Because of averse selection, insurers will employ classification schemes for their clients. This means that if you happen to be born ill, you’re worse off then someone who’s born healthy, this is an independent factor from income.
Now classification isn’t a bad thing, it helps keep costs down for the cheaper insurance clients. However, most people want to pay a fair amount, not the least amount. At least, they would want to compensate the unfortunate sick person for the extra health care costs they incur because of their sad fortune (possibly at birth).

Given the market tendency to client-classification, and given the high valuation of fairness in society, one needs to find a solution. One would be to explicitly redistribute income to the sick (i.e. those in a more expensive than average insurance class), which money is taken from the healty (those in a cheaper than average class). This is nice, because it’s explicit distribution.

But it’s backwards. Why even classify clients at all? If you let everyone pay the same amount of money, the nett effect would be the same. However, there would be no need for classification by insurers. This would save money.

A fair system which takes market forces into consideration could use such implicit income distrubtion as a more efficient way for distribution, not meant to hide anything. As an economist, I think you’d appreciate these cost savings, because those would benefit us all.

Because of averse selection, insurers will employ classification schemes for their clients. This means that if you happen to be born ill, you’re worse off then someone who’s born healthy, this is an independent factor from income.
Now classification isn’t a bad thing, it helps keep costs down for the cheaper insurance clients. However, most people want to pay a fair amount, not the least amount. At least, they would want to compensate the unfortunate sick person for the extra health care costs they incur because of their sad fortune (possibly at birth).

Given the market tendency to client-classification, and given the high valuation of fairness in society, one needs to find a solution. One would be to explicitly redistribute income to the sick (i.e. those in a more expensive than average insurance class), which money is taken from the healty (those in a cheaper than average class). This is nice, because it’s explicit distribution.

But it’s backwards. Why even classify clients at all? If you let everyone pay the same amount of money, the nett effect would be the same. However, there would be no need for classification by insurers. This would save money.

A fair system which takes market forces into consideration could use such implicit income distrubtion as a more efficient way for distribution, not meant to hide anything. As an economist, I think you’d appreciate these cost savings, because those would benefit us all.

As seems to happen just about every other day, Wil Wilkinson is just awed by his own brilliance, and secondarily by the good taste of those who agree with him.
It is incredible to me how often this idea occurs to me, and how seldom it seems to occur to…