567 sats \ 4 replies \ @gabybaby 25 Nov 2023 \ on: Meta Econ Takeover Day 40 meta
Public healthcare can never work at scale because of adverse selection. You see this already with the ACA exchanges here in the US; people who opt for ACA plans are on average less able to pay full-price (require public subsidies) and need more care. You will never be able to find enough healthy people willing to pay into the system while taking up minimal to none of the pooled resources.
Anyone can see this is true by looking at the plans that are available. Even the cheapest options have massive deductibles and still decently large monthly premiums.
It's one of the reasons I never even considered becoming a health actuary (I'm in property & casualty), the business is fundamentally economically imbalanced and the only way to make profit is to lobby government and find ways to get reimbursed from the feds/states. Just not a real business fundamentally if it's driven mainly by political jockeying and not superior positioning in the marketplace.
The complete perversion of insurance must drive actuaries nuts. It's such a powerful market institution, but it has to be allowed to actually function as insurance.
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It's not really insurance if it inevitably gets stopgapped by taxpayers against their will. It absolutely grinds my fucking gears and when I talk to health actuaries I'm blown away by how much less sophisticated their pricing techniques are relative to my industry's.
We actually rely pretty heavily on data and statistical techniques, significantly less on trying to get our way through political avenues.
One thing too to note about insurance markets, don't be surprised if places like CA or FL see private personal lines insurers (homeowners, auto, etc.) leave because of terrible economics and get replaced by fully public options.
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I've only heard mention of Florida screwing up their homeowners insurance, but I don't know the details of what happened. Obviously, I'm not surprised California screwed theirs up.
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Depending on how the heads of Departments of Insurance (DOIs) are selected (elected or appointed), there can be varying levels of political pressure to keep insurance rates down even in the face of grim economic realities.
A popular maneuver is capping the rate increases that can be filed on a yearly basis; this looks like a win for the consumers in the short term (and great for political bonafides), but creates a massive loss in the medium to long term as insurers leave markets entirely and remaining insurers have little to no incentive to provide good service.
Sadly, both states have geographical drawbacks (CA, wildfires; FL, hurricanes) and aggressive DOIs that make it hard to charge the appropriate rates given the risks involved. Surprisingly, FL is a bit more reasonable than CA or even NY are; I have personal experience filing in FL and while they're tough and demanding they understand that insurers raise rates for a reason. Other states are much less flexible and forgiving.
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