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From: ems@amdahl.UUCP (ems)
Newsgroups: net.motss,net.med
Subject: Re: Politics of AIDS, of Foster Care
Message-ID: <2057@amdahl.UUCP>
Date: Tue, 24-Sep-85 15:30:17 EDT
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Posted: Tue Sep 24 15:30:17 1985
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> > [E. Michael Smith]
> > The problem:  Insurance is a form of socialism.  The purpose is to
> > spread the costs generated by one individual over the whole group.
> > ANY attempt to select out ANY higher risk subgroup is in conflict
> > with the basic purpose of insurance.  The inevitable result is a
> > reduction in the cost sharing and a lessening of the 'insurance'.
> > (Yes, I know there are differential rates based on various
> > tables, charts, etc.  The conflict still remains.)
> ---------
> Wrong.  You are correct only if the higher risk subgroup is either
> denied coverage completely or assigned to a separate insurance pool.
> Differential rates (based on risk factors) within the same insurance
> pool in no way lessens the effects of cost sharing.  An insurance
> company with a million customers could use so many risk factors
> that no two customers pay the same rate.  Please explain to me
> how this adversely affects cost sharing.   ...
> Bill Tanenbaum - AT&T Bell Labs - Naperville IL  ihnp4!ihlpg!tan

In a very simple way.  If I pay more than you do for insurance, then
I have greater expense than you do.  My costs are not perfectly shared.
While it is true that in our present economy there are differential
rates based on a variety of 'risk factors' and while it is true that
most of the time the people paying more for coverage are still
getting some sharing of costs; it is also true that the only time
costs are perfectly shared is when all parties pay the same
amount without regard to costs generated.  Any thing else is a
compromise.  (This is probably a point that is not relevent
to the real world,  perfection is rare in it ...)

BTW, I am confused by the statement '...correct only if ... assigned
to a separate insurance pool.'  It would seem to me that the act
of segregating me into a different rate group *is* putting me
into a separate insurance pool...  Or are you saying that an insurance
pool is a given asset base from which insurance can be paid?

Let me try a different model for explaination.  The purpose of
insurance is to share cost, on that I think we have agreed.  If all
costs were summed, then shared equally, we would have perfect sharing.
If all costs were summed, then divided equally by the number of
people, then some people had costs deducted while others had costs added
based on some 'risk factors', we would have imperfect sharing.
(So far, so good, I hope )  At this point I claim that the imperfect
sharing is a reduction of the 'insurance' by the amount extra that
an individual must pay due to risk factors.  Admitedly a very small amount
compared to the potential magnetude of individual costs if one is
totaly uninsured.

The only way that I can see where this would not be true would be
the following.  If the definition of insurance is not taken to be the
sharing of costs, but rather the substitution of *some known* fixed cost
for some unknown variable cost.  Then it would not matter that the
costs were unequally shared.  The only important point would be that
there was a known rather than unknown cost.  The known cost could vary
by individual yet still be 'insurance'.  However, the underlying
mechanism by which insurance companies work depends on the sharing of
costs over a large group, so I would hold the cost sharing definition
to be the best on.

(Sorry about the length of this.  I hope that by making one long
explaination of my position we can avoid several dozen rounds of
missunderstandings...)
-- 

E. Michael Smith  ...!{hplabs,ihnp4,amd,nsc}!amdahl!ems

This is the obligatory disclaimer of everything. (Including but
not limited to: typos, spelling, diction, logic, and nuclear war)