> The idea is not to put people with similar levels of risk in the same pool.
The idea is to make the pool as large as possible, charge everyone for their expected cost + a margin...
As a consumer who is fortunate enough to get life insurance at the "Super Preferred" low-risk rate, I would prefer be in a small pool that excludes people with higher actual costs. That's an economic preference, not moral, though my morals are not bothered by using the system as designed.
As long as insurance companies are free to offer plans that admit only really healthy people and exclude people with higher actual costs, my plan will be cheaper. Really healthy people will drop out of the larger pool and into the cheaper pool. The larger pool will, as a result, get more expensive. And the people remaining in what's effectively the shallow end of the pool will be offered a "Preferred" rate that's more expensive than super preferred but less than the large pool.
Eventually you end up with small risk pools, with the least insurable, highest-risk and highest actual cost customers unable to buy affordable life insurance. If you're a 20-year-old obese diabetic who smokes and has a family history of cancer, and the actuarial table says there's a 50% chance that your 50-year $1M policy will have to pay out, your premiums before a margin are 1M * 50% / 50 / 12 = $833/month. That's not really affordable, even if it would be wise for our unhealthy friend if he or she has dependents. My super-preferred policy costs me $21.25/month.
I empathize with the plight of the uninsurable. Given my voting history on health insurance issues, I would probably vote in favor of a law that limited segmentation and would bump my premiums to, say $50/mo and would offer life insurance to the $833/mo individual at the same rate. But I'm not going to jump from my pool into a more expensive pool by myself if that signal will fall on deaf ears.
As a consumer who is fortunate enough to get life insurance at the "Super Preferred" low-risk rate, I would prefer be in a small pool that excludes people with higher actual costs. That's an economic preference, not moral, though my morals are not bothered by using the system as designed.
As long as insurance companies are free to offer plans that admit only really healthy people and exclude people with higher actual costs, my plan will be cheaper. Really healthy people will drop out of the larger pool and into the cheaper pool. The larger pool will, as a result, get more expensive. And the people remaining in what's effectively the shallow end of the pool will be offered a "Preferred" rate that's more expensive than super preferred but less than the large pool.
Eventually you end up with small risk pools, with the least insurable, highest-risk and highest actual cost customers unable to buy affordable life insurance. If you're a 20-year-old obese diabetic who smokes and has a family history of cancer, and the actuarial table says there's a 50% chance that your 50-year $1M policy will have to pay out, your premiums before a margin are 1M * 50% / 50 / 12 = $833/month. That's not really affordable, even if it would be wise for our unhealthy friend if he or she has dependents. My super-preferred policy costs me $21.25/month.
I empathize with the plight of the uninsurable. Given my voting history on health insurance issues, I would probably vote in favor of a law that limited segmentation and would bump my premiums to, say $50/mo and would offer life insurance to the $833/mo individual at the same rate. But I'm not going to jump from my pool into a more expensive pool by myself if that signal will fall on deaf ears.