What's The Bottom Line?

 by Patrick Appel

A reader writes:

Although the benefit of preventive care for the long-term health of an individual is obvious, it's less clear that it benefits that individual's insurance company to the same degree. Americans change jobs and employers more often than they used to - and thus, are less likely to be covered continuously under the same insurance company.

Insurance companies are not in the health business; they make money by applying actuarial principles. They surely can determine, based on average length of enrollment, exactly how much and what kind of preventive care is worth paying for. Suppose John's extreme hypertension gives him an 80% chance of having an expensive heart attack next year, while Steve's moderate hypertension gives him the same odds of having an expensive heart attack 20 years from now. Treating John now is almost certain to save his current insurance company money, but treating Steve now - depending on the % likelihood of his changing jobs or insurance coverage at some point in the next 20 years - is not so clearly beneficial to the company.

If the employment market is volatile enough, or the insurance playing field particularly unbalanced, an insurance co. may even perceive preventive coverage as helping a competitor's bottom line more than it helps its own.