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 Vaktathi wrote:
In insurance, it's a simple reality that people get charged more or less for many things they can't control. Age & Gender are both taken into consideration for just about any type of insurance, and in *most* (though not all) cases, women get cheaper rates than men.

Due to there being a competitive market, insurers will offer lower rates to people they think are lower insurance risks. Car insurance attempting to use big data to identify safer drivers is a classic example.

And in most cases insurance companies are free to do that, if they want. In terms of how it affects the overall industry, the behaviour is harmless, has a neutral effect. But when you're designing an insurance sector and what insurers may price on, there's just no reason to include those factors.


I mean, are people really not getting this? Would it help if I went back to basics about insurance sector design? If people are genuinely curious I'll put in the effort, but if they're just trying to moan about ACA again then I won't bother.

I don't have a dog in the ACA fight, just making a note is all.

I thought the difference between commercial insurers competing for more niche market shares, and an act designed to get everyone affordable health care aught to be obvious.

Allowing insurance companies to pick and choose only people they feel will be profitable, is the same as allowing schools to pick and choose students they feel are going to pass. Yes, it allows the organisation the maintain unrealistically good results, but it does nothing for educating and medicating society.

 Vaktathi wrote:
I don't have a dog in the ACA fight, just making a note is all.

Sure, it's just there seems to be a bit of confusion about how and why insurance operates, at an individual and company level, and how it works best as an overall sector.

No, thats not what it is. Its more like the companies being allowed to charge appropriate rates for every persons risks instead of telling them they can't charge a certain amount.

 Smacks wrote:
I thought the difference between commercial insurers competing for more niche market shares, and an act designed to get everyone affordable health care aught to be obvious.

Allowing insurance companies to pick and choose only people they feel will be profitable, is the same as allowing schools to pick and choose students they feel are going to pass. Yes, it allows the organisation the maintain unrealistically good results, but it does nothing for educating and medicating society.

Forget writing up a design for the sector from scratch, you've made the point better with about 1/100 as many words

It seems pretty straightforwards, right? If you're making an insurance system and everyone has to get insurance, you want to incentivise behaviour that will reduce the number of payouts you have to make. So if you are talking about car insurance you want to encourage people to drive safely. Maybe you're insuring against theft and you want to give people lower rates for installing particular security measures or something. Or if you're making everyone get health insurance maybe you want to encourage people to not smoke and to lose weight.

But you can't encourage people to not be their particular gender, so there's no point in making it cost more for that. It'd just be perverse to charge people more for it when they have no control over it.

Also whoa apparently men get charged like a dollar less for car insurance than women later in life? What the heck, insurance industry. I think it's clear we should make discriminating by gender on car insurance illegal. (And apparently the EU already has.)

Trying to pick out customers who will cost less and offering them cheaper rates is a strategy designed to make the insurance company more profitable, not actually provide the maximum number of people with insurance.

 HiveFleetPlastic wrote:

But you can't encourage people to not be their particular gender, so there's no point in making it cost more for that. It'd just be perverse to charge people more for it when they have no control over it.

Are you just going to ignore risk factors? Insurance isn't just about incentivizing good behavior, its also about covering your risk. And if you are a higher risk you should pay more.

Trying to pick out customers who will cost less and offering them cheaper rates is a strategy designed to make the insurance company more profitable, not actually provide the maximum number of people with insurance.

Yeah, so? You can't just say "screw you Insurance companies, you gotta eat all the risk for no reward because reasons!"

 Grey Templar wrote:

 HiveFleetPlastic wrote:

But you can't encourage people to not be their particular gender, so there's no point in making it cost more for that. It'd just be perverse to charge people more for it when they have no control over it.

Are you just going to ignore risk factors? Insurance isn't just about incentivizing good behavior, its also about covering your risk. And if you are a higher risk you should pay more.

Why should you pay more if you're higher risk due to factors you can't control? It doesn't do anything except make life suck more for people who're already at a disadvantage.

 HiveFleetPlastic wrote:

 Grey Templar wrote:

 HiveFleetPlastic wrote:

But you can't encourage people to not be their particular gender, so there's no point in making it cost more for that. It'd just be perverse to charge people more for it when they have no control over it.

Are you just going to ignore risk factors? Insurance isn't just about incentivizing good behavior, its also about covering your risk. And if you are a higher risk you should pay more.

Why should you pay more if you're higher risk due to factors you can't control? It doesn't do anything except make life suck more for people who're already at a disadvantage.

Why should you not? Why should the insurance companies eat your risk?

