Weight Loss Support - Health Insurance and the Obesity Externality




Genesis
12-09-2005, 10:40 PM
Hi there, I was doing some research on the National Bureau of Economic Research website for work today and came across this paper on obesity and health insurance. I do not have a subscription to NBER, so I was not able to access the full paper. However, here is the abstract:

Health Insurance and the Obesity Externality: If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for obesity, health insurance coverage systematically shields those covered from the full costs of physical inactivity and overeating. Since the obese consume significantly more medical resources than the non-obese, but pay the same health insurance premiums, they impose a negative externality on normal weight individuals in their insurance pool. To estimate the size of this externality, we develop a model of weight loss and health insurance under two regimes——(1) underwriting on weight is allowed, and (2) underwriting on weight is not allowed. We show that under regime (1), there is no obesity externality. Under regime (2), where there is an obesity externality, all plan participants face inefficient incentives to undertake unpleasant dieting and exercise. These reduced incentives lead to inefficient increases in body weight, and reduced social welfare. Using data on medical expenditures and body weight from the National Health and Interview Survey and the Medical Expenditure Panel Survey, we estimate that, in a health plan with a coinsurance rate of 17.5%, the obesity externality imposes a welfare cost of about $150 per capita. Our results also indicate that the welfare loss can be reduced by technological change that lowers the pecuniary and non-pecuniary costs of losing weight, and also by increasing the coinsurance rate.

For those of you who may frequent NBER, I thought you might find this paper of interest.


CBETA
12-10-2005, 03:49 AM
Hi there, I was doing some research on the National Bureau of Economic Research website for work today and came across this paper on obesity and health insurance. I do not have a subscription to NBER, so I was not able to access the full paper. However, here is the abstract:

Health Insurance and the Obesity Externality: If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for obesity, health insurance coverage systematically shields those covered from the full costs of physical inactivity and overeating. Since the obese consume significantly more medical resources than the non-obese, but pay the same health insurance premiums, they impose a negative externality on normal weight individuals in their insurance pool. To estimate the size of this externality, we develop a model of weight loss and health insurance under two regimes——(1) underwriting on weight is allowed, and (2) underwriting on weight is not allowed. We show that under regime (1), there is no obesity externality. Under regime (2), where there is an obesity externality, all plan participants face inefficient incentives to undertake unpleasant dieting and exercise. These reduced incentives lead to inefficient increases in body weight, and reduced social welfare. Using data on medical expenditures and body weight from the National Health and Interview Survey and the Medical Expenditure Panel Survey, we estimate that, in a health plan with a coinsurance rate of 17.5%, the obesity externality imposes a welfare cost of about $150 per capita. Our results also indicate that the welfare loss can be reduced by technological change that lowers the pecuniary and non-pecuniary costs of losing weight, and also by increasing the coinsurance rate.

For those of you who may frequent NBER, I thought you might find this paper of interest.
Though this is great, I find the information presented not presicely reflecting the current situation.
Perhaps my problem is somewhat different, but yet related.
I am overweight. I am employed as a contractor, and since my firm is so small, I do not get insurance coverage through them. They've offered to pay the monthly dues if I got HMO insurance from the Health Net carrier or Kaiser...
When I applied, I was rejected due to my height to weight ratio...After searching for alternatives, the only one I was provided is 600 something dollars a month with an addional 1000 insurance installation fee. Mind you: I have no problems, of any types, I've been at a doctor's office once outside of routine checkups or cold once a year every couple of years. When I was there, I broke an ankle skiing. I am left w/o a choice to have any kind of coverage at a reasonable cost.
I just happened to be lucky that my previous temp service offered Cobra, because I was on their insurance and it is not as expensive, but once it runs out early next year, I am ultlimately forced to find a permanent job at any rate, just to get ability to go and get cobra later on.....
I think wheels have been turning and it is changing, but not for the better. Raising the cost is not what's going to solve the problem, requiring certain participation in activly changing bad habits does. But for now, this next raise will simply make me NOT get the attention I need, that otherwise could have helped me fix the problem.....

