There’s been a lot of chatter lately, in print and on the web, about whether hospitals should refuse to treat unvaccinated Covid patients. Among other things, it’s been pointed out that there are potential logistical nightmares in trying to ascertain whether a patient is vaccinated before treating him, especially in emergency situations.
But it seems to me that the hospitals never were the right institutions to making these decisions in the first place — the insurance companies are. Why haven’t the insurance companies announced that they won’t cover the costs of Covid care unless you’re vaccinated? If you show up at the hospital unvaccinated and accept treatment, you’d be on the hook for the costs — at least up to the point where you’re left bankrupt.
Creating appropriate incentives is, after all, a large part of what we pay our insurance companies to do. Nobody wants to buy insurance from a company that approves every claim (and charges commensurate premiums). When you buy insurance, part of what you’re buying is the company’s promise to exercise due diligence and not fritter away its resources. There’s a pretty good argument that subsidizing people to remain unvaccinated counts as frittering.
It seems to me that “no coverage if you’re unvaccinated” would be both good social policy and clearly a win for the insurance companies themselves (because it’s a win for their customers). So the question is—why isn’t it happening?
And here’s where I hit the limits of my knowledge — is there some law that’s preventing this? Or some regulation? Or is it not happening for some other reason that I haven’t thought of?
I don’t know if there’s a law or regulation, but it could be simply that there’s a contract of a certain duration. The understanding insured people have is that the insurer will cover treatment and that this treatment will not depend on certain choices of the insured–obesity, exercise, smoking, etc.
So when it comes time to renew, the insurance company could say that we won’t cover x if you’re y. But during the term of the contract, it seems unreasonable for the insurance company to declare a change in terms midstream.
The Insurance policy acts as a contract between the company and the insured. I expect policies issued prior to 2021 wouldn’t consider vaccinations at all and so would be required to pay. Some companies might have exclusions for the unvaccinated now. You should expect rates to be higher now than a year ago and higher yet in a years time. Covid will drastically change the health insurance industry.
I hear that life actuaries are seeing extraordinary departures from expected mortality rates. Life carriers are also going to be have disappointing financial results.
Liability costs for property casualty companies shouldn’t be hurt much by covid, other than increased worker compensation costs. On the property side though, global warming from fires and weather will hurt.
It’s not a good time to be an insurance company.
For employer based insurance premium employer is charged could depend on vaccination rate of employees giving employer incentive to encourage vaccination.
See
https://www.statnews.com/2021/09/01/two-insurance-based-ways-to-get-more-americans-vaccinated/
Making unvaccinated individual responsible for cost of care would have perverse public health consequences b/c they’d be less likely to seek care when infectious.
You assume that the unvaccinated cost insurance companies extra money. This might be true, but it is not obvious.
Health insurance companies are not allowed to charge for extra risk, or refuse to cover, anyway.
If they could do what you suggest, then they should be refusing to treat those with high blood pressure, high cholesterol, and high BMI. Also smokers and other drug users. All of these conditions can be remedied by the patient, such as by taking blood-pressure-lowering drugs. Those who refuse the drugs or continue being fat can be considered anti-social, like the unvaccinated.
As Roger says, “If they could do what you suggest, then they should be refusing to treat those with high blood pressure, high cholesterol, and high BMI.”
It is something of a can of worms. Coming from the UK, where treatment is free at the point of use, we have a different perspective about healthcare generally. You are treated when you turn up sick, no questions asked.
I checked on US insurance for wearing crash helmets on motorbikes. It seems your insurance rates are not affected, and your claims will be paid if you don’t wear one. I would have thought that would be one area where insurance companies could withhold part payment for head injuries because you contributed to the injury by not wearing a helmet, but this seems not to be the case. I think this is because the companies are not allowed to do this, but I am not sure.
This reflects the mixed view of healthcare. US believes in insurance based medicine, but also believes people should be treated when they are sick and get healthcare needed as a result of their own choices. It is a difficult circle to square.
If it cannot be done for crash helmets, it seems unlikely that it could be done for vaccinations.
One solution could be to do away with this sentimental concern. Let the insurers charge proper risk-based fees for everyone, as best they can. There is information asymmetry, people know if they are sick whereas the company does not. But lets assume the companies can reasonably assess whether someone has a high likelihood of claiming from detailed physicals and lifestyle questions.
The problem with that is it removes the benefit of insurance based policy, which is to spread the risk. Sick people will pay huge fees and healthy people will not be cross subsidizing them. That may be good idea in one sense, but it would have to be accepted that lots of people will simply not get healthcare.
If the immunizations prove to make a substantial difference, some provisions might be added to plans for the future. IANAL, but I believe large companies are required to offer health insurance to their employees (ACA, maybe?).
But at Xerox, you can get a discount on your insurance if you attest (or prove) that you are not a smoker. I assume that they could add a vaccinated “discount” as well (and increase the general rate to compensate, so effectively charge more for smokers and unvaccinated).
