Universal Insurance = High Premiums?

Forbes has an Article today "ObamaCare could punish you for being healthy" at http://www.forbes.com/2009/06/11/obama-health-care-reform-insurance-business-healthcare-obamacare.html.

The gist of the article is if we had to insure every one and had to give every one the SAME rate then the cost of the insurance for healthy people is going to be greater than that for sick people.

This of course is a true statement. The deeper question is to evaluate two things:

a. Are insurance premiums a strong incentive/dis-incentive for healthy/unhealthy behaviors?
b. Is health insurance like car insurance or is it more akin to utility?

The primary incentive for being healthy is you live longer and in less physical pain. You are less restricted for longer in doing whatever activity you want to engage in. Healthy behaviors extend the healthy state, and unhealthy behaviors shrink the period we are healthy. I don't think using the insurance premium as a incentive or penalty gets you much "utility".

Now people have mentioned that in auto insurance if you drive poorly (unhealthy behavior) your rates go up; if you drive well and have no claims (healthy behavior) your rates stay low. The logic extreme of course is there comes a point at which insurance is no longer affordable and you don't (should not) drive any more. So when your health insurance does not become affordable we would say the person should not...?

I think health insurance is not a category similar to other risk insurance. Health insurance is by definition risk pooling and socializing of costs. So you are better off creating population sized pools (I am not advocating single payer) -- but create large pools such that the costs reflect the population costs and then treat it is a tax -- everybody pays an equal share. Some people get subsidized because they can't afford it otherwise.

To make it fair and market oriented we should try to allow lots of fair competition with clear standards, opportunities for profit, price and quality transparency and lots of choice. We do this in lots of other industries without this crazy runaway inflation and terrible quality record.