The Beauty of "A la Carte" Insurance Plans

[tcmay@got.net (Timothy C. May)]

At 8:44 PM 9/18/96, jbugden@smtplink.alis.ca wrote:

>I don't speak for the left, nor for the right. I don't think that there is a
>unified voice on either side of the political spectrum. However I do find it
>ironic that market driven health insurance has the potential to be more
>intrusive into personal life than many government systems (cf. genetic
>screening).
>
>If all you do is replace Big Brother with Big Business, then all that has
>changed is the name.

To paraphrase the character in "The Graduate": "One phrase, Benjamin...a la
carte insurance."

I delight in explaining this point to people, and watching the glimmer of
understanding take hold, then watching them realize the implications. I
recall explaining this view a couple of years ago here on this list, but
probably not since then. So, time has come for me to give it another shot.

Is there an alternative to a Giant Corporation (tm) essentially performing
the role of Big Brother? I submit that there is.

Here's what one does. I'll use a concrete example. Suppose that one is not
a homosexual, is not engaging in anal intercourse with partners, is not an
IV drug user, and is not a hemophiliac. Further, suppose that one is
reasonably monogamous (e.g., fewer than several different sex partners a
year, and such partners are themselves not in high-risk groups, as defined
in the first part of this paragraph). Such a person is in a very low risk
group for AIDS.

What one does is to *opt out* of any coverage for AIDS-related coverage.
One opts out completely, signs a waiver to this effect, and absolves the
insurer of any responsibility for AIDS- or ARC-related illnesses.

(This is not perfect, is not "fine-grained" enough, compared to an insurer
doing exhaustive tests and lifestyle interrogations and then offering some
precise rate to be paid. But it has the advantage that the insurer does not
get the exhaustive and intrusive lifestyle information, and the rough cut
of "opting out" is almost certainly OK for most low-risk persons. Your
mileage may vary, in which case you may submit to a detailed lifestyle
analysis. Sadly, many laws exist which don't allow insurance companies to
ask the questions and do the tests needed to establish the risk of getting
AIDS--sort of like not allowing an insurance company to ask if a person is
a low-risk philosopher or a high-risk aircraft test pilot!)

Ditto for any other disease which one can either make a reasonable estimate
of, or can be _tested for_ (tested privately, independently of any
insurance company!). Thus, for the various _genetic_-related diseases, one
can check independently to see if one is a reasonably likely carrier of
such genes, and, if not, can *opt out* of any coverage for those diseases.

This process of *opting out* has the beautiful advantage of taking one's
self out of the "subsidizers" pool while not materially affecting one's
actual risk of being uncovered for some disease or condition. And all
without an intrusive physical exam (though an exam may still be asked for,
etc.).

The parallel is quite close to people opting out of coverage for things
they know they are not at risk for, such as hang-gliding accidents,
horseback-riding accidents, aircraft test piloting, etc. (Such exemptions
are not "enforced" by the insurance company following one around, or
mounting a "position escrow" device on one's body, but by the eminently
reasonable approach of simply not paying off if the accident was due to a
hang-gliding accident, a horseback riding accident, etc.  This is how the
"non-smoker" discounts in auto insurance work...finding strong evidence
that one is actually a smoker (crud in the lungs, cigarette butts all
around the house when living alone, etc.) is positive evidence that one
lied about being a non-smoker, and the policy is cancelled without payout.)

I wish I could say I thought of this strategem of "opting out," but I
believe I read about it some years ago in "Reason" or "Liberty." It
understandably outrages liberals, who realize that people will arrange
private tests for themselves, and will then opt out of a la carte coverage
of diseases they reasonably believe are unlikely to affect them. (Nothing
is certain, of course, and there is some chance that if one opts of
coverage for Lou Gehrig Disease, or MS, or AIDS, that one may still end up
with one of these diseases. TANSTAAFL, and most people will jump at the
chance to remove themselves from a pool for something they feel they are
very unlikely to get.)

To relate this to the other examples, if one opts out of SCUBA-diving
coverage, because one is not a SCUBA diver, this does not require the
insurance company to intrusively investigate one's life. Diving accidents
just don't get covered, period.

Some have argued that a la carte insurance should be banned, for precisely
this reason, that people will always be able to "game against" the rules.
(To make this clear, the flip side of someone opting out of coverage for
Disease A is that someone else may already know they are very likely to
have Disease A or be at strong risk for Disease A. Forcing an insurance
company to accept all applicants means this second category can game
against the system, getting more out of the system than they expect to put
in.)

Supporting the "opting out" or "a la carte" approach to insurance allows
personal privacy to be maximally preserved.

--Tim May

We got computers, we're tapping phone lines, I know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^1,257,787-1 | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."