Free-market insurance and pre-existing conditions
September 20th, 2009 | by Brian Schwartz |Paul Hsieh, MD has written a review of how a free market in medical insurance would address customer concerns about how changes in health status can effect premiums and insurability. He of course mentions health status insurance as an example. My favorite part of the article concerns how rights connect with customers and businessmen making rational choices according to their self-interest:
Medical insurance does not grow on trees. It is a complex financial service created by businessmen seeking to make a profit. This service enables a pool of individuals to voluntarily share the risks of unlikely but expensive adverse events, such as a serious accident or illness. Willing participants pay premiums to the insurer in exchange for the assurance that if a covered accident or illness befalls them, they will receive payments from the insurer according to contractually agreed-upon terms. Insurance thus creates voluntary “risk pools” in which customers can combine and share their risks to their mutual benefit.
To make money organizing and managing these risk pools, an insurer must carefully analyze the likelihoods and costs of possible adverse events; he must calculate the proper prices to charge customers in exchange for the promised payments; he must set these prices at levels that enable him to make a profit while offering a value to customers; and so on. In short, to establish and maintain a profitable insurance business, the insurer must think rationally and act accordingly—and, to do so, he must be free to enter or refuse to enter contracts according to his own best judgment.
Likewise, a potential customer must decide whether the benefits offered by a prospective insurer are worth the price of the premium. He must consider his personal health, lifestyle, financial situation, and future plans. He too must think rationally and act accordingly—and, to do so, he too must be free to enter or refuse to enter contracts according to his own best judgment.
A free market in health insurance (which does not currently exist) would respect the rights of both insurers and customers to voluntarily contract to mutual benefit. …
Read the whole article: How the Freedom to Contract Protects Insurability.
tags: health-status insurance, pre-existing conditions