Genesis
12-10-2005, 09:25 PM
CBETA, I sympathize with your situation. I have several friends who cannot afford individual medical insurance. Consequently, they are walking around uninsured and risking their financial well-being (and health) by being uninsured. I am a contract worker as well, but fortunately my husband works for a firm with quality benefits and I am able to get coverage through him.

My brother was diagnosed with cancer at age 25 and he did not have medical coverage at the time. His outcome was not good (he’s dead), and I’ve always wondered if he would have received better care if he had had decent health insurance versus Medicaid. I am torn on the issue of healthcare in the US, as I can understand the positions of the both the hospitals/doctors and the patients. With our litigious society these days, malpractice insurance in some states w/o tort reform has skyrocketed so high that good doctors are being driven out of the state. The insurance companies, however, may need a firm talking to! :nono:

Good luck to you! :)


JayEll
09-05-2007, 09:56 AM
Re: Insurance. I'm a self-employed business owner, and I carry my own plan through Blue Cross Blue Shield. I pay higher premiums because of my "build," which is what they call people who are obese according to their charts. I'm currently documenting my weight loss so that I can have my insurance premiums re-evaluated, but I have to keep the weight off for a year.

I think the main issue in the article has to do with group plans, where some companies might not be differentiating between normal weight, overweight, and obese.

I was incensed at first when I was told I would pay a higher premium because of my "build," but considering the higher health risks for obese people, it makes sense.

Jay

NightengaleShane
09-05-2007, 10:25 AM
Wow, I honestly didn't know how scarily high insurance rates could be just for being obese, even if you're perfectly healthy... WHAT A CROCK!

I DO know, however, that insurance costs are insanely high in general. Infact, I've found that the amount of money per month insurance companies want from me is more than the initial cost of prescription and supplies. My job has a minimal benefits package, and I go with that, though when I was self-employed, I just didn't bother! However, I can also say that medical professionals are A LOT more friendly towards you if you DO have some sort of insurance because there's no wondering in their minds whether they're going to get their money :lol:

JayEll
09-05-2007, 10:46 AM
Here's the other thing I didn't know about insurance: If you have insurance, you get charged less for medical services. A LOT less! That's because the insurance company and providers negotiate rates that the insurer's clients will pay.

I had an outpatient procedure that would have cost something like $15,000 if I had not had insurance coverage! :eek: With insurance, the cost was $6,000, and I had to pay the deductible--which was considerable, but a big difference from $15K!

Jay

QuilterInVA
09-05-2007, 10:56 AM
Since smokers have to pay more because of the increased medical costs, it's only fair the obese pay more too. We may not have problems now, but it will catch up to us as we get older. Lets face it, we have the means at our disposal to keep the cost down - eat less and exercise more. I'm trying to!

modkittn
09-05-2007, 10:58 AM
Here's the other thing I didn't know about insurance: If you have insurance, you get charged less for medical services. A LOT less! That's because the insurance company and providers negotiate rates that the insurer's clients will pay.

I had an outpatient procedure that would have cost something like $15,000 if I had not had insurance coverage! :eek: With insurance, the cost was $6,000, and I had to pay the deductible--which was considerable, but a big difference from $15K!

Jay

I think that is only true if you have health insurance where they have a "network" and the doctor you see is in the "network". If you went to someone outside the "network", I don't think they negotiate prices like that.

Steelslady
09-06-2007, 12:12 PM
Since smokers have to pay more because of the increased medical costs, it's only fair the obese pay more too. We may not have problems now, but it will catch up to us as we get older. Lets face it, we have the means at our disposal to keep the cost down - eat less and exercise more. I'm trying to!

Alcoholics and drug addicts should also have to pay higher, in my opinion. Why just target the obese and smokers? Oh, and should athletes pay higher, too, because of the risk of injury while participating in sports? Where will this end?

junebug41
09-06-2007, 01:27 PM
I wonder if the cost of treating the obese, the smokers, drug addicts and others will increase if we keep refusing to insure them at all?

