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On the Third Hand: Kidneys

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Kidney transplant specialists have complained in the American Journal of Transplantation that people who donate kidneys to others end up facing trouble getting life insurance and often pay higher rates for life coverage.

The authors of the article contend that kidney donors — who go on living with one kidney — tend to be healthier than other people and go on to live about as long as members of the general public. They argue that life insurers could take away a concern that discourages some people from donating kidneys by charging kidney donors the same premiums as non-donors.

On the one hand: If live kidney donors really have a longer life expectancy than members of the general public, that seems to be in interesting bit of data.

If researchers can show that U.S. live kidney donors have a life expectancy similar to that of otherwise comparable members of the general public, or similar to that of some other relevant group of people, then life insurers should certainly offer live kidney donors coverage priced in accord with their actual level of risk.

On the other hand: I think the transplant community ought to work with actuaries to come up with the information that insurers and their actuaries need to justify lower rates — if the numbers justify lower rates.

If a careful look at the numbers shows that live donors actually have a lower life expectancy than members of the general public and are fairly risky, I think life insurers should use that as a chance to talk to people about the idea of writing life insurance that reflects the reality of how the world is, rather than fantasies about how we want it to be.

See also: On the Third Hand: Venezuela

In the health insurance market, we as a nation have decided to try to ignore the issue of health status when writing major medical insurance — in part because, in the real world, moral and ethical concerns make letting market forces work freely is difficult.

Whatever the virtues of ignoring morbidity reality in the health insurance market might be, the disadvantages are that we end up making health care finance more complicated and, especially for the young and the healthy, more expensive.

If we distribute the extra, fairness-pricing-related expense to everyone equally, and hide the amount in the overall price, we may find the way we have allocated that hidden fairness pricing surcharge is as terrible and unfair as the medical underwriting we were trying to eradicate in the first place.

One question might be how big of an effect a certain type of fairness pricing might have.

If, for example, ignoring any life expectancy differences between live organ donors and non-donors is a penny per policy, it seems reasonable to say the life insurer could just shrug and add that penny to everyone’s premium.

If fairness pricing will increase the cost of some people’s coverage significantly, maybe the insurer should make a point of talking to a wide range of stakeholders, to make sure other stakeholders are comfortable with that increase, and that the increase is going to address a popular, high-priority need. 

Maybe the insurer would find that policyholders would rather see the insurer use fairness pricing to help aid workers who travel to disaster zones, or to increase contributions to the United Way, or to build playgrounds in poor communities, than to help live kidney donors.

Maybe the policyholders would prefer to see the insurer give a lot of fairness pricing help to living people who donate a portion of their livers than to people who donate kidneys. 

On the third hand, certainly, if an insurer of any kind is going to use intentional fairness pricing because of government mandates or a desire to do the right thing, it ought to disclose that, and estimate how much the fairness pricing effect has increased or decreased a customer’s premiums.

Maybe simply disclosing the fairness pricing would please consumers who agree with ideas of fairness behind the pricing decisions. Other consumers might decide that they think the fairness pricing is unfair and either try to get the pricing rules changed or avoid buying the product with the altered pricing.