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Legal arbitrage and US health insurance


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http://marginalrevolution.com/marginalrevolution/2013/02/will-health-insurance-premia-rise-for-young-males.html

 

http://americanactionforum.org/sites/default/files/AAF_Premiums_and_ACA_Survey.pdf

 

For young healthy males, health insurance premiums may rise from an average of $2,000 per year currently to as much as $5,000 as a result of the new health care legislation. (I regard this as a high end number due to the bias of the source.) This is because health insurers can no longer cost discriminate on the basis of gender (child bearing), preexisting conditions, etc. Further, an insurer can't deny coverage. So young healthy men may end up subsidizing the system.

 

But what if you created a health insurer domiciled in say Bermuda, not subject to US laws, that marketed insurance specifically to this segment, perhaps via the Internet? It's not even clear to me that under current law that doing this would be illegal (this would be a question for an attorney). Such a company could then undercut the majors on price and win the segment's market share.

 

Now, I'm obviously hand waving a lot, and I'm typing this on my phone so I can't go into a ton of detail. Personally, I think it would be very difficult to make the above work. Still, I can't help but think about the size of the opportunity and how disruptive it would be if it could be pulled off.

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I went into a local medical clinic for an ultrasound scan yesterday to have something checked out.  It cost about $217 (I paid cash upfront) but they said it would have cost $295 if it was billed to insurance.

 

That's how efficient our private insurance system is I guess.  So if you are going about arbitraging things, why can't this wide gap between cash price and insured price be brought down?

 

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Now, I'm obviously hand waving a lot, and I'm typing this on my phone so I can't go into a ton of detail. Personally, I think it would be very difficult to make the above work. Still, I can't help but think about the size of the opportunity and how disruptive it would be if it could be pulled off.

I mean, let's be honest here: the business model violates the "spirit" of the law. Ethics aside, local insurance regulators would probably not allow such an entity to do business in their locality.

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