I think there should be incentives to losing weight (gym membership/eating plan reimbursements, premium breaks upon weight loss and maintenance and, as a maintainer, skin removal surgery). I don't think leaving people out in the cold is much of an incentive, though.

kaplods
09-06-2007, 01:59 PM
I understand that insurance companies are not looking out for my best interest, they want to make money. I can accept that, but I suspect that if employers and insurance companies paid for preventive care, weight loss, and healthy lifestyle benefits, that they would actually spend less and profit more.

Some companies are recognizing that healthy lifestyle benefits do decrease sick time and increase the productivity of employees, increasing their profits. I think there is evidence that preventive care often is less expensive than treatment, so maybe insurance companies will eventually catch on.

veggielover
09-06-2007, 04:00 PM
Alcoholics and drug addicts should also have to pay higher, in my opinion. Why just target the obese and smokers? Oh, and should athletes pay higher, too, because of the risk of injury while participating in sports? Where will this end?

Not likely unless you play sports for professional leagues. The reason being is that they simply need to limt their coverage for those who are more likely to require care. Athletes that participate in sports as a part of their daily career do pay higher rates and in fact, get better care because their private insurance companies know they pay more for a reason. I do believe that some health insurance companies require physical examinations and questions before they offer a premium, and if I'm not mistaken, your doctors have records of any alcohol abuse, substance abuse or even mental disabilities. Even though some of these may be confidential, a lot of insurance companies would prefer to insure healthier individuals. How they assess healthy is their own issue.

NightengaleShane
09-06-2007, 04:24 PM
veggielover: yeah. it's true. the healthier the better, with insurance. What blows my mind is... it's the UNhealthy/chronically ill people who actually NEED the insurance. I'm under the firm belief that insurance companies need to follow their intended purposes and offer less outlandish insurance towards people who are actually going to use it ;)

Of course, in reality, I know it's all about the profit. They profit so much from perfectly healthy people who just want to be safe, though bad as it sounds, I don't know why a perfectly healthy person in this economy would bother spending the money on an extra bill for something that is not legally required (unlike car insurance) that they may never use.

JayEll
09-06-2007, 05:22 PM
Actually, some policies do have exclusions if the policyholder engages in a dangerous sport such as bungee jumping, hang gliding, parachuting, whitewater rafting, etc.

Jay

veggielover
09-06-2007, 07:55 PM
Of course, in reality, I know it's all about the profit. They profit so much from perfectly healthy people who just want to be safe, though bad as it sounds, I don't know why a perfectly healthy person in this economy would bother spending the money on an extra bill for something that is not legally required (unlike car insurance) that they may never use.

Yup, i can totally see it as soley a business as opposed to providing care... insurance, that is


Actually, some policies do have exclusions if the policyholder engages in a dangerous sport such as bungee jumping, hang gliding, parachuting, whitewater rafting, etc.

Jay

Yeah, because to them these guys are probably very likely to need extra care

stranger n my mirror
09-06-2007, 08:38 PM
I have worked in the insurance industry for more than 20 yrs. The company I work for provides administrative services for self-funded group plans. Basically, whatever monies are paid to the hospitals, doctors, etc comes directly out of the employer's pocket. Typically these plans do have really good coverage for preventive services since the employer has a vested interest in keeping their employees healthy. My own employer is looking at possibly increasing the premiums for their own employees who are overweight as well as smokers. But before they do they are also looking at ways to encourage the employees to live a healthier lifestyle. They have already banned smoking anywhere on the premises. If a person wants to smoke, even during their lunch hour, they have to be completely off the company's property. They cannot even smoke in their cars while parked in the parking lot. They have offered smoking cessation programs also. A few weeks ago they opened an onsite fitness center and brought in a fitness trainer for one-on-one counseling free of charge. They are looking to see if there is enough interest in having Weight Watchers come onsite for weekly meetings. I do not have health insurance through my employer (my husband's plan is better!) and I work out of my home so none of these changes directly affect me but it definitely is the wave of the future.