• In Praise of Discrimination

      Tomorrow the Supreme Court rules on the constitutionality of Obamacare. Will they kill the mandate but keep the popular parts?

      This week my syndicated column discusses the benefits of discrimination in health insurance:

      ... Discrimination is what makes insurance work. An insurance regime where everyone pays the same amount is called ‘community rating.' That sounds fair. No more cruel discrimination against the obese or people with cancer. But community rating is as destructive as ordering flood insurance companies to charge me nothing extra to insure my very vulnerable beach house, or ordering car insurance companies to charge Lindsay Lohan no more than they charge you. Such one-size-fits-all rules take away insurance companies' best tool: risk-based pricing. Risk-based pricing encourages us to take better care of ourselves.

      But as I show in my new book, "No They Can't: Why Government Fails - But Individuals Succeed," politicians want to eliminate this choice. And the health insurance companies were happy to go along with it. Why?

      ...Caving seemed to provide the industry with benefits. Insurance companies wouldn't have to work as hard. They wouldn't have to carefully analyze risk. They'd be partners with government -- fat and lazy, another sleepy bureaucracy feeding off the welfare state. Alcoholics, drug addicts and the obese won't have to pay any more than the rest of us.
      But this just kills off a useful part of insurance: encouraging healthy behavior. Charging heavy drinkers more for insurance gives them one more incentive to quit. "No-discrimination" pricing makes health care costs rise even faster. Is it too much to expect our rulers to understand this?

      The rest of my column here.

      Syndicated Column
      Supreme Court