Matthew Yglesias » Insurance Premiums

Sep 10th, 2008 at 6:22 pm

Insurance Premiums

Josh Bivens says it’s not just gasoline that’s squeezing family budgets:

Lipstick!

Comments
24

24 Responses to “Insurance Premiums”

howard Says:
September 10th, 2008 at 6:51 pm
as a couple of fine points on that: the percentage of people employed with health insurance has fallen some 5-7% in the past 8 years, and the out-of-pockets that people pay when they have insurance through their job have risen.

http://www.kff.org/insurance/7672/
Flo Says:
September 10th, 2008 at 6:57 pm
Doc has to gas up his Hummer……. unlike Matt he’s not going to walk or bike. Same goes for CEO of the insurance company.
John Henry Says:
September 10th, 2008 at 7:03 pm
Healthcare Baby Healthcare!
right Says:
September 10th, 2008 at 7:19 pm
Of course, one thing to keep in mind is that while gasoline is just gasoline today, yesterday and forever, and same for electricity, so cost increases there are pure inflation.

Health-care, on the other hand, gets better over time. New drugs, procedures and treatments are uncovered every day, so you would expect upward movement in the cost of premiums.
pseudonymous in nc Says:
September 10th, 2008 at 7:34 pm
New drugs, procedures and treatments are uncovered every day, so you would expect upward movement in the cost of premiums.

That’s a non sequitur. As new drugs are discovered, older drugs go off patent; as treatments develop and become widespread, efficiencies emerge; as techniques become widely-adopted, you no longer need to go to a handful of specialists to have them performed.

There are bottlenecks, often run as moneyspinners: the MRI racket, for instance. But the entire premise is just silly: is it logical to argue that auto insurance premiums would rise because vehicles have more safety features year on year?
AB Says:
September 10th, 2008 at 7:59 pm
pseudonymous in nc, that response shows such a complete lack of knowledge of how health care trend works that you should really spend quite a few months reading and learning before you ever again try to opine on the matter. Seriously, you couldn’t possibly be more incorrect on the subject, and it’s quite hilarious that you actually seem to think you know what you’re talking about. A certain Billy Madison quote comes to mind.
right Says:
September 10th, 2008 at 8:09 pm
But the entire premise is just silly: is it logical to argue that auto insurance premiums would rise because vehicles have more safety features year on year?

Of course not. Auto insurance doesn’t pay for vehicle safety features. If vehicle repair technology became more and more expensive over time, so would auto insurance premiums.
howard Says:
September 10th, 2008 at 8:12 pm
except that the improvements in health-care are, like all other such improvements, reflected in the hedonic adjustment: what we’re talking about here is increased costs after accounting for qualitative improvement….
AB Says:
September 10th, 2008 at 8:44 pm
what we’re talking about here is increased costs after accounting for qualitative improvement

No, actually we’re not. We’re talking about increased absolute costs due to increased utilization, technological advances, new and expensive drugs, an aging population, and increased cost shifting.
howard Says:
September 10th, 2008 at 8:55 pm
you know what, AB? you’re right. i looked too quickly and assumed it was a real dollars chart. in that case, yes, it’s everything, of which qualitative improvement is one aspect.
JonF Says:
September 10th, 2008 at 9:27 pm
Re: is it logical to argue that auto insurance premiums would rise because vehicles have more safety features year on year?

Auto premiums have risen as cars have grown more expensive. But with auto insurance there’s a fairly low cap: too much damage and the vheicle is simply totaled. But you can’t total out a human being, and a single hospital stay can wrack up a higher payout than totaling out Queen Elizabeth’s rolls royce would.
Mixner Says:
September 10th, 2008 at 9:57 pm
pseudo,

That’s a non sequitur. As new drugs are discovered, older drugs go off patent; as treatments develop and become widespread, efficiencies emerge; as techniques become widely-adopted, you no longer need to go to a handful of specialists to have them performed.

It’s your statement that’s a nonsequitur. The point is that health care is not a commodity like energy but a vast and constantly improving set of products and services. As such, it makes little sense to compare changes in the cost of health care with changes in the cost of a fixed commodity.

But the entire premise is just silly: is it logical to argue that auto insurance premiums would rise because vehicles have more safety features year on year?

You are clearly utterly confused about the premise. More car safety features might be expected to raise the cost of cars, but not of car insurance. If anything, they would be more likely to lower the cost of insurance by reducing the risk of accidents or the costs arising from accidents.
pseudonymous in nc Says:
September 11th, 2008 at 1:46 am
I’ll ignore squeakypants directly upthread, except to say that ‘cost of health insurance premiums’ is not the same thing as ‘cost of health care’.

I’ll grant that the cost of health care per se rises, particularly on account of increased utilization, an aging population, and greater access to previously limited treatments. The cost of premiums does not correspond directly to the cost of care. And I take issue with ‘right’ asserting that innovation is the key driver for rising premiums: hooking Grandma up to machines to give her an extra three months is not innovation; sending people to the Magic MRI Machine at the drop of a hat is not groundbreaking medicine.

(The McKinsey study from 2007 goes some way towards showing where the existing healthcare expenditure goes.)
Mixner Says:
September 11th, 2008 at 2:08 am
pseudo,

that ‘cost of health insurance premiums’ is not the same thing as ‘cost of health care’.

Another nonsequitur. The cost of health insurance premiums is obviously correlated with the cost of health care. Health insurance premiums go up because health care costs go up.

I’ll grant that the cost of health care per se rises,

You don’t need to “grant” it since we didn’t think you disputed it. The part you don’t seem to understand is that the increase in cost is not simply a matter of paying more for the same “health care,” but paying more for constantly-improving “health care.” New and better drugs, new and better tests, new and better surgeries.

And I take issue with ‘right’ asserting that innovation is the key driver for rising premiums:

Please present your evidence regarding “the key driver” of rising health care premiums.
topgun Says:
September 16th, 2008 at 12:05 am
A couple of questions:

1. If the quality of health care was truly rising as fast as our premiums, shouldn’t this in some way be reflected in the health of the population? Why does the US lag so far behind other countries in infant mortality, life expectancy, etc.?

2. Insurance premiums are not just cost-driven, they’re market driven. They charge what they can get away with charging, and the business has seen drastic consolidation in recent years. Why should we assume that the actual cost of health care is the only variable driving insurance costs, when (apart from financing it) insurance companies contribute absolutely nothing to actual treatment?

3. Right now 30% of our health care dollars go into the pockets of the insurance industry. How many of us would take out a home mortgage or a new car loan with a financial institution that charged 30% interest?
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Matt Yglesias

Insurance Premiums

24 Responses to “Insurance Premiums”

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