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May 13, 1992, Vol 267, No. 18 >
ARTICLE | May 13, 1992

The Practice and Ethics of Risk-Rated Health Insurance FREE

Donald W. Light, PhD
[+] Author Affiliations

Reprint requests to 401 Haddon Ave, Camden, NJ 08103 (Dr Light).


JAMA. 1992;267(18):2503-2508. doi:10.1001/jama.1992.03480180089035
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References

Health insurance in the United States is driven by competitive risk rating and is promoted as the best way to give policyholders optimal value for their money and to be fair to those with lower risks. In practice, however, competitive risk rating costs more than noncompetitive, universal systems of health insurance, and it erodes the basic function of insurance to spread infrequent large losses over a wide base. This article describes not only how risk rating covers least those with the greatest medical bills, but also how it has spawned a labyrinth of complex manipulations by insurance companies to charge more or pay less than actuarially fair risk rating would justify. The final section shows that even if risk rating were done fairly, it contradicts moral fairness. Many of the leading proposals for national health insurance do not address these practical and ethical issues. The medical profession and policymakers need to discuss them and take a stand on them.

(JAMA. 1992;267:2503-2508)

REFERENCES

1 +
US Office of Technology Assistance. AIDS and Health Insurance . Washington, DC: US Office of Technology Assistance; 1988;.
2 +
Promoting Health Insurance in the Workplace: State and Local Initiatives to Increase Private Coverage . Chicago, Ill: American Hospital Association; 1988;.
3 +
US General Accounting Office. Health Insurance: Cost Increases Lead to Coverage Limitations and Cost Shifting . Washington, DC: US General Accounting Office; 1990;. Publication HRD-90-68.
4 +
Congressional Research Service. Health Insurance and the Uninsured: Background Data and Analysis . Washington, DC: Congressional Research Service; 1988;. Publication 85-568.
5 +
Trevino FM, Moyer ME, Valdez RB, Stroup-Benham CA.  Health insurance coverage and utilization of health services by Mexican Americans, mainland Puerto Ricans, and Cuban Americans. JAMA . 1991;;265:233-237.
6 +
Wenneker MB, Epstein AM.  Racial inequalities in the use of procedures for patients with ischemic heart disease in Massachusetts. JAMA . 1989;;261: 253-257.
7 +
Short PF. National Medical Expenditures Survey: Estimates of the Uninsured Population: Calendar Year 1987: Data Summary 2 . Rockville, Md: National Center for Health Services Research and Health Care Technology Assessment; 1990;.
8 +
Farley P.  Who are the underinsured? Milbank Q . 1985;;63:476-503.
9 +
Freudenheim M.  Employers winning wide leeway to cut medical insurance benefits. New York Times . (March 29) , 1992;:1, 24.
10 +
Rothstein MA. Medical Screening and the Employee Health Cost Crisis . Washington, DC: Bureau of National Affairs; 1989;.
11 +
Nelkin D, Tancredi L. Dangerous Diagnostics . New York, NY: Basic Books Inc Publishers; 1989;.
12 +
Stone D.  At risk in the welfare state. Social Res . 1989;;56:591-633.
13 +
Hunt M.  The total gene screen. New York Times Magazine . (January 19) , 1986;:33, 38, 55-60.
14 +
Waldholz M.  The diagnostic power of genetics is posing hard medical choices: ability to detect conditions but not to treat them may increase abortions. Wall Street J . (February 18) , 1986;:1.
15 +
Neil RAW, Mant D.  Cholesterol screening and life assurance. BMJ . 1991;;302:891-893.
16 +
Cotton P.  Preexisting conditions 'hold Americans hostage' to employers and insurance. JAMA . 1991;;265:2451-2453.
17 +
Beebe J, Lubtiz J, Eggers P.  Using prior utilization to determine payments for Medicare enrollees in health maintenance organizations. Health Care Finan Rev . 1985;;6:27-37.
18 +
Lubitz J.  Health status adjustments for Medicare capitation. Inquiry . 1987;;24:362-375.
19 +
Nadel MY. Health Insurance: Availability and Adequacy for Small Businesses . Testimony before the Subcommittee on Antitrust, Monopolies and Business Rights, Committee on the Judiciary, US Senate. US General Accounting Office publication GAO/T-HRD-90-33; June 5, 1990;.
20 +
Community Rate Schedules and Development . Newark, NJ: Blue Cross and Blue Shield of New Jersey, Inc; March 28, 1990;.
21 +
The Public Advocate vs Blue Cross and Blue Shield of New Jersey. NJ Super Ct App Div A-2232-89T1.
22 +
