Friday, December 16, 2016

(Mis)understanding Insurance

As I was reading the transcript of Scott Pelley’s 60 Minutes interview with House Speaker Paul Ryan, I noticed that he seemed to be not interested in hard news or in-depth information so much as he was interested in tripping up the Speaker, trying to put him in a position of disagreeing with his new boss, making one or the other of them look bad, or uncovering something potentially embarrassing.

He asked how often they speak on the phone and who initiates the conversation.  The answers were almost daily and both.  No news there.  How does he answer the phone?  He doesn’t say, ‘This is the president-elect?’”  No.  “Have you told him being president is not being CEO of the United States, that the Congress is going to have a say?”  Instead of asking how the two got together after a contentious election, he asked, “Who apologized to whom?”  It’s clear by now that Pelley has no liking or respect for Trump, thinks he is a bully and a racist, and is searching for evidence to back up his views.  Better yet, he would like to get Ryan to agree on any point that might make it seem he is of the same opinion.

The silliness and self-serving finally comes to a close, and Pelley asks a number of questions about policy issues.  Soon he gets to the details about possible changes to Obamacare and the sniping continues.  At one point Pelley says “And women will pay the same as men? That didn’t used to be the case.”  This is a question designed to bait an answer that will incite outrage.  He is trying to get some admission of bias against women, showing in the process that he does not understand how insurance works and counts on the fact that many Americans don’t either.

Insurance usually works by assessing the risk and charging premiums accordingly.  If you have homeowner’s insurance you expect a discount for having a working alarm system.  Teen drivers are generally less safe than more experienced drivers, but boys have more accidents than girls.  Auto insurance for a young man 16-25 is higher.  There is no outrage there.  It’s not unusual for companies to charge smokers more for their health insurance benefits.  Owners of cars with higher repair costs pay higher premiums.  Older cars are cheaper to insure due to the lower replacement cost.  Those who don’t drive as many miles sometimes pay lower premiums.  Costs of auto and homeowners insurance vary by what part of the country and by the size of the town or city you live in.  And since women outlive men and take fewer chances, they pay less for life insurance.  Older people pay more, as do those who participate in dangerous hobbies like skydiving or juggling chainsaws.

This all happens without a stir.  Everyone seems to understand that certain classes of people are at a higher risk for either the frequency or the size of insurance claims.  Hence they should pay more.  The ones in the classes with higher premiums don’t like it, but they pay.  So why would people be upset that some women, especially those of childbearing age, might have to pay more?  That “used to be the case” and it didn’t have anything to do with prejudice or victimization.

Apparently the government and some group of citizens have decided that now charging women more for health insurance can be justified only by prejudice.  Everyone must purchase the same insurance for the same cost or there will be an uproar.  And Scott Pelley and others in his profession are more than happy to incite and later fan the flames of that uproar, because it makes their job of reporting the news so much easier.  Their job is not to inform or to educate; their job is to attract views and clicks.  Nothing does that better than a good demonstration or protest, even those grounded in fundamental misunderstanding.

(I have often said that the problems with healthcare costs cannot be solved with insurance changes, but that’s for another discussion.)

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