If you are higher risk due to circumstances beyond your control that sucks but them's the breaks. Life's not fair. Deal with it. If I have to pay $20 extra a month because I have an elevated risk of cancer I'd say its worth it in case I do get cancer I'll be covered when I need it.

 Grey Templar wrote:
Are you just going to ignore risk factors? Insurance isn't just about incentivizing good behavior, its also about covering your risk. And if you are a higher risk you should pay more.

Once again, risks that are spread across the pool do not need to be individually covered. Insurance companies might like to do that so that their own pool of insured people are lower cost individuals, but that doesn't actually improve things for the greater population.

The only time individual pricing matters is if it produces a price incentive to change individual behaviour, ie to encourage someone to quit smoking or to not start in the first place.

 sebster wrote:

The only time individual pricing matters is if it produces a price incentive to change individual behaviour, ie to encourage someone to quit smoking or to not start in the first place.

OR if its to compensate for an inherent risk that person poses.

Really, the risk for something out of someones control and in someones control makes no difference to the insurance companies. Risk is risk. They should be allowed to charge in relation to it.

 Grey Templar wrote:

 HiveFleetPlastic wrote:

 Grey Templar wrote:

 HiveFleetPlastic wrote:

But you can't encourage people to not be their particular gender, so there's no point in making it cost more for that. It'd just be perverse to charge people more for it when they have no control over it.

Are you just going to ignore risk factors? Insurance isn't just about incentivizing good behavior, its also about covering your risk. And if you are a higher risk you should pay more.

Why should you pay more if you're higher risk due to factors you can't control? It doesn't do anything except make life suck more for people who're already at a disadvantage.

Why should you not? Why should the insurance companies eat your risk?

If you are higher risk due to circumstances beyond your control that sucks but them's the breaks. Life's not fair. Deal with it. If I have to pay $20 extra a month because I have an elevated risk of cancer I'd say its worth it in case I do get cancer I'll be covered when I need it.

You seem a bit confused about how insurance works? The insurance company doesn't "eat the risk." They charge their customer pool based on how much they expect to have to pay out. The other customers will end up paying a bit more because the company has to take into account the potential increased cost of the higher-risk customer.

Part of why this is neat is it allows people to access preventative and diagnostic health care, and it turns out that preventative health care is way cheaper than the alternative, meaning as a society we can spend less on health care overall.

And each customer should be charged a rate reflective of their specific risk if they have complicating factors. They still get the health care they need, but also are charged to reflect their increased risk.

 Grey Templar wrote:

If you are higher risk due to circumstances beyond your control that sucks but them's the breaks. Life's not fair. Deal with it.

Indeed it is not, but one of the primary functions of the state is to push "life" in the direction of fairness.

 Grey Templar wrote:
And each customer should be charged a rate reflective of their specific risk if they have complicating factors. They still get the health care they need, but also are charged to reflect their increased risk.

Why? What's the point?

 Grey Templar wrote:
Risk is risk. They should be allowed to charge in relation to it.

Why?

 dogma wrote:

 Grey Templar wrote:

If you are higher risk due to circumstances beyond your control that sucks but them's the breaks. Life's not fair. Deal with it.

Indeed it is not, but one of the primary functions of the state is to push "life" in the direction of fairness.

No. The purpose of the state is to provide external/internal security and public services(and no, fairness is not a public service).

 Grey Templar wrote:
You can't just say "screw you Insurance companies, you gotta eat all the risk for no reward because reasons!"

And neither is it right to say "screw the public, insurance companies have to have all the reward for no risk!" Insurance companies would like that I'm sure, and there are plenty of high powered lawyers and politicians who will fight their corner (for the right price). But there is a middle ground which is kind of fair for both sides. Besides insurance companies don't eat all the risk, they share it across more people, which is the whole idea behind fund pooling.

The idea that things like schools, hospitals, transport, insurance etc... exist only to make the maximum profit for shareholders is a gross perversion of what they are supposed to be doing. Regulating, so that profits are at least somewhat balanced against providing a service to society is hardly kicking the bread out of their mouths.

 Grey Templar wrote:
And each customer should be charged a rate reflective of their specific risk if they have complicating factors. They still get the health care they need, but also are charged to reflect their increased risk.

Then my medical bills get discharged during bankruptcy and everyone loses.

Yes, the risk is spread out, but its still there. Taking on another policy is a risk. If you are higher risk than normal you should pay more to gain the benefits of the pool.

Insurance companies hope most of their clients never withdraw more than they put in. But even though it gets spread out, they should still be allowed to charge certain people extra if they are a higher risk.