Light DW.  NJ citizens stop Blue Cross discrimination. Health/PAC Bull . (Winter) 1990;:34-35.
23 +
Mondics C.  Anger grows over Blue Cross rate hike. Bergen Rec . (March 13) , 1992;:1.
24 +
Heidorn R Jr.  State tries to deal with insurance fiasco. Philadelphia Inquirer . (March29) , 1992;:B1, B3.
25 +
Indemnity Plans: Costs, Design, and Funding . Princeton, NJ: Foster Higgins; 1990;.
26 +
Kolata G.  New insurance practice: dividing sick from well. New York Times . (March 4) , 1992;:A1, A15.
27 +
Grumet GW.  Health care rationing through inconvenience: the third party's secret weapon. N Engl J Med . 1989;;321:607-611.
28 +
Saywell RM Jr, Zollinger TW, Chu OK, MacBeth CA, Sechrist ME.  Hospital and patient characteristics of uncompensated hospital care: policy implications. J Health Polit Policy Law . 1989;; 14( (2) ):287-307.
29 +
Blendon RJ, Leitman R, Morrison I, Donelan K.  Satisfaction with health systems in ten nations. Health Aff . 1990;;9:185-192.
30 +
Harvey LK. American Medical Association Survey of Public and Physicians' Opinions on Health Care Issues . Chicago, Ill: American Medical Association; 1990;.
31 +
Harvey LK. American Medical Association Survey of Public and Physicians' Opinions on Health Care Issues . Chicago, Ill: American Medical Association; 1991;.
32 +
McQueen M.  Voters, sick of the current healthcare system, want federal government to prescribe remedy. Wall Street J . (June 28) , 1991;:A14.
33 +
US House of Representatives, Select Committee on Aging. Abuses in the Sale of Health Insurance to the Elderly in Supplementation of Medicare: A National Scandal . Washington, DC: US House of Representatives Select Committee on Aging; 1978;. US Dept of Health, Education, and Welfare publication 052-070-04742-9.
34 +
McCall N, Rice T, Hall A.  The effect of state regulations on the quality and sale of insurance policies to Medicare beneficiaries. J Health Polit Policy Law . 1987;;12:53-76.
35 +
US General Accounting Office. Medigap Insurance: Law Has Increased Protection Against Substandard and Overpriced Policies . Washington, DC: US General Accounting Office; 1986;. Publication GAO/HRD-87-8.
36 +
Shikles JL. Medigap Insurance: Proposals for Regulatory Changes and 1988 Loss Ratio Data . Washington, DC: US General Accounting Office; 1990;. Publication GAO/T-HRD-90-35.
37 +
Pear R.  US to simplify insurance plans for the elderly. New York Times . (April 9) , 1991;:A1, A20.
38 +
Pear R.  Elderly get new protections on health insurance. New York Times . (November 5) , 1991;:A1, A17.
39 +
McLeod D.  Nursing home insurance under fire: abolishing 'lemon' policies. AARP Bull . 1991;;32( (7) ): 4-5.
40 +
Geer CT.  The promises and pitfalls of nursing home insurance. Forbes . (December 9) , 1991;:168-169.
41 +
Meier B.  A growing US affliction: worthless health policies. New York Times . (January 4) , 1992;:1, 46.
42 +
Schramm CJ.  Insurers advocate HIV testing. AIDS Patient Care . (February) 1988;:4-6.
43 +
Stone DA.  AIDS and the moral economy of insurance. Am Prospect . 1990;;No. (1) :62-74.
44 +
Nozick R. Anarchy, State and Utopia . Oxford, England: Blackwell Scientific Publications Inc; 1974;.
45 +
Clifford HA, Iuculano RP.  AIDS and insurance: the rationale for AIDS-related testing. Harvard Law Rev . 1987;;99:727-751.
46 +
Wright R.  The end of insurance. New Republic . (July 9/16) , 1990;:26.
47 +
Hadley J, Steinberg EP, Feder J.  Comparison of uninsured and privately insured hospital patients: condition on admission, resource use, and outcome. JAMA . 1991;;265:374-379.
48 +
US Government Accounting Office. Canadian Health Insurance: Lessons for the United States . Washington, DC: US General Accounting Office; 1991;. Publication GAO/HRD-91-90.
49 +
Kronick R.  Health insurance, 1979-1989: the frayed connection between employment and insurance. Inquiry . 1991;;28:318-322.
50 +
US Dept of Commerce. US Industrial Outlook 1991: Health and Medical Services . Washington, DC: US Dept of Commerce; 1991;.
51 +
Daniels N.  Insurability and the HIV epidemic: ethical issues in underwriting. Milbank Q . 1990;;68: 497-525.
52 +
Rawls J. A Theory of Justice . Oxford, England: Oxford University Press; 1989;.
53 +
Daniels N. Just Health Care . Cambridge, England: Cambridge University Press; 1985;.
54 +
President's Commission for the Study of Ethical Problems in Medicine and Behavioral Research. Securing Access to Health Care . Washington, DC: President's Commission for the Study of Ethical Problems in Medicine and Behavioral Research; 1983;:4-5.

