Okay, for the sake of argument, let's also refuse to pay for treatment for BASE jumpers and cave divers. Now let's refuse coverage to people who get STDs. Now people who smoke. Now people who don't fasten their seat belts.
Uhm, towards a highly efficient system? Why do I need to pay the same premium as someone who eats fast food 3 times a day and downs 4 gallons of Coke and smokes in between?
Yes, totalitarianism can be highly efficient, when all the inefficient people are forcibly excluded from the system.
You need to pay the same as that person, so that the insurer does not have to know every tiny detail that separates the low-risk person from the high-risk person.
Do you really want 24-7 surveillance tracking how often you drink Coke, and tattling on you if you smoke? Or do you imagine that the guy who dips fries in his milkshake is going to self-report derogatory information to their insurer? And do you think that you will be the one deciding which behaviors will be considered high-risk? Do you think that they will all be firmly grounded in science rather than morality or politics?
So you must also think you should pay the same car insurance premium as a guy who gets DUI's every couple of years and runs red lights?
People who do not take care of their own bodies burden the system significantly more than people who lead a healthy lifestyle. It does not take a genius (or a clinical study) to figure this out. They simply should pay more for the resources they consume.
As another poster commented, this already works this way with life insurance. Should my life insurance premium be the same as a person who skydives every weekend?
One of the only ways to get people in this country healthier is by exposing their financial burden on the system. When you know you are paying $2000 for the same insurance your healthy next door neighbor gets for $250 - you pretty quickly figure out you're doing something wrong.
DUI convictions are already public record. Driving while intoxicated is already illegal. Actual damage done by drunk drivers is quantifiable by aggregating the police reports and injury and damage claims where one or more of the drivers was drunk. So people with drunk driving convictions on their record should pay higher car insurance premiums. You can make that calculation without hiring an investigator or surveillance robot to follow your customer around.
Skydiving trips are not public record. Wingsuit flights are not public record. I don't think insurance companies should know more about you than one of your casual acquaintances. So I don't think that it is justified for them to charge thrill-sport adrenaline junkies more than stay-at-home bodies for their life insurance. This currently does not stop insurers from refusing to do business entirely unless the customer first divulges their private information, because the practice does allow them to make more money. For me, that only raises the issue of whether or not a scheme to collectively mitigate risk should be for private profit, private mutual benefit, or an inherently governmental function. At a certain level, you are essentially enforcing an implicit mandate that only rich people are allowed to have fun or get high.
The actual effect of what you propose is that people go uninsured, rather than pay the grossly inflated premiums. Healthy/safe people may also go uninsured, as their risk is so low that they might be able to cover their entire risk by saving the money that would otherwise go to premiums. The high-risk people then eventually suffer a crisis and can't pay their own costs. Those have to be shouldered by society anyway, or you stand by and say, "You deserve to die, because you were too weak to not be a sugar addict, fatty." or "You deserve to die, because you were too weak to not be a nicotine addict, filthbreather." or "You deserve to die, because you chose to unnecessarily jump out of perfectly good airplanes, chutepacker." Raising the cost of something always prices someone out of the market.
What you are saying about risk is unequivocally true. Unhealthy people are a higher risk, and the expected value of their medical care is higher, and their projected life expectancy shorter. But consider also that externalities from data breaches and non-overt but still unlawful discrimination are also not factored in to the costs of providing insurance. If you want drinkers and smokers and fatties to pay more for insurance, I will also want insurance companies to be fined $X per breach, every time that a single datum of personal information is disclosed to anyone outside the company, or anyone inside the company that does not need to know it to do their job. If you need to invade my privacy to do your job, your job is also to protect my privacy from being invaded by others.
And those companies also need to be able to prove that they aren't charging black people more than white people, even if the claims statistics indicate that black people should be charged more, mathematically, because they really are at higher risk for injuries and death. We, as a society, have collectively decided that some types of discrimination are not okay, and you can't hide behind the math to do it anyway. Suck it up and fudge the numbers to make it work, because we have all decided to pretend that people of different skin colors are de jure equal, even if the de facto equality hasn't happened yet.
If those challenges make running an insurance business impossible, that's fine. They don't actually have a right to always make profits.
What you have done is provide a simple solution to long-standing problems in a very complex business, and gave no thought to the unintended consequences of your proposal. It only works in a simulated world, full of numeric representations of people, that are all programmed to act in the ways that you have already anticipated.
Yes, I see where it goes. Either premiums would rise on the basis of lifestyle, or supplementary health insurance companies would pick up the slack. Your choice to smoke, have unprotected sex, or BASE jump would come with additional costs, which would be in addition to the cost of the cigarettes, wingsuits, etc - rather than being an externality which society pays.
Note that we already do this for life insurance, and fully accept doing so. You cannot even get a short term policy without a blood test. Why should health insurance be any different?
Many medical insurance companies already offer premium discounts based on tested blood glucose and/or A1c levels. So we kind of already have a mild form of what you're proposing. I don't agree with cutting off Type-2 diabetics from health insurance benefits, but financial incentives can help encourage some people to make better choices.
