In 2013, I pointed out morale hazard as a major risk facing issuers of medical insurance. Morale hazard has now come up in the current debate among majority House Republicans on the Patient Protection and Affordable Care Act’s non-group medical insurance reforms. Here’s the context from a Yahoo News item:
Though the GOP leadership is insisting those with preexisting conditions will be covered under its bill, some individual lawmakers are telegraphing a different message. Rep. Mo Brooks, R-Ala., a member of the Freedom Caucus, told CNN Monday that the provision will allow those who have lived “good lives” to pay less for health care, by taking unhealthy people out of the insurance pool. “They’ve done the things to keep their bodies healthy, and right now, those are the people who have done things the right way, who are seeing their costs skyrocketing,” Brooks said.
Morale hazard is tied to the perception that medical care and insurance are consumable commodities. The more they are used, the greater likelihood of good health the flawed reasoning goes. In fact for most people, these resources are – and should — be used as little as possible. Fortunately that’s the case according to a recent Health Affairs analysis that found most Americans use few health care resources and have low out-of-pocket spending. The outliers who use a lot of care are driving medical utilization.
Some policymakers such as Rep. Brooks argue their premium rates should be medically underwritten to ensure they are proportional to the risk they pose. Or excluded from the insurance pool and placed in high risk pools that violate the basic insurance principle of risk spreading. The challenge is how to identify and distinguish these folks from those who have congenital predispositions to chronic medical conditions whose risk to insurers is far less prone to morale hazard as well as those who engage in health promoting lifestyles that reduce their likelihood of needing medical care for chronic conditions. Some have suggested the rapid growth in genomics along with wearable biometric monitoring devices provides a possible solution. Time will tell.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email