Figures

Tables

Interactive Graphics

Video

Country-Specific Mortality and Growth Failure in Infancy and Yound Children and Association With Material Stature

Use interactive graphics and maps to view and sort country-specific infant and early dhildhood mortality and growth failure data and their association with maternal

1 +
US Office of Technology Assistance. AIDS and Health Insurance . Washington, DC: US Office of Technology Assistance; 1988;.
2 +
Promoting Health Insurance in the Workplace: State and Local Initiatives to Increase Private Coverage . Chicago, Ill: American Hospital Association; 1988;.
3 +
US General Accounting Office. Health Insurance: Cost Increases Lead to Coverage Limitations and Cost Shifting . Washington, DC: US General Accounting Office; 1990;. Publication HRD-90-68.
4 +
Congressional Research Service. Health Insurance and the Uninsured: Background Data and Analysis . Washington, DC: Congressional Research Service; 1988;. Publication 85-568.
5 +
Trevino FM, Moyer ME, Valdez RB, Stroup-Benham CA.  Health insurance coverage and utilization of health services by Mexican Americans, mainland Puerto Ricans, and Cuban Americans. JAMA . 1991;;265:233-237.
6 +
Wenneker MB, Epstein AM.  Racial inequalities in the use of procedures for patients with ischemic heart disease in Massachusetts. JAMA . 1989;;261: 253-257.
7 +
Short PF. National Medical Expenditures Survey: Estimates of the Uninsured Population: Calendar Year 1987: Data Summary 2 . Rockville, Md: National Center for Health Services Research and Health Care Technology Assessment; 1990;.
8 +
Farley P.  Who are the underinsured? Milbank Q . 1985;;63:476-503.
9 +
Freudenheim M.  Employers winning wide leeway to cut medical insurance benefits. New York Times . (March 29) , 1992;:1, 24.
10 +
Rothstein MA. Medical Screening and the Employee Health Cost Crisis . Washington, DC: Bureau of National Affairs; 1989;.
11 +
Nelkin D, Tancredi L. Dangerous Diagnostics . New York, NY: Basic Books Inc Publishers; 1989;.
12 +
Stone D.  At risk in the welfare state. Social Res . 1989;;56:591-633.
13 +
Hunt M.  The total gene screen. New York Times Magazine . (January 19) , 1986;:33, 38, 55-60.
14 +
Waldholz M.  The diagnostic power of genetics is posing hard medical choices: ability to detect conditions but not to treat them may increase abortions. Wall Street J . (February 18) , 1986;:1.
15 +
Neil RAW, Mant D.  Cholesterol screening and life assurance. BMJ . 1991;;302:891-893.
16 +
Cotton P.  Preexisting conditions 'hold Americans hostage' to employers and insurance. JAMA . 1991;;265:2451-2453.
17 +
Beebe J, Lubtiz J, Eggers P.  Using prior utilization to determine payments for Medicare enrollees in health maintenance organizations. Health Care Finan Rev . 1985;;6:27-37.
18 +
Lubitz J.  Health status adjustments for Medicare capitation. Inquiry . 1987;;24:362-375.
19 +
Nadel MY. Health Insurance: Availability and Adequacy for Small Businesses . Testimony before the Subcommittee on Antitrust, Monopolies and Business Rights, Committee on the Judiciary, US Senate. US General Accounting Office publication GAO/T-HRD-90-33; June 5, 1990;.
20 +
Community Rate Schedules and Development . Newark, NJ: Blue Cross and Blue Shield of New Jersey, Inc; March 28, 1990;.
21 +
The Public Advocate vs Blue Cross and Blue Shield of New Jersey. NJ Super Ct App Div A-2232-89T1.
22 +
Light DW.  NJ citizens stop Blue Cross discrimination. Health/PAC Bull . (Winter) 1990;:34-35.
23 +
Mondics C.  Anger grows over Blue Cross rate hike. Bergen Rec . (March 13) , 1992;:1.
24 +
Heidorn R Jr.  State tries to deal with insurance fiasco. Philadelphia Inquirer . (March29) , 1992;:B1, B3.
25 +
Indemnity Plans: Costs, Design, and Funding . Princeton, NJ: Foster Higgins; 1990;.
26 +
Kolata G.  New insurance practice: dividing sick from well. New York Times . (March 4) , 1992;:A1, A15.
27 +
Grumet GW.  Health care rationing through inconvenience: the third party's secret weapon. N Engl J Med . 1989;;321:607-611.
