Health Insurance, Obesity and Its Economic Costs

Because medical costs are higher for the obese and premiums do not depend on weight, lighter people in the same pool pay for the food/exercise decisions of the obese. Furthermore, the negative health effects of obesity decrease the ability of the obese to pay for government-mandated social programs. Bhattacharya and Soods paper focused on these health insurance externalities. The authors developed a model of weight loss and health insurance under two alternative regimes, one that allows underwriting on weight, with premiums a function of weight, and another that does not allow this, and premiums do not depend on weight. The goal of this study was to estimate the impact of absent or imperfect underwriting on weight and health.