by Paul Eigenmann / Managing Director of
A fitness health fund with primarily healthy contributors (= good risks) would in principle be tantamount to abandoning the shared risk insurance idea where healthy people pay for the sick. Sure, such a health fund would certainly be cheap – over the short term at least. In the long term though the whole idea of 'risk-unsharing' is a dead end.
Individual health funds and indeed the health insurance system as a whole evolved during times of health threatening diseases (epidemics) which seemed much more fateful than today's modern lifestyle diseases. The latter is often a result of people's own personal lifestyles (and their genes) but adjusting their lifestyle is mostly within everyone's power and so is responsibility - unlike with epidemics where it is often fate that played a role in who became sick.
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When the consequences of fate exceed the financial limits of individuals, "ideal" conditions are created for "shared risk insurance programs". The healthy pay for the sick – they are, so to speak, grateful for not having suffered that fate themselves. Shared risk insurance schemes have therefore been conceived not only to cover sickness, but also fire, natural hazards etc. |
Shared risk insurance schemes have their limits when people's behaviour impacts the probability of loss or damage occurring and when the relationship between behaviour and incurred damages can be demonstrated. |
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Such insurance schemes are often omnium insurances, where it can be clearly established whether or not a claim is genuine. And should there be any doubts, careful investigation is undertaken to find out if for example fraudulent claims for damages (such as malicious arson) have been made. Viewed from this perspective, someone who becomes ill due to overeating and complete lack of physical exercise wouldn't have a claim, but would more likely be considered an arsonist...
As soon as it becomes clear that the cause for a damage event may be linked to personal responsibility, shared risk insurance solutions reach their limits. Undoubtedly road users may be involved in accidents as a result of fate (= shared risk insurance) but it is equally clear how drivers' own behaviour behind the wheel impacts the probability of getting involved in an accident (=merit-rating system). Because the causality between driving behaviour and an accident can be established in the case of a claim, culpable drivers are punished with an extra premium while driving without causing an accident is rewarded with a premium rebate. Today even whole groups of the population with a statistically increased risk behaviour are charged higher premiums. It seems that specific and well-founded risk-sharing is profitable business – but the same cannot be said about health insurance schemes...
Why, many people ask themselves, can the method of insuring cars not be applied to health insurance where people who exhibit high risk behaviour must pay a higher, risk-dependent premium? The answer is quite simple:
• It is both impossible and undesirable to continually monitor the behaviour of people and check if they conform with healthy principles. Even car insurers don't check drivers' behaviour on the road. What they do in the event of a claim is establish the causality between their behaviour at the time (such as speeding) and the damage event (accident) – and if necessary 'punish' the driver with a fine or an extra premium.
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Unlike in the case of road accidents, the causality between illness and possible wrong behaviour cannot be as easily demonstrated beyond doubt using hard and fast physical laws. What's more, there is no legal body such as the police that might carry out the required investigations funded by taxpayers' money. |
The causality between wrong behaviour and sickness is more long term and cannot be demonstrated as reliably as in road traffic. |
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• Again, unlike with road accidents, illness can frequently occur without having been caused by "wrong behaviour" (at least based on current facts). Old or very young people for instance fall ill more frequently than middle-aged adults and the cause is not a direct result of their own maladaptive behaviour. In other words there are large fractions of the population that – largely irrespective of their own behaviour – exhibit a higher health risk. Health insurance schemes are not just based on risk sharing between the healthy and the sick, but also within one's own lifecycle: Each individual insured person pays for his own high-risk policy in his old age during his younger and middle-aged years.
With this in mind, it remains incomprehensible why, when the new health insurance legislation was adopted in the middle of the 1990s, the idea was put forward that to allow people to change between health insurance funds without any restrictions or premium increases whatsoever might improve things.
This option of changing between health insurance funds without any restrictions or premium increases provided for by the new health insurance law has merely led to a disastrous hunt for good risks, such as gym members...
Gym members represent good risks. This has been widely demonstrated and is the reason why most health insurers are hunting these good risks, or at the very least are trying to ensure they do not lose these clients. But why not turn the table and set up a dedicated fund for gym members straight away? It's clear that such a health fund would be much cheaper, and not just because of the reduced risk of sickness among its members, but also because gym members are probably in a better position from a financial and health point of view to absorb higher cost sharing.
Unfortunately this would only be a short-lived affair – such a health fund would inevitably attract too many members of other, more expensive funds. Other funds are more expensive mainly because they cater for 'bad risks' (= cost intensive members) which means that the initially low overall risk of the fitness fund would also move towards a more normal level. The next issue will feature an article on the impact of such 'risk unsharing' as applied to a fitness health fund.
no. 106 / p. 88