28 +
Saywell RM Jr, Zollinger TW, Chu OK, MacBeth CA, Sechrist ME.  Hospital and patient characteristics of uncompensated hospital care: policy implications. J Health Polit Policy Law . 1989;; 14( (2) ):287-307.
29 +
Blendon RJ, Leitman R, Morrison I, Donelan K.  Satisfaction with health systems in ten nations. Health Aff . 1990;;9:185-192.
30 +
Harvey LK. American Medical Association Survey of Public and Physicians' Opinions on Health Care Issues . Chicago, Ill: American Medical Association; 1990;.
31 +
Harvey LK. American Medical Association Survey of Public and Physicians' Opinions on Health Care Issues . Chicago, Ill: American Medical Association; 1991;.
32 +
McQueen M.  Voters, sick of the current healthcare system, want federal government to prescribe remedy. Wall Street J . (June 28) , 1991;:A14.
33 +
US House of Representatives, Select Committee on Aging. Abuses in the Sale of Health Insurance to the Elderly in Supplementation of Medicare: A National Scandal . Washington, DC: US House of Representatives Select Committee on Aging; 1978;. US Dept of Health, Education, and Welfare publication 052-070-04742-9.
34 +
McCall N, Rice T, Hall A.  The effect of state regulations on the quality and sale of insurance policies to Medicare beneficiaries. J Health Polit Policy Law . 1987;;12:53-76.
35 +
US General Accounting Office. Medigap Insurance: Law Has Increased Protection Against Substandard and Overpriced Policies . Washington, DC: US General Accounting Office; 1986;. Publication GAO/HRD-87-8.
36 +
Shikles JL. Medigap Insurance: Proposals for Regulatory Changes and 1988 Loss Ratio Data . Washington, DC: US General Accounting Office; 1990;. Publication GAO/T-HRD-90-35.
37 +
Pear R.  US to simplify insurance plans for the elderly. New York Times . (April 9) , 1991;:A1, A20.
38 +
Pear R.  Elderly get new protections on health insurance. New York Times . (November 5) , 1991;:A1, A17.
39 +
McLeod D.  Nursing home insurance under fire: abolishing 'lemon' policies. AARP Bull . 1991;;32( (7) ): 4-5.
40 +
Geer CT.  The promises and pitfalls of nursing home insurance. Forbes . (December 9) , 1991;:168-169.
41 +
Meier B.  A growing US affliction: worthless health policies. New York Times . (January 4) , 1992;:1, 46.
42 +
Schramm CJ.  Insurers advocate HIV testing. AIDS Patient Care . (February) 1988;:4-6.
43 +
Stone DA.  AIDS and the moral economy of insurance. Am Prospect . 1990;;No. (1) :62-74.
44 +
Nozick R. Anarchy, State and Utopia . Oxford, England: Blackwell Scientific Publications Inc; 1974;.
45 +
Clifford HA, Iuculano RP.  AIDS and insurance: the rationale for AIDS-related testing. Harvard Law Rev . 1987;;99:727-751.
46 +
Wright R.  The end of insurance. New Republic . (July 9/16) , 1990;:26.
47 +
Hadley J, Steinberg EP, Feder J.  Comparison of uninsured and privately insured hospital patients: condition on admission, resource use, and outcome. JAMA . 1991;;265:374-379.
48 +
US Government Accounting Office. Canadian Health Insurance: Lessons for the United States . Washington, DC: US General Accounting Office; 1991;. Publication GAO/HRD-91-90.
49 +
Kronick R.  Health insurance, 1979-1989: the frayed connection between employment and insurance. Inquiry . 1991;;28:318-322.
50 +
US Dept of Commerce. US Industrial Outlook 1991: Health and Medical Services . Washington, DC: US Dept of Commerce; 1991;.
51 +
Daniels N.  Insurability and the HIV epidemic: ethical issues in underwriting. Milbank Q . 1990;;68: 497-525.
52 +
Rawls J. A Theory of Justice . Oxford, England: Oxford University Press; 1989;.
53 +
Daniels N. Just Health Care . Cambridge, England: Cambridge University Press; 1985;.
54 +
President's Commission for the Study of Ethical Problems in Medicine and Behavioral Research. Securing Access to Health Care . Washington, DC: President's Commission for the Study of Ethical Problems in Medicine and Behavioral Research; 1983;:4-5.

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