I while back I made a sarcastic proposal of how a health insurance company could serve free riders:
Here's the business model: I charge a premium in the lowest permissible amount (the least expensive plan you can buy to avoid any penalty from the mandate), use that to obtain reinsurance for losses above, say, $50,000, and offer essentially no other coverage. Participants can fund HSA's, if they wish. If a participant gets through a year without making a claim, I refund... let's say 50% of their premiums. The rest goes to the cost of administering reinsurance, administering claims (something I would outsource), and profit. Coverage for pre-existing conditions? Not a problem. Unhealthy people will stay away in droves.I've also commented on how angry it can make people when they're instructed to buy insurance in which they see no value, or inadequate value. Today, the Wall Street Journal published a letter manifesting that anger, by somebody whose insurance is inadequate under Massachusetts law - due, no doubt, to the free rider problem:
My husband retired from IBM about a decade ago, and as we aren't old enough for Medicare we still buy our health insurance through the company. But IBM, with its typical courtesy, informed us recently that we will be fined by the state.Insurance that is adequate is available from IBM at a significant increase in cost. It's also available through state plans at a much lower cost, but of course the complaint is that any increase in cost is too much.
Why? Because Massachusetts requires every resident to have health insurance, and this year, without informing us directly, the state had changed the rules in a way that made our bare-bones policy no longer acceptable.
A song dedication for the WSJ: Free Ride.
Update: The other side of the coin:
Industry representatives put Congress and the Obama administration on notice that if health-reform legislation doesn’t send even more new customers the industry’s way or if a windfall profits tax is included, the industry would hit businesses, individuals and the government with higher premiums, effectively defeating one of the initiative’s top goals, reining in ever-rising costs.Of course, we probably won't see the WSJ complaining of the insurance industry distorting the debate, impeding any real competition, forcing costly insurance on people who are the least likely to need it, then demanding record profits as the price of their "cooperation".
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The industry wants more of the estimated 25 million still uninsured – especially healthy, young people – to be compelled to buy policies, too. Without more healthy customers added to the mix, the industry says it will have no choice but to raise rates.