Tuesday, September 10, 2013

Price Discrimination for Health Insurance

Mrs. Spivonomist is eligible for open enrollment at her new place of employment. She has expressed some... well, let's call it consternation at the baroque processes by which one now signs up for medical insurance with the provider her company uses.

The most irritating part? It's kind of laughable if you've taken a principles of microeconomics course. They offer discounts on the order of five or ten bucks a month if you take two out of four offered courses: 
  1. Smoking cessation (we both quit in 2002)
  2. Weight management 
  3. I can't recall the other two, but they were also inapplicable to our situation.
Point is, these courses would have been entirely orthogonal to our interests. A waste of time, if you will. But they allow for some price discrimination. Folks whose time is valuable because of high opportunity cost also tend to be those folks who would have a high willingness to pay to avoid nonsense courses offered by insurance companies. They can then extract some of this consumer surplus. Straightforward relative price economics.

Here's the curious thing for me: as tech improves and these firms are legislatively barred from price discrimination along certain margins, should we expect to see more of this sorts of skulduggery? Is this even dirty pool? 

And now that medical coverage is coercive, how will folks adjust their attitudes towards insurance firms? My gut tells me that it'll become more adversarial than it already is. I'm with the GTM. I'd bet even odds that the US will be single-payer by the time my daughter is old enough to have her own coverage.

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Do you have suggestions on where we could find more examples of this phenomenon?