Automatically Appended Next Post:

 dogma wrote:

 Grey Templar wrote:
And each customer should be charged a rate reflective of their specific risk if they have complicating factors. They still get the health care they need, but also are charged to reflect their increased risk.

Then my medical bills get discharged during bankruptcy and everyone loses.

No, you still had insurance to cover your expenses. You just paid more per month than someone without those risks. Why are you in bankruptcy?

 Grey Templar wrote:

No. The purpose of the state is to provide external/internal security and public services(and no, fairness is not a public service).

So your contention is that security and public services should not be administered fairly?

 Grey Templar wrote:

No, you still had insurance to cover your expenses. You just paid more per month than someone without those risks. Why are you in bankruptcy?

I'm not. I was making a point about how US citizens tend to handle medical debt.

 dogma wrote:

 Grey Templar wrote:

No. The purpose of the state is to provide external/internal security and public services(and no, fairness is not a public service).

So your contention is that security and public services should not be administered fairly?

You misunderstand me. The government does not exist to ensure everyone's life is fair, not even a little bit. All they exist to do is provide security and public services to everyone, which of course should be done fairly but the fairness is not the purpose or primary objective. They have zero business doing anything else, like making sure there is equity in everything.


Automatically Appended Next Post:

 dogma wrote:

I'm not. I was making a point about how US citizens handle medical debt.

But that had nothing to do with what we were talking about.

 Grey Templar wrote:
Insurance companies hope most of their clients never withdraw more than they put in. But even though it gets spread out, they should still be allowed to charge certain people extra if they are a higher risk.

Perhaps they should, but it needs to be within reason. If they have complete freedom to charge whatever they want then they will try to price out people they aren't interested in, and we end up with a cruel and dysfunctional system where only the very wealthy can afford treatment.

 Grey Templar wrote:
OR if its to compensate for an inherent risk that person poses.

Really, the risk for something out of someones control and in someones control makes no difference to the insurance companies. Risk is risk. They should be allowed to charge in relation to it.

And so now I’ll just repost the part of my post that you deleted, because it answered your last post, and answers this post just as well.

“Once again, risks that are spread across the pool do not need to be individually covered. Insurance companies might like to do that so that their own pool of insured people are lower cost individuals, but that doesn't actually improve things for the greater population.”

If you really don’t get it, here’s a simple example. Let’s say the world has four people in it, two men and two women, and they all need insurance. The insurance companies expects those four people will have $10 worth of claims in the next year, so it sets its charges at $3 each, so there’s $10 to cover expenses, and $2 profit.

But then they come up with an idea, they realise that two women will cost more, and so they charge those two women more. Now the girls pay $4 each, and the two boys pay $2. So the boys gain a bit and the girls lose a little, but what’s actually changed? Nothing. The insurance company still gets $12, still pays out $10.

The insurance company wouldn’t bother with that. The reason it wants to differentiate is so it can affect the risk of its clients. It wants one or both of the women to decide they can’t afford $4 and leave the system, taking their high expenses with them. So if a woman left, the company would lose $4 in revenue, but maybe save itself $5 in expenses, so now it makes $8, and only pays out $5. That’s the point of differential pricing to the insurance company.

And in a world where we’ve realised that it’s very important that everyone has insurance, it shouldn’t be too hard to figure out why that kind of approach has been heavily curtailed.


Automatically Appended Next Post:

 Grey Templar wrote:
No. The purpose of the state is to provide external/internal security and public services(and no, fairness is not a public service).

There is no country on earth where government is limited to that mandate.

 Grey Templar wrote:
The government does not exist to ensure everyone's life is fair, not even a little bit.

Then why does the Bill of Rights exist? Or the US Declaration of Independence?

 Grey Templar wrote:

But that had nothing to do with what we were talking about.

How so? We have been talking about US healthcare for at least 2 pages.

 sebster wrote:

 Grey Templar wrote:
OR if its to compensate for an inherent risk that person poses.

Really, the risk for something out of someones control and in someones control makes no difference to the insurance companies. Risk is risk. They should be allowed to charge in relation to it.

And so now I’ll just repost the part of my post that you deleted, because it answered your last post, and answers this post just as well.

“Once again, risks that are spread across the pool do not need to be individually covered. Insurance companies might like to do that so that their own pool of insured people are lower cost individuals, but that doesn't actually improve things for the greater population.”

If you really don’t get it, here’s a simple example. Let’s say the world has four people in it, two men and two women, and they all need insurance. The insurance companies expects those four people will have $10 worth of claims in the next year, so it sets its charges at $3 each, so there’s $10 to cover expenses, and $2 profit.

