rummy. Everyone else will be dead or bankrupt:)- Oh yeah, I almost forgot Pat Buchanan.
sounds like a planDougSloan
Jun 18, 2003 8:41 AM
Suicide is a little drastic. Could just move to Canada? ;-)

Doug
sounds like a planJon Billheimer
Jun 18, 2003 8:51 AM
Hah! With our limited tax base we're already supporting as many liberals as we can afford--like me and 31,000,000 others.

Seriously, while on the subject, here's another thought. Why not curtail elaborate medical interventions for the old and terminally ill and focus on lifestyle and palliative care instead? It has always seemed to me to be a little flawed to spend zillions of dollars on heart transplants, egregiously expensive cancer treatment, etc. when the patient's probably going to die shortly anyway. Many of these procedures, as well, don't improve quality of life and in some cases worsen it. We keep raising the bar and our expectations with respect to what is regarded as adequate medical care to the point where the cost/benefit ratio is waay out of whack. This has been a legitimate point of debate here in Canada with respect to re-engineering and financing our own medical system, which by the way is considerably less costly than the American model.
easy to manageDougSloan
Jun 18, 2003 8:59 AM
Just exclude low benefit (in terms of life lengthening and quality) / high cost procedures from coverage, be it private or government.

Of course, then everyone will cry foul, as only the wealthy will benefit from the expensive measures. Can't win.

Doug
easy to manageJon Billheimer
Jun 18, 2003 1:16 PM
That's one of the key points of debate here in Alberta, that is evaluating what we do in terms of outcomes. But as you say, you can't win. Regardless of the choices that are made somebody perceives a loss of benefit.
I think you are rightmoneyman
Jun 18, 2003 8:44 AM
When someone turns 50, the lights should go out. That is, until I turn 50, which is right around the corner. At that time, we'll up the age.

$$
Doug: How would you define "reckless driving?"retro
Jun 17, 2003 12:10 PM
This is a subject I've debated for years. I've driven (near as I can figure) at least 1.2 million miles in about 35 years, a lot of it at illegal speeds (I'm talking about 85 on the interstate, not 25 in a school zone). Haven't had a ticket in six or eight years, but I got a LOT of them in my 20s through 40s, when I traveled quite a bit (I've gotten smarter, not slower).
Still, I'm a cautious driver. In all that time and over all those miles, I've never had an accident or even a close call. I've probably had to hit the brakes hard only eight or 10 times, the result of someone else's mistake. No insurance company has ever paid a claim to me or because of me. But if you look at my record prior to about 1995, I'd probably be classified as "reckless." What's the libertarian view on that?
drunk?DougSloan
Jun 17, 2003 1:24 PM
Driving drunk or a bad accident record.

Yes, I drive swiftly, too, but always carefully.

Not sure what you mean by "Libertarian view". In a true Libertarian world, I suppose insurance would not be mandatory and there would be no safety regulations, so we'd be driving around in Mad Max contraptions to protect ourselves.

Doug
Slippery SlopeKristin
Jun 17, 2003 8:13 AM
It wouldn't make sense to charge higher risk patients more premium. However, coverage amounts or claim eligibility should be affected by an insureds behavior. Insurers should be legally allowed to deny claims if they can demonstrate that their insured engaged in optional behaviors that lead to the medical condition. If a chronic, long-term alcoholic contracts liver disease, the insurer should be allowed to refuse coverage or pay-out at a lower rate. There are allowances for this with other types of insurance. Everyone knows about suicide clauses on life insurance policies.

But this is a slippery slope. You can't prove that someone contracted liver disease because they drank. He may have contracted the illness without ever taking a sip. Even if you demonstrate that he placed himself at higher risk though his actions, there is not enough scientific evidence to prove that he could have helped himself. We still don't understand alcoholism enough to garentee we can "cure" a person of it. So how could anyone ascert that the alcoholic could have quit? Now some here will argue that you can garentee this. But they would be thinking about alcohol treatment facilities--which are currently not covered by most health insurance. Now, in order for the insurer to deny the liver disease coverage, they must allow for some coverage of alcohol treatment and recovery. Overall, that will cost more than covering the smaller percentage who actually die from their alcoholism.
How would you handle...moneyman
Jun 17, 2003 8:39 AM
The insured who is healthy at the time of application and acceptance, then three years later falls prey to alcoholism? Would you discontinue coverage at the very time it is needed? If so, what has he paid for in three years of premium payments?

