Monday, February 1, 2010

How Health Insurance Reform Can Learn From Auto Insurance

Car Meets House (aka South Austin Parking Spot)
One of the characteristics of auto insurance is that a driver’s accident record is taken into account in the computation of auto insurance premiums to be paid [see "Safe Drivers Save on Auto Insurance"]. Thus, good drivers are rewarded with lower premiums. One of the proposals in the insurance industry is to mimic this incentive-based system found in auto insurance with health insurance. An adoption of this proposal would then mean that there are different premiums amount, which is unlike the current practice of having the same healthcare coverage at the same price for employees.


In fact, some private employers offer special health insurance (with lower rates) to individuals who meet certain health standards such as body-mass indexes, lower blood pressure and avoidance of smoking. Supporters of this trend tout the private and public benefits of this type of system. Those who take care of their health tend to have lower medical bills, which is the ideal situation for everyone. Because of the lower costs for employers, adopting this system has garnered the support of business groups.


However, there are some who oppose this practice because it may create a situation where patients with pre-existing conditions are refused health insurance or are financially penalized. Groups such as American Heart Society and American Cancer Society worry about uncontrollable features that may result in higher premiums. the For example, people taking medication that has weight gain as a side effect may be unable to qualify to weight standards imposed.

One of the major problems encountered by this proposal is that President Barack Obama has vowed to only sign plans that guarantee that no one will be charged more money by insurance companies based on the condition of their health. Obamacare, in a nutshell, tries to eliminate the occurrence of skewed incentives.

photo credit: ret0dd