Unbiased Analysis of Today's Healthcare Issues

Why is ‘health status insurance’ better than ‘health insurance’?

Written By: Jason Shafrin - Mar• 31•09

If you get sick and have a non-group health insurance plan, your premiums will increase.  When you think about it, this really doesn’t make much sense.  The concept of ‘health insurance’ is that it is supposed to protect your assets in the case where your health deteriorates.

John Cochrane proposes one solution: the creation of health status insurance.  “If a health shock causes your medical-insurance premiums to rise, it pays a lump-sum payment sufficient to pay the higher medical-insurance premiums. (To deter fraud, the payment goes into a special account that can only be used for medical insurance premiums.)”

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  1. Jason Shafrin says:

    See also this Barron’s article on Cochrane’s idea for “health-status insurance or time-consistent insurance.”

  2. […] Many other Americans who are willing and able to pay are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or expensive to cover. [This is one of the major problems with the current health insurance system.  There is insurance for acute illnesses (e.g., a broken arm, a car accident), but those with chronic conditions face higher insurance premiums or may be dropped completely.  What is needed may be health status insurance.] […]

  3. […] most unique aspect of Goodman’s proposal is his advocating for health status insurance. Health status insurance pays you a lump-sum sufficient to pay the higher medical insurance premiums which would occur after […]

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