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Author: rharmelink Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19224  
Subject: Re: Lower Health Premiums in NY Date: 7/19/2013 6:08 PM
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This will reduce premiums for those individuals who are currently priced out of the market.

OK, let's set up a simple case.

You have a population of 100 people, broken up into 3 risk groups:

A. Low risk, 20 people averaging $1K per year.
B. Medium risk, 78 people averaging $3K per year.
C. High risk (pre-existing conditions) 2 people averaging $73K per year

That comes out to a population average of $4K per person.

You're one of five insurance companies competing for business. What price do you set on your policies? If you charge $4K, you'll lose money if either of those (C) individuals join your plan.

Assuming you can get 20% of the population, you'd need to charge over $6K if only one (C) individual joins your plan.

However, why would I as an (A) or (B) individual pay $6K when the insurance company next door, who has no (C) individuals in the plan, charges under $3K? I'll cancel my policy and move to the other company. Now, the remaining individuals in the first insurance company need to pay more, to account for one less member paying in. Why wouldn't the others than move, as their costs go up?

And why would any (A) individual want to join a plan that would cost him triple or more his current health care costs?

Instead, those (C) individuals should be covered by EVERYONE, using taxation. Not fellow policy holders. Then the insurance companies are free to compete for those other 98 people. In other words, the (A) and (B) individuals each need to pony up about $1.5K to cover those in group (C), regardless of their own health-care situation.

You don't want people to escape their "fair share" of "income redistribution" for those with pre-exisiting conditions by not joining an insurance plan.

The simple truth is -- collected premiums need to cover outgoing expenses.
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