Suicide clauses, while varying by state, do not negate benefits if the suicide takes place one to two years after acceptance by the insurance company. If the suicide takes place before the elimination period, the premiums are returned to the beneficiary and no benefit is paid.

$$
I wouldn'tKristin
Jun 17, 2003 11:23 AM
Personally, I don't think it is possible to regulate or legislate this issue. If society gets to the place where 75% of the people lead unhealthy lifestyles that lead to expensive illnesses, then insurance will no longer be a suitable solution for medical expenses. We're getting there. In the end, insurance will be replaced by something else all together.

I'm sure its improper; but when thinking through an issue like this, I tend to argue both sides.
hope you stay healthymohair_chair
Jun 17, 2003 8:48 AM
Even the so-called "healthy" people who would lower premiums can end up being as big or bigger a burden on the system than the so-called "un-healthy" people. Insurance is about spreading risk not only over a large group of people, but ideally over a long period of time.

You could get mad cow disease.
You could be crushed by a falling piano.
You could develop cancer.

None of these are your fault. Being a perfectly healthy person today in no way guarantees that you will be perfectly healthy tomorrow. And just because I live a healthy lifestyle doesn't mean I'm not a reckless driver or a thrill seeker or otherwise live an unverifiably dangerous lifestyle.

Living an "unhealthy" lifestyle today does not guarantee that you will always live that lifestyle. Furthermore, every time they interview someone who has lived to 100 or more, they almost always say they smoked every day and had a shot of whiskey. Who is to say what's unhealthy? I think genetics is the bigger factor, and you don't want to go that route.

Look at Lance. Nobody could say he lived an unhealthy lifestyle, and yet, he got cancer.
One nitpick...TJeanloz
Jun 17, 2003 9:50 AM
Look at Lance - in a bit of irony, in his pre-cancer days, he frequently opined that he believed pro cycling was taking years off his life because it was so hard on his body. He had no idea how true it was.

Professional athletes, of any sort, are not typically very healthy individuals.
sure they aremohair_chair
Jun 17, 2003 10:39 AM
One problem is how do you define "healthy?" A guy like Jerry Rice is one of the most fit humans on earth, but he's got bad knees and a bad back. Plus, from a health insurance standpoint, he's a higher risk because he plays a contact sport. Lance is in the same boat.

Pro athletes hasve wear and tear on their bodies that won't show up for years, which is one reason why I think linking premiums to a "healthy lifestyle" is a terrible idea. Then there's guys like Mike Tyson, who would probably qualify as "healthy" in a physical sense, but who are mentally unstable.

That's really the problem. What is healthy and what is a healthy lifestyle? Who defines it? The same people who came up with BMI? The anti-fun/anti-junk food crowd? PETA?

There used to be commercials for Mongoose bikes (?) starring Steve Larsen. He was in a Denny's or IHOP eating an insane amount of food. If the lifestyle police saw this, they would arrest him on the spot and jack up his premiums. In the ad, he says "When you train as hard as I do, you can eat anything you want." Is there anyone who can tell me Larsen isn't healthy?
Pro athletes and lifespan (OT, but related)...retro
Jun 17, 2003 11:59 AM
That's an interesting area. Can't find it online now, but a few years ago there was a study on it. Football players were the shortest-lived, I think--many of them die in their 50s, and as somebody else said, they're often crippled and in pain when their careers are over. Watch Steve Young, the former '49er quarterback, over the next 15-20 years. Pro basketball is a relatively new sport, so there weren't a lot of statistics available on those guys. Steroids and other drugs will probably complicate that and football in the long view, too.
Cycling, at the time, was too small even to consider. The stresses are huge, but cyclists don't get the big hits that affect football players. Same with soccer.
Longest-lived athletes on average were baseball players. Jog a little, stand around outside, never have a financial worry...what's going to kill them?
LanceDougSloan
Jun 17, 2003 2:05 PM
According to Lance, I got the impression that his testicular cancer would have been easier to treat had he paid attention to the symptoms sooner, and that his competition and pain tolerance probably contributed to his not seeing a doctor sooner. He only went to a doc when he could no longer tolerate sitting in a bike seat...

Doug