Health Care Reform: The REAL Solution
The issue at hand in the health care debate is how best to ensure reasonable access to care
for everyone at the most reasonable cost.
Costs are rising. While it's easy to blame "greed" and the "evil profit motive" eminating from health insurance
companies, let's not lose sight of what a health insurance company is: an actuarial firm that makes or loses money
by pricing risk. Risk is, literally, a payout; any event that will cause the company to pay money is, to that
company, a risk. By calculating what it must charge in order to make a profit that keeps its stock afloat and its
business growing, the insurance company's rates are essentially set FOR it. This is not a matter of greed, but
it IS, of course, a matter of profit motive; after all, the only proven way to administer any product or service
consistently, efficiently, and cost-effectively, is to introduce profitability.
This brings us to one fundamental flaw with the health insurance system: precisely that it is NOT fundamentally
market-driven.
How can it be? Insurance isn't sold to individuals; it's sold to employers who distribute and take part in the
administration of their plans to their employees. This doesn't constitute free choice for the employee, the
person using the product or service; it constitutes only choice for the employer and a mandate to use whatever
the employer has selected or go without insurance. This is not, thus, a free-market opportunity for
individuals.
More egregious, employers themselves don't have free choice of available plans; they can purchase select plans
only from insurance companies permitted to sell coverage in the employer's geographic area. Instead of choosing
coverage from any number of insurance companies across America, employer choice is severely restricted due to
federal and state regulations, and without choice, a fundamental free-market principle, performance
invariably suffers.
Federal and state regulations do not just hinder the quantity of choices for employers but also the quality.
Regulations dictate to a large extent scope of coverage and who must be covered. Take, for example, the state
health insurance regulations in New York. Some of these are as follows, courtesy of www.healthinsuranceindepth.com:
- New York health insurance companies that sell individual health insurance cannot refuse to sell you insurance
and must provide family coverage, if desired.
In other words, if you apply for insurance in the state of New York, the insurance company must sell it to you --
period. This seems reasonable -- though, of course, the insurance company can tweak its rates based on information
about you, right? Well... keep reading.
- New York health insurance laws state that you cannot be denied health insurance due to your health status,
age, or any other factor. Also, the cost of your New York health insurance premiums cannot be dependent upon
your health, occupation, age, or gender.
So the insurance company not only must SELL you coverage at your request, but no matter how you take care of
yourself, no matter any pre-existing conditions, no matter any other risk factor you may have, it must charge you
the SAME price it charges everyone else. Huh. Well, okay, but the insurance company can at least provide
varying levels of coverage at its discretion? Well... not so fast...
- In New York, HMO's must offer a standardized New York health insurance policy that offers comprehensive
coverage. Although your health insurance policy can be canceled for some certain reasons, New York health
insurance laws prohibit health insurance companies from terminating your policy on the grounds of illness.
Yes, you got it right: in the state of New York, everyone gets coverage, everyone gets the same rate, and everyone
gets the SAME coverage (assuming you're purchasing an HMO). Well then... how does the actuarial part factor
in?
It doesn't. There's no actuarial component in New York state at all, save for determining what flat rate to charge
every single customer. When risk cannot be spread fairly across everyone enrolled, everyone enrolled must pay
more. And because enrollees have no choices when it comes to coverage level, many will pay more for coverages
they don't even want. It makes no sense.
Letting the market work solves this entire problem -- for the insurable folks. In short:
- Decouple health insurance from the employer and sell it directly to individuals.
- Get the government out of the business of health insurance oligarchies by ending the practice of permitting
specific companies to operate in specific areas; let every insurance company compete with every other for every
customer across America. This greatly increases competition among private insurers, which drives prices down
and service quality up.
- The government must stop telling insurance companies what they must and must not cover. Get out of the way
and let them determine which policies make sense for their customers, whether they be catastrophic plans,
mid-range, or comprehensive full-coverage plans. Less coverage means cheaper prices, but less coverage might be
perfect for a 25 year old athlete between jobs.
- End the myth that "health insurance" is somehow different from, say, "auto insurance." Your auto insurance
company doesn't pay for preventative care, does it? To confirm, file an auto insurance claim after your next
oil change, tire rotation, alignment, or wheel balance. They'll laugh. But you expect your health insurance
to cover your physical, mammogram, or ED meds? C'mon.
As for the uninsurable, this is a true problem, and it's not one that's easily resolved using market forces.
It's THESE folks, however, that could benefit from a health co-op administered by a non-profit organization.
Legislation to incentivize the creation of such co-ops to cover the elderly and those with pre-existing
conditions makes a lot of sense.
But government control of health care in ANY WAY? NO WAY!
- HQ staff
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