Fragments (or figments?) from my failing memory;
Insurance companies have tried to adjust rates and coverage based clients’ lifestyle choices and the government has stepped in and said, “No, that’s not fair”.
Some countries have gone to socialized medicine / government managed healthcare. Some of those countries are now dropping coverage for bad lifestyle choices, e.g., smokers, the obese, because it’s “not fair” to the tax payers.
Back to America some companies offer healthcare insurance to their employees and are able to do exactly what you suggest; premium hikes for smokers and premium hikes for the unvaccinated.
Assessing actual cost for lifestyle decisions is complex. For example, motorcyclists who refuse to wear helmets usually just die in a significant accident, striking your unprotected head on the ground or an object at just 20 MPH causes major brain injury. Thus, costs are lower than the motorcyclist with a helmet who survives multiple trauma and requires several operations and prolonged hospital care. I don’t know the exact numbers, but it would be unsurprising if wearing a helmet increases overall health insurance payouts. Of course, this does not account for the possibility that cyclists who wear a helmet drive more safely, etc. etc.
Steve T – “the possibility that cyclists who wear a helmet drive more safely” – actually I recall once reading a book called The Armchair Economist (by some guy who was a pretty good writer) that suggested the opposite, and supported the claim with accident data following the passage of state seatbelt laws. You’re probably right that people who *voluntarily* wear a helmet are likely more risk-averse to begin with. But I think the point here is that *requiring* people to wear helmets does not *cause* any of them drive more safely…and I have little doubt your argument then follows that accidents involving helmeted riders are *more* expensive for health insurers (if not for life insurers). I wouldn’t be surprised if unvaccinated people have been similarly less expensive for hospitals — as Roger suggests — as cases have tended to be pretty severe at that point…although that may be changing as Covid mutates into more contagious but less severe forms.
But assuming the unvaccinated were more expensive, the post makes a good point, and the answers that current contracts must be honored seem on point (although we’ve seen plenty of “emergency powers” exercised by the public sector lately). We routinely look to insurance companies to do the dirty work no one else wants to…and then of course routinely vilify them for it; we want to “bend the cost curve”, but not by denying any individual any care. Other systems fairly successfully obfuscate the issue by using queues which people tend to perceive as more “fair” – even if delayed care is denied care – and because the cost to innovation that would’ve become part of tomorrow’s basic care is unobservable.
According to this poll, about half of Democrats favor much more drastic measures:
Fifty-eight percent (58%) of voters would oppose a proposal for federal or state governments to fine Americans who choose not to get a COVID-19 vaccine.
Fifty-nine percent (59%) of Democratic voters would favor a government policy requiring that citizens remain confined to their homes at all times, except for emergencies, if they refuse to get a COVID-19 vaccine.
Nearly half (48%) of Democratic voters think federal and state governments should be able to fine or imprison individuals who publicly question the efficacy of the existing COVID-19 vaccines on social media, television, radio, or in online or digital publications.
Forty-five percent (45%) of Democrats would favor governments requiring citizens to temporarily live in designated facilities or locations if they refuse to get a COVID-19 vaccine.
https://www.rasmussenreports.com/public_content/politics/partner_surveys/jan_2022/covid_19_democratic_voters_support_harsh_measures_against_unvaccinated
#10 I think the poll would have been better if the second question had not mentioned Biden, but just the policy. That primes the respondents to think along political rather than policy lines. Even so it is very surprising to me how many people support locking people up.
#8 Steve T. This paper looked at costs of accident for those who did not die at the scene.
https://pubmed.ncbi.nlm.nih.gov/12352482/#:~:text=Failure%20to%20wear%20a%20helmet,created%20by%20motorcycle%2Drelated%20injuries.
They found acute costs were $6000 higher for non-wearers (2002). They could not asses rehabilitation costs, but indicated there were higher also. They conclude that this justifies mandatory helmet wearing.
It is possible that so many died at the scene that overall costs for non wearers was overall lower. Mean costs for wearers was $31K. Each death at the scene saves $31K. By my quick calculation, if 1 in 5 non-wearers dies at the scene, it is roughly a wash.
This study in Hawaii found non wearers were 3 times more likely to die, based on Emergency Medical Services reports. They found costs were 50% higher for non wearers, about $13K.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5146975/
They did not find any difference in overall acute costs for moped riders. they did not measure rehabilitation costs, but suggested these would be higher for non-wearers because even for mopeds there were many more head injuries, which typically result ion more longer term care needs.
As far as I know, there is no study off-setting the benefits to healthcare from organ donation by motorcyclists who die of head injury, but this would not affect insurance pay outs.
I do think it would be a bit surprising, but not impossible, that wearing a helmet increases overall health insurance payouts.
