The debate over health insurance and healthcare reform ignites strong feelings among most groups in
With the founding of Lloyd’s of London, insurance began as a way for merchants and ship-owners to protect themselves against loss at sea. Health insurance has not deviated strongly in principal from this founding idea of insurance: members pool risk for mutual benefit. Health insurance, therefore, can be thought of as the mitigation of individual risk through the distribution of cost across a group of members. By creating a certain association and then spreading risk across that association, individuals are freed from the possibility of a catastrophic expense.
In order to pool risk, individuals must associate and become members of a particular group. Groups are formed because of some certain and common affinity that its members share. However, how do individuals form these groups? How do they learn of the initial affiliation with other individuals? The merchants and ship-owners of Lloyd’s did not initially gather because of a common profession. Lloyd’s was instead a simple coffeehouse which became a popular gathering place for sailors, merchants, and ship-owners. It was through their common location that the initial common interests and mutual concerns were discovered.
When we move the principle of insurance to health, we find that the same principle of association has always been used to mitigate risk. Through the industrial revolution and the rise of factories and mass employment, employers and work-associated unions became the obvious method by which to form affiliations. Employment based insurance created the easiest method not only because of ease of member affiliation, but also that those employable are generally healthy. Our current system of health insurance companies does not generally use a single organization as the root of member affiliation. However, insurance companies still use the concept of a common employer as grounds for membership in a particular plan.
If you exclude the concept of limiting risk by accepting only employable “healthy” members, it could be argued that the concept of employer based group affiliation is entirely arbitrary. One could achieve the same risk mitigation across any group of members, even if at random. If you created a group for Americans whose first names start with the letter Z, you could form an association with a common pool of risk, providing that those members could communicate and conduct administrative affairs. However, forming any large group of random individuals is impossible. If the members of a particular grouping have no real affiliation, there is no principle of mutual concern upon which to organize. Employment based insurance may be mostly a convenience, a path of least resistance to form a group of affiliated members.
Until very recently, it was impossible to conceive of large groups of disparate individuals coming together around a common cause of communal risk mitigation without any particular real-life association (like that of employment.) We might therefore think of the problems of association as being essentially a technological issue…
Enter Social Media and the advent of real-time global communication. It is a very common thesis to posture that social media can be a highly effective form of communication among members and facilitate the administrative function. Examples of this principle are already in existence, with the creation of social-network like interface portals on the websites of major insurance companies. However, this invention may not exploit the power of social media to its fullest capacity. The true leverage of social media is not simply in furthering the bond between existing group associations, but rather the technological advancement which enables unaffiliated individuals to unite together. Stated another way, social media has the potential to enable increasingly complex and variant groups and associations. Some mutual affiliation may still be prerequisite; however, this prerequisite for membership becomes completely unlimited.
Social media enables the instant communication between individuals and even a hierarchical relationship structure among members. While it was once impossible to have affiliations based on complex demographic information, geography, interests, or industry, social media technology may provide just the platform basis for these groups to take off. Even if we assume the necessity of an administrative health insurance provider, social media could enable the immediate cross platform distribution and promotion necessary to band together members of disparate interests. There is no reason why we cannot use worldwide distribution/publishing and communication technology in a way that creates valuable insurable memberships or associations. Stated another way, we could now allow the creative blend of interests and geographic patterns to emerge into effective products in a health insurance marketplace.
Many argue against applying free market theory to health insurance and healthcare. However, it may be the case that the free market could never truly be applied to such a complex and personal market due to lack of technology. Social media does provide a platform that could engage and affiliate cross-border, unattached individuals to unite for their common risk mitigation. Until now, we have not had this technology to create such a marketplace. Social media is an entirely disruptive force that has not yet been applied to health insurance. It would be up to mathematicians, actuaries, and computer scientists to structure the nuances of a freely social-based insurance system and model the involved risks to investors and insurance companies. However, we are no longer limited by our technical capacities when modeling a new health insurance system. Our problems are now purely political.
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