Cavalcade of Risk #14

Greetings, risk‐​seekers. We’ve got a smorgasbord of entries for the 14th occasional Cavalcade of Risk blog carnival. I received 24 entries, many of them actually related to the topic of risk.


Lacking Confidence in Confidentiality


Leon Gettler at Sox First reports on a study concerning the risk that companies will compromise confidential data about their customers. That study found that “one‐​third of senior executives don’t trust their own companies to handle this kind of information.” Tune in to see which industries are trusted least.


In a later post, Gettler looks at the “private equity frenzy,” whose risks he likens to that of the dot‐​com bubble.


Sympathy for the Investor


Long or Short Capital blogger Mr. Juggles — fresh from a signing ceremony with the Prince of Darkness — explains the profitability of the infotainment industry in four easy‐​to‐​understand squares.


Born to Insure


In an interview at RDoctor Medical Portal, Dr. Aleksandr Kavokin gets InsureBlog host Hank Stern to bare his soul (sort of) about “testing positive for insurance sales,” employer‐​sponsored health benefits, and government regulation of insurance premiums, among other things. Watch Stern give a shout‐​out to his “brilliant, trophy wife and equally brilliant and lovely chillun.”


Then watch the warm fuzzies continue as Stern, this time from his home base of InsureBlog, shrugs at technology that would allow him to monitor the driving habits of his two trustworthy teenage daughters. Insurers apparently haven’t started offering discounts to families that use these chips — but my guess is that as the market evolves, the discount will be greater for families with teenage sons.


Who’s Your Agent?


Jay of Colorado Health Insurance Insider fame picks up on two themes raised by Stern: that health insurance is about managing risk, not prepayment of care, and that employer‐​sponsored coverage is nutty. He argues that health savings accounts (HSAs) can help end the madness. I mostly agree. But if Jay can find a health insurance policy that “cost[s] the employer more than 2x what a similar individual/​family health insurance plan will cost,” he either must be suuuuper healthy or have really sick co‐​workers.


Thanks, Pal


As a guy who’s about to undergo surgery (albeit minor), I just don’t need reminding about the rates of medical error in the United States. Nevertheless, Healthcare Economist Jason Shafrin is all too happy to remind me anyway, noting that medical errors kill an estimated 50,000 to 100,000 patients per year. He discusses one organization’s efforts to promote medical practices that will reduce some of the most common forms of medical error.


I’ll See Your HSA Deductible, and Raise You …


My Cato Institute colleague Arnold Kling takes on fellow blogger Ezra Klein’s argument that HSAs won’t do much to reduce health care spending. Arnold draws from his book Crisis of Abundance, where he argues for some real catastrophic coverage.


Insurance Is Dead. Long Live Insurance.


In what I found the most intriguing submission to this Cavalcade, Jon Coppelman of Workers’ Comp Insider writes that we may be seeing a fundamental change in the nature of insurance since insurers now have the data mining tools to limit their risks dramatically. He foresees that as the concept of pooling evaporates, the number of losers is likely to exceed the winners.


This echoes a phenomenon I see frequently in the area of health insurance. (You might want to read Coppelman’s post before continuing here.) Insurance is a tool for dealing with uncertainty (i.e., by subsidizing uncertain losses). How do we know that? Because people generally don’t buy actuarially fair insurance to pay for certainties. When additional information moves a potential loss from the “uncertainty” to the “certainty” end of the spectrum, people understandably decry the loss of that subsidy. But I find it bewildering when some call that “the end of insurance” or a market failure. First, unless we’re close to eliminating uncertainty, we will always have insurance. Second, in cases where uncertainty is reduced, insurance markets are doing exactly what they should: replacing the subsidy with some very valuable information. Finally, just because the insurance subsidy is gone, that does not prevent society from subsidizing those losses in other ways. I’d be interested to hear from Coppelman and others on this.


Okay, off my soapbox.


Hard to Joke about This One


Meanwhile, Joe Paduda of Managed Care Matters provides evidence that the insurance industry is not heartless.


GRxvy Train


In (at?) the wake of torcetrapib, Wenchypoo prescribes a serious dose of cynicism for those seeking to understand clinical trials for pharmaceuticals. Wenchypoo provides my favorite quote from this week’s submissions: “I suppose when you’re dying, the last thing you worry about is who’s profiting from keeping you alive a few more weeks.”


Libertarian Roundup


And finally, here at my home of Cato@Liberty, you may peruse my colleague Sigrid Fry-Revere’s libertarian perspective on genetic engineering, as well as Arnold Kling on why libertarians have a lot of work to do on health policy.