Comments on: Insurance choice can be bad

By: Geoffrey Irving

Geoffrey Irving — Mon, 31 Aug 2009 03:16:27 +0000

For better or worse, I think the conclusion of the argument is that “actuarial science” breaks down in the presence of sufficient individual information plus sufficient individual choice. At a minimum, it means that “actuarial science” has to mean “actuarial science plus game theory plus security analysis” in order to track knowledge and knowledge leakage. If these can be made to work, I’d prefer market mechanisms as well, but I don’t see how to target the regulations accurately enough.

Can you think of a natural set of regulations that would, for example, prohibit individuals from choosing different levels of insurance based on whether they plan to have children? Assuming you accept that it makes sense to insure against the costs of pregnancy, that is (which is an entirely subjective thing to accept).

Exotic solutions come to mind, such as allowing customers to craft their own insurance plans and running them through some kind of blind actuarial auction system, but that kind of thing is unattractive.

By: Jon

Jon — Mon, 31 Aug 2009 02:08:22 +0000

Regarding the marxist line, the qualifier “in a cooperative pool” is critical. A single payer system is one such example of such a pool, but so are more fragmentary constructions (such as are being proposed in some of the bills). I think these are distinct from ‘insurance’ more generally.

“cooperatives” would likely be apportionment of benefits (and “taxes”) by a political process–whereas, ‘insurance’ implies something based on actuarial science.

Clearly I’d like to make something work more like the latter than the former.

By: Geoffrey Irving

Geoffrey Irving — Mon, 31 Aug 2009 00:46:09 +0000

Pregnancy costs are a good example. It’s unfortunate that you have to throw in the socialism reference, though. In an ideal world, we’d be able to separate the issue of insurance from the idea of progressive taxation, since they really are separate. However, but I’ll grant that this probably isn’t that world.

By: Jon

Jon — Sun, 30 Aug 2009 23:43:45 +0000

One case of this is pregnancy costs. Accidental pregnant is rare (scare stories about teens aside). Pregnancy is planned; yet I think most would insist upon its inclusion in any health plan. No not because they are concerned about accidental pregnancy but because they want the benefit.

In a cooperative pool, people will demand what they will consume and resist what they will not. From each according to his ability, to each according to his need.