Americans are already required to hand over full access of their financial documentation to the government, for, essentially, an evaluation each year (as witnessed during tax season). However, imagine if instead of a mandatory appraisal of finances, this was a government sanctioned physical exam? In Japan, this is a reality. Citizens are annually assigned letter grades, A through F, that represent the state of their health. A report of each individual’s compulsory health screening is then shared with current and potential employers to ensure there aren’t any physiological defects that will prevent employees from doing their jobs effectively. While an annual physical isn’t a new concept, positive or negative discrimination stemming from it is. Obviously, health checks offer multiple benefits: preventive and/or early diagnosis of any potential issues, and, in the case of the Japanese system, one centralized authority that records a lifetime of health information. Not only does this save patients from having to track down and transfer records every time they move or switch doctors, but year-over-year data also offers insight into health status trends that could be used to evaluate coverage options for both health and life insurance. If given access to the medical history of an entire country, insurance carriers would be able to easily differentiate between higher and lower risk individuals and match them with the best suited policy.
For most healthy people, this would be beneficial, as they’d be rewarded with lower insurance costs, and in fact, more job security. However, for people with relatively poorer health conditions, it could mean no career advancement, loss of work and/or higher insurance premiums. These individuals could even be declined coverage altogether, because insurance companies would deem them too great a risk, having full and thorough medical records at their fingertips.
Mandatory exams could potentially put individuals at risk of discrimination from both employers and insurance companies. Traditionally, people can either be underwritten for an individual (or private purchase) policy or a group policy that is typically offered through an employer. However, if an employer is able to assess a candidate’s health
prior to offering employment, an individual with poor health has little chance of benefiting from a group policy that tends to offer lower premiums and require less medical history background. With few options, a higher risk individual is likely to be steered toward a term life insurance policy that could expire well before their life, leaving the individual with no life insurance coverage to cover funeral expenses or protect their family’s financial health.
On the flip side, there is the possibility that mandatory annual exams could result in lower healthcare costs universally, if exams were to detect medical conditions before they worsened or required more costly medical resources. That would mean less monetary risk for insurance companies, which is exactly what they want. If this holds true, the overall cost of healthcare could be reduced for everyone: medical providers, patients and insurance carriers. Through these exams and preventative medical care, the entire healthcare system could operate more efficiently, and it could even result in lower tax dollars going toward Medicare subsidies.
In a free market like the United States, if insurance carriers were given more information to accurately assess levels of risks, they could theoretically provide better rates and coverage for clients. On the other hand, they are more likely to decline to insure higher risk clients. It’s a fact that life i nsurers base pricing on mortality risk. Insurance companies are positioned for larger profit margins if they only insure individuals deemed healthy with longer life expectancy. This concept demonstrates why most highly rated carriers with stronger products often service clients with a longer life expectancy, compared to counterpart carriers with lower-rated product offerings.
Due to the lack of universal health care and privacy regulations, a government-mandated annual exam in the U.S. is highly unlikely. However, some carriers are already gathering medical data and history to a smaller extent by utilizing fitness tracking apps and watches, while offering incentives to encourage policyholders to participate in these programs. Whether or not insurance carriers should get detailed reports depends on the individual, but it’s important to note that the advantage of one group is inevitably at the expense of the other.
Article By Nelson Lee, Managing Partner of Pacific Wealth Solutions