Last week’s tax day Health Wonk Review included an article written by Jared Rhoads about how the health care reform legislation amounts to a funeral march for the health insurance industry. I don’t think that will be the case – I believe that the health insurance industry will adapt to the new regulations and continue to offer private health insurance options, both to individuals and to businesses. Medicare was passed into law 45 years ago, and today the sale of private supplemental plans for Medicare enrollees is a booming business. We don’t know what our health insurance delivery system will look like a generation from now, but I seriously doubt that the private health insurance sector will disappear.
Jared included numerous examples of provisions in the Patient Protection And Affordable Care Act that will make things a little more challenging for health insurance companies, but he didn’t mention anything about the mandate that would require everyone to buy into the health insurance system. If that mandate is successful in this regard, there should be millions more people paying into the system in a few years, and those premiums can be used to offset some of the increased costs that will go along with things like guaranteed availability. If the mandate isn’t successful, it’s reasonable to expect that premiums will have to increase to cover costs, but the fact that the mandate exists ought to be included alongside the list of things that will increase costs for the health insurance industry.
Jared mentioned that
He [President Obama] should know that insurance is a brilliant financial invention and a win-win arrangement when both sides are free to act voluntarily in the context of a free market.
I agree. Insurance is an excellent product that is beneficial to both the insured and the insurer in most situations. The insured gets peace of mind and is protected from catastrophic financial loss in the event of an unforeseen circumstance, and the insurer makes a profit by providing this very necessary service. But underwritten insurance doesn’t fall completely in the realm of the free market, and there are some people who can’t purchase health insurance, no matter how much money they bring to the table. The idea that health insurance should be strictly a free market, unregulated product is popular among people who are healthy and able to select from numerous options when shopping for health insurance. It’s also popular among people who have great health insurance provided by an employer, and are thus relatively insulated from the process that is required if a person needs to qualify medically for individual health insurance. But a free market system ultimately leaves unhealthy people with no options for health insurance. This in turn means that the cost of healthcare for those individuals is eventually passed on to the rest of the population in the form of higher healthcare costs. Clothing and houses and cars… the free market works great for those things, because people can choose to buy less expensive options, or not to purchase them at all. But if you’re having a heart attack, there aren’t really any viable alternatives other than standard medical care in an emergency room. And without health insurance, paying for that care will be extremely difficult for all but the wealthiest among us.
We definitely needed a solution to make health insurance available for everyone, and there’s no way to do that without taking away some of the freedoms from both sides (including the ability for insurance companies to decline applicants, and the ability for people to choose to not have health insurance). The legislation isn’t perfect, and it won’t please everyone, but hopefully a decade from now, the problem of millions of Americans living without health insurance will be a memory.