Saturday, July 21, 2007

John Tamney, Hits the Economic Nail on the Head, Again

Without Healthy People, There Is No Insurance

By John Tamney

A recent newspaper headline bemoaned the fact that "Insurance rewards healthy workers." A similarly tautological headline might be that, "Employers reward productive workers." What's surprising isn't that healthy employees would be rewarded with cheaper insurance premiums, but that something so logical could be passed off as news.

USA Today's Julie Appleby began the above-mentioned article with a scenario suggesting that an overweight worker "with high cholesterol and blood pressure could pay $2,000 more a year in health insurance deductibles" than a more fit co-worker under a new insurance plan being offered by UnitedHealthcare (UHC). The latter firm is set to begin offering new policies that will reward its customers not just for living healthy lifestyles, but for actual health results.

Specifically, UHC will offer high deductible insurance of $2,500 per year for individuals, alongside $5,000 per family. The innovation within is that the plan offers its enrollees an opportunity to lower their annual deductibles by submitting to blood tests and other evaluations to see if they smoke, and generally measure up to other targets set in terms of blood pressure, cholesterol, and height/weight ratio.

Not surprisingly, UHC's evolved form of insurance has attracted its share of criticism, specifically from Jamie Court of the Foundation for Taxpayer & Consumer Rights. Court says, "If you want people to live healthier lives, you need to educate them and make it safe for them to seek medical treatment, without fear of financial penalties." Without addressing how the plan will save healthier-living consumers money, Court misunderstands the happy truth that insurance companies are in the business of making money. Wanting to avoid excessive costs, firms in the insurance space will have a very real incentive to make sure their customers are well educated about healthy living in a way that will save customers and providers money, all the while offering the former an incentive to improve how they live.

Court adds that the new plan "is turning health care into a police state." In truth, customers will have a choice as to whether they want to meet the requirements set by UHC. No one will force them to live in a way that could potentially save them money.

Furthermore, for someone who claims to defend consumer rights, Court has an interesting way of showing it. The reality is that the consumers who live more healthily will gain from UHC's product, and importantly, not have to pay as much for the excesses of others within traditional plans. Rather than an assault on the consumer, UHC's innovation means there will be less in the way of "moral hazard" that presently exists due to customers being treated equally irrespective of their lifestyles.

Most importantly, it should be remembered that without healthy people, there is no insurance. Insurance firms prosper and compete for customers given the certainty that some will need less in the way of health care, and because of that, their premiums will fund the doctor visits of those who aren't as healthy. UHC's logical innovation doesn't strip the sick in favor of the strong, but it does give both an incentive to save money through voluntary actions that will make them feel and look better.

Once again, the only surprise here is that such a logical step (sure to be followed by others) made by UHC is news, and more surprising, that it's being criticized.

Tamney is the editor of RealClearMarkets and can be reached at


In our increasingly political correct world, it's getting to be scandalous that companies should be in business to make a profit and to reward its best and healthiest customers. What ever is this world coming to?!

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