This is currently illegal in Australia. And for good measure.
The private sector does a lot of good, but it has to be regulated and boundaries put around these things, otherwise they can turn into a "corporate cancer" growing and profiting, regardless of fairness, ethics and at the expense of the broader society.
The reason why Australia has "community rating" (i.e. you have to accept everybody warts and all) is to prevent something called "cream skimming" where the private fund skims the young and healthy (who probably don't need health cover so much at all) and leaves most who need it (old, sick, obese etc) with out cover to then have to bill the public account (and public hospitals).
The same logic is behind leaving out pregnancy and cardio-thoracic (i.e. if you have a heart bypass) from all but the most expensive private plans.
A good suggestion, but can't be used. On the other hand, some private funds do offer weight loss and other incentives to stay healthy (free such and such, giveaways etc).
Yes, I am aware it is illegal in Australia. I am questioning not the legality but its ethics. I also recognise that many health insurance companies are dabbling in this area by offering incentive to stay healthy - and reducing premiums if this is the case. This is almost a way around the legality aspects of my suggestion, interesting!
I understand that you have put the view that you believe it is unethical in that health funds could increase profits from certain demographics such as the young and healthy.
I accept some of this, but would like to make two points assuming my proposition of allowing health insurance funds to charge different rates for individuals depending upon the assessment of that person's risk of incurring expenditure from the health fund.
1. If one health fund built a lot of profit into their pricing, in an attempt to skim the cream, then a low cost health fund would take advantage of this pretty quickly and create a low cost fund and gain that market segment that put price as their number one priority. There are other ways apart from price to differentiate in a market place, price being the easiest to measure.
This is of course normal market forces at play. Skimming is opportunistic and doesn't last long in an informed market. And the collusion of competitors is illegal so prices could not be held artificially high - but of course we all know that collusions does sometimes occur. Making something illegal does not mean it prevents it from occurring.
2. In effect, by not permitting health insurance companies to charge more to those they assess to be at risk, it means those same companies must average their charges across their customers. This means the customers who would be assessed as low risk are penalised by being charged more than if they were assessed.
So, I will argue for the case that health insurance companies should be permitted to charge based upon their assessment of the health risk of the individual concerned.
I guess I am also saying, that our taxes should be directed to those who need and deserve them the most. It is up to the Government to define deserve of course, but I do not think that people who lived a very unhealthy life eating fast food, no significant exercise, drug abuse, binge drinking, smoking etc deserve in any ethical sense, a greater proportion of the health budget from a private or public purse than someone who has lived a healthy life. yet this is the situation today.
How to implement what I suggest? I don't know! So I guess I agree with your last statement, I think it is a good idea, but not something that can't be done, but something that there is no political will to do.