Becker on Health Insurance
Nobel Laureate Gary Becker writes,
Long-term health insurance with individual plans is uncommon mainly because health insurance companies cannot force customers to make a long-term commitment. If a person has experienced good health, he may seek a cheaper plan with another company that would reward his additional years of good health, an experience that his original plan could not fully anticipate. Given such “adverse selection”, health insurance companies are discouraged from offering long-term insurance.
I disagree. In Crisis of Abundance, I suggest that an insurance company could offer a policy with a five-year cumulative deductible. You pay a premium in 2007, and if your health care expenses exceed the cumulative deductible at any point in the next five years, the insurance kicks in.
Generally speaking, though, I certainly agree with Becker that health insurance needs to be long term. He points out that this an advantage of employer-provided health insurance over current individual plans.
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