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Preeti on the Web |
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Providing Food for Thought |
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Young, healthy males are leaving Duke’s student health insurance plan. As a result, the plan is becoming more concentrated with expensive-to-insure students, which drives up insurance costs. |
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Duke’s insurance plan is the victim of adverse selection |
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March 22, 2006 |
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To Contact Preeti: preetiontheweb at yahoo dot com |
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Note: This op-ed column appeared in The Chronicle Mar. 22, 2006. Young, healthy men: Please don’t defect. We need you. That was the underlying message I got while sitting through a statistics-filled PowerPoint presentation on Duke’s student health insurance plan at Monday night’s GPSC meeting. Currently, students pay $1,589 for insurance. That’s 50 percent higher than the $1,063 students paid just two years ago. As a result, students under 26—who were repeatedly referred to in the GPSC meeting as “young, healthy males”—have been defecting from Duke’s student health insurance plan and privately purchasing cheaper individual plans. Sadly, those of us who aren’t young, healthy and/or male don’t have that luxury. To join a private, individual plan, applicants have to complete an extensive medical history questionnaire. If you’re older, if you’re female or if you have a pre-existing condition such as allergies, diabetes or an anxiety disorder, then you are typically charged a higher cost or are outright rejected. Thus, expensive students—those over 25, female and/or unhealthy—remain on Duke’s plan, which accepts all students at the same price. Any student of economics or public policy should now know the phenomenon I’m describing—adverse selection. As inexpensive students—the young, healthy males—exit Duke’s plan, the plan becomes more concentrated with expensive students, which drives up insurance costs to levels that are increasingly unaffordable to the very people who need healthcare the most. Monday’s presentation included a recommendation for age banding, a structural change that would address adverse selection head-on. Next year students under 26 would pay $1,469, those 26 to 34 would pay $1,541, those 35 to 44 would pay $1,939 and those older than 45 would pay $2,791. Given that all students, regardless of their age, currently pay $1,589, it’s clear who the winners and the losers would be. Let me emphasize that age banding is just a recommendation at this point. (If you have feelings either way, e-mail GPSC at gpsc@duke.edu.) Age banding represents just one of the many ethical dilemmas that plague health insurance. Just as younger students currently subsidize the higher medical costs incurred by older students, single students subsidize students with families. During the 2003-2004 academic year, single students paid $1,063 for health insurance but only rang up an average of $757 in medical costs. Meanwhile, students with families paid $2,282 for insurance but rang up an average of $4,773 in medical costs. Similarly, if the data were available, it would probably show that men subsidize women, slim people subsidize obese people, non-smokers subsidize smokers and gym rats subsidize coach potatoes. From a philosophical viewpoint, how much of this subsidization is fair, both at Duke and in the United States at large? On one hand, there’s the individualistic, personal-responsibility-oriented viewpoint: Why should I, as a slim, marathon-running vegetarian, have to pay the healthcare costs of a fat smoker who goes to McDonald’s three times a week? On the other hand, there’s the compassionate, we’re-all-in-this-together viewpoint: Society should help people who have the bad luck of being afflicted by asthma or hypoglycemia. Plus, people who are young and childless today are likely to one day be old and have kids. I lean more toward the compassionate, we’re-all-in-this-together viewpoint even though it means subsidizing people who make poor lifestyle choices. For ethical reasons, I want people with ulcers, hay fever, depression, thyroid disorders, spina bifida and cancer to have access to affordable healthcare. For pragmatic reasons, I want people to have affordable healthcare so that they can be economically productive workers and receive relatively inexpensive routine preventative care rather than expensive emergency care when untreated health problems turn into emergencies. As I sat through last night’s health insurance presentation, I came to the conclusion that the equity issues raised by age banding, single students’ subsidization of families and the defection of young, healthy men are problems that Duke simply can not solve on its own. Without outside help from effective public policies at the state and/or national levels, Duke and other institutions will perennially face the problem of getting enough inexpensive people to remain in a plan and subsidize the expensive people. Presently, my sentiment is that it would be more practical for Duke’s most expensive students to be subsidized by Americans as a whole rather than the shrinking population of young, healthy males on Duke’s plan. Young, healthy males may be able to defect from Duke, but it’s harder to defect from the United States. |
