ASSESSMENT OF FINANCIAL RISKS
Conventional approaches to health insurance assume that individuals make rational decisions to maximize their preferred outcomes. In this way, individuals who are risk-averse will purchase health insurance. However, studies show that individuals do not make rational decisions and struggle to assess their health risks and know how much insurance they need. These insecurities diminish health and human flourishing.
The health capability paradigm focuses on individuals’ exposure to risk and their ability to adequately manage it, rather than their preferences regarding it. From this perspective, universal health insurance reduces and mitigates risks of ill-health and financial insecurity. Access to health insurance increases access to necessary care, which in turn reduces one’s exposure to risk of illness or injury.
As health risks and costs are difficult to predict, the health capability paradigm requires that financial risks are spread fairly across the population. While private insurance pools segment risk to maximize profits, public insurance generally spreads risk more efficiently and equitably. In this way, guaranteed health insurance is critical in ensuring a just society.
Health care costs affect us all. A higher uninsured rate means more expensive premiums for those who have health insurance. Universal health insurance can effectively pool risk across time and across individuals. With a sufficiently large pool, financial risks can be predicted, and premiums can be estimated.