#9 Iceman “I wouldn’t be surprised if unvaccinated people have been similarly less expensive for hospitals — as Roger suggests — as cases have tended to be pretty severe at that point” I would be very surprised. It is not like the motorbike crash, where some are killed instantly at the scene and do not get to hospital to be counted. There is no suggestion at all that vaccination will result in a quick death at home in any significant numbers. Unvaccinated means you are much more likely to end up in hospital. I think it is certain that unvaccinated people have resulted in higher healthcare costs.
Getting a shot is such a simple action. It’s much more difficult to try to tame a food or alcohol addiction or to get in shape for lost people than to stroll into the CVS and get a shot.
Someone in the comments said we aren’t sure whether these patients are more costly. It may be true that there are some selection effects where many of those who died may have required just as much health care or more throughout the rest of their lives. But… when you concentrate that needed care into such a tight window of time it strains resources, making the expenditures more expensive than if they were spread out more evenly over time.
I guess I say all this to say I would be shocked if the unvaccinated as a whole are not more costly to our health care system, even looking at it from a long time horizon.
It is difficult I think to quantify exactly how much they’re costing us by not doing a simple task.
Well some French hospital authorities have proposed charging the unvaccinated and it produced outrage.
https://amp.theguardian.com/world/2022/jan/28/outrage-as-paris-hospitals-chief-raises-idea-of-charging-unvaccinated-patients
Obviously there can be regulatory reasons for this or goodwill reasons or whatever, but if we were to pretend that insurance companies are basing these policy costs on what they expect to have to pay, the answer my UofR econ degree would have trained me to is:
the insurance companies don’t expect being vaccinated to correlate with lower health care costs thank being unvaccinated.
Most recent UK data shows >73% of those hospitalized with COVID have had at least 2 shots. Nearly 60% of the remaining hospitalized are among those over 70 who have had 0 or 1 shot. So “good social policy” would be to take away the insurance of a bunch of old people who perhaps were too frail to take the shots? It would allow for some additional moral posturing, however, so I guess that goes in the benefits column?
Harold 11 – fair enough, I said “hospitals” when what I really had in mind was the health care system, and in a longer-term sense (see Josh H 12…while he talks about $, I think his comment could be fairly taken to mean that delayed care for non-Covid purposes is also a valid cost). My impression so far had been that once a case is severe enough that someone goes on a ventilator the end comes quickly…while there have been many cases of mild to moderate symptoms…and vaccinating & boosting people also comes at a cost. (Insurance companies do tend to cover preventative measures that are known to be cost-effective.) But let’s assume that over the horizon since vaccines have been widely available you are correct (personally I wouldn’t be too “surprised” either way). For the longer term, a better analogy may be the tobacco lawsuits, which were also purportedly about health care costs even though as I recall that argument was never established – in fact I believe the defense was not *allowed* to present an argument that earlier death means potential costs avoided.
Government entities pay over 50% of all health care costs in the U.S. Getting politicians to force vaccination policy clauses into the Medicare and the 50 states’ Medicaid plans would be a tough row to hoe.
#15: It’s very important to keep in mind this concept: if you have a very high rate of vaccination in a country, then most of your hospitalizations will be amongst the vaccinated. That doesn’t mean the vaccines don’t work to reduce relative risk! Also, even in places where it’s, say, 70% of people there could be selection effects if the folks with the highest absolute risk of hospitalization due to say age are the ones getting vaxxed at the highest rates. So it could artificially look like vaccines aren’t effective if you look at hospitalization date even again if they’re reducing relative risk. You’d need to compare to a world where nobody is vaxxed or do other kinds of analysis since we can’t re-run the world.
Josh H- I said nothing about whether the vaccines were effective at reducing risk. We are talking about refusing to cover the medical costs of the unvaccinated. For that to be in any way justified as a public health policy, (in my view) it would need to be the case that the unvaccinated were overrunning our health care system. That is obviously not the case. Unless we want to go down the road of denying medical coverage to anyone who has higher risks (smokers, obese people, extreme skiers, etc, etc, etc), I don’t see the argument here. It just seems to be punitive to a group of “other” people.
Tcoddington, 19: the USA has a different situation from Britain and most other advanced countries in that we aren’t as vaxxed. Therefore, in some areas of the country in the last year the unvaxxed are placing a burden on hospitals that wouldn’t exist in a world where we had a higher rate of vax.
My understanding is that someone who dies at the scene of an accident (helmet or no helmet, car or motorcycle), like someone who just drops dead of a heart attack does not affect the actuarial analysis of a health insurance provider.
Someone who is instantly dead and has zero health care costs is simply no longer part of the equation. In other words, that zero cost does not bring down the overall average costs that go into setting rates. Only people who remain insured and have no health issues have a zero cost that works its way into the setting of rates.
An instant death is no different to an insurance company that a person simply choosing to no longer be insured by that company.