But then they come up with an idea, they realise that two women will cost more, and so they charge those two women more. Now the girls pay $4 each, and the two boys pay $2. So the boys gain a bit and the girls lose a little, but what’s actually changed? Nothing. The insurance company still gets $12, still pays out $10.

The insurance company wouldn’t bother with that. The reason it wants to differentiate is so it can affect the risk of its clients. It wants one or both of the women to decide they can’t afford $4 and leave the system, taking their high expenses with them. So if a woman left, the company would lose $4 in revenue, but maybe save itself $5 in expenses, so now it makes $8, and only pays out $5. That’s the point of differential pricing to the insurance company.

And in a world where we’ve realised that it’s very important that everyone has insurance, it shouldn’t be too hard to figure out why that kind of approach has been heavily curtailed.

No. What actually happens is the men keep paying $3 and the women pay $4.

Lets say the women average out to $1.5 a year in medical bills. The men are only expected to have $1.

The women are thus charged $4 and the men are charged $3. There is $5 a year in payouts, but the insurance company gains $14. If they went with the equalized model where everyone pays $3 they would only make $12. They are not incentivized to crowd women out because, while they are higher risk they are also higher reward. If they dropped one of the women they would lose $4 in revenue and only $1.5 in costs. This is because the company is always going to charge you more than what they expect you to use, they're not going to take on people they'd lose money on repeatedly. They'll charge those people a matching rate. All they do is charge higher risk patients more money. Even though the probability of paying out is higher if they get more of these customers they'll make more money in the long run. Higher risk = higher reward.

Your example is flawed in that they are not going to be charging only slightly above their expected costs.

Ah - a philosophical question! I do love these.

Having ever-so-quickly scanned the thread and not seen it referenced (apologies if I missed it), I come back to the definition of poverty. What is it exactly?


I would suggest that we start with Maslow's Hierarchy of Needs. https://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs



Simply put, it is an attempt to categorise all needs and desires of humans, starting from the absolutely necessary things for survival all the way through to lofty philosophical/spiritual enlightenment and fulfillment.


To be naked, homeless, starving and illiterate would be by my definition, destitute.

To be clothed (in makeshift, handmade clothing) in a crude shelter and have a command of the basics of language, with little to no education, and hard physical labour as your only option for employment. You may not always get a meal, and when you do its not going to be much or of a high quality. I would define this as poor.

To have some education, with employment still very mechanical or repetitive (little to no requirement for higher thinking) and some basic literacy, numeracy and social awareness. Holidays are a rarity, usually a state-dictated affair than personal. I would describe these people as getting by. They are neither poor, nor are they comfortable.

Beyond that, you have greater levels of material wealth, social mobility and education, which reflect in higher attainment of needs met. They are the rich, the wealthy. Collecting our various miniature hobbies, painting them and arranging them in fictitious battles with each other, this is feeding a psychological need for deeper stimulus; intellectual and creative in nature. This is a 'luxury' in the higher end of needs, regardless of the amount of money spent to acquire them. The fact you have disposable income where you are not *forced* to spend on other necessities deems it so.


This is my small contribution to the debate. I pose the question to the forum, at what point do you draw the line? In order to define poverty, we have to know at what point we deem someone to have 'enough'?

 iLLiTHiD wrote:
This is a 'luxury' in the higher end of needs, regardless of the amount of money spent to acquire them. The fact you have disposable income where you are not *forced* to spend on other necessities deems it so.

I studied maslow's hierarchy of human needs at university, and even though it's a very interesting way of defining human needs, it isn't ironclad. It will apply differently in different aspects of people's lives, and people will short circuit it when certain needs can't be fulfilled. ButteryComissar made an excellent post about this earlier in the topic, about the need to just feel human.

Soldiers during the first world war often wrote poetry, even though their safety was far from secured. This is why people will never be content with just the basics, no matter how poor they are. They will never resign themselves to just not having fun or expressing themselves simply because they can't afford it.

 Grey Templar wrote:
No. What actually happens is the men keep paying $3 and the women pay $4.

Lets say the women average out to $1.5 a year in medical bills. The men are only expected to have $1.

Nope. If the men only cost $1 in expenses, then competition among insurers will drive the price they pay down. Everyone will be chasing men for their own insurance pool, until the price stabilises at the point where show normal profit.

Arbitrage. Read about it.

Anyhow, now that we've got that silliness out of the way, you get back to the reality that if you chop up the pool in to higher and lower cost parts, then each of those pools will still be costed for competitively, at some % above expected cost. Which means the only way to achieve a greater return is for the individual fund to change the make up of people in it's overall risk pool.