Cato @ Liberty has posted an article espousing the view that the individual health insurance market protects sick Americans better than the small group health insurance market. My view is that health care – like police protection and public education – is a necessity and should therefore be afforded to all Americans as part of the tax-funded array of basic services that we all receive. I realize this is unlikely to become a reality anytime soon, given the tremendous lobbying power that the health insurance industry possesses. So let’s consider potential reforms for the private health insurance market. I don’t believe that we need to have health insurance tied to employment, the way it is with our current group policy model. I think our group health insurance system has some basic flaws, the most obvious – for anyone with pre-existing medical conditions – being that maintaining health insurance coverage is contingent upon continuing to work for an employer who provides health insurance. But shifting the focus to an unregulated “free market” individual health insurance system would make things pretty tough for the rather large portion of the population with pre-existing conditions.
We work primarily in the individual health insurance market. Colorado is one of the healthiest states in the US, and yet we still have about one applicant in ten unable to obtain coverage. Luckily we have a high risk pool – Cover Colorado – that we can present as a last resort, but the high premiums and out-of-pocket expenses can be a bit off-putting. Although 9 out of 10 applicants do get approved, several of them end up with modified policies, either paying more because of their medical history or taking a policy that specifically doesn’t cover their pre-existing conditions. For these people, especially the ones whose applications are declined, the individual health insurance market probably doesn’t seem all that great.
Let’s consider the current problem we’re facing: 47 million people without health insurance coverage. I have to believe that some of these people are uninsured because they have already tried to obtain individual health insurance and been declined. If they were to all apply for individual health insurance today, it’s likely that a lot more than one in ten would be declined. For argument’s sake, let’s say 20% are uninsurable. That’s nearly 10 million people who would still be uninsured with an unregulated individual health insurance market, even if we assume that everyone who could qualify for coverage could also afford to pay for it.
The Cato Institute article defends the individual health insurance market by saying “Provided consumers insure while they are still healthy, individual-market coverage offers as much or more protection to high-cost patients than they have now.” True… but that’s a pretty big ‘provided’. Without some sort of enforceable mandate requiring everyone to maintain health insurance coverage from cradle to grave, there are always going to be significant numbers of people who go looking for health insurance only after their health has taken a turn for the worse (like when they lose their job). Of course a national health care system funded by tax dollars would provide lifetime coverage regardless of whether a person has the foresight to go looking for health insurance before getting ill, but that’s another story.
So how would a switch from guaranteed-issue employer group coverage to individual health insurance work? The Cato article maintains that “In the transition to a level playing field between employer-sponsored and individual-market coverage, there may be some people with high-cost conditions who lose their existing coverage, and cannot obtain subsequent coverage. If that occurs, most Americans will want to offer some form of subsidy to those hard cases.” First, I don’t think that there “may” be some people who are unable to qualify for individual coverage. There absolutely will be people unable to transition to the individual health insurance market, and not a small number at that. And while I’d like to agree that most Americans would want to subsidize coverage for those folks, what’s to make us think that the situation would be any different than it is now? I don’t see a huge rush on the part of the American people to subsidize coverage for the 47 million people who are currently without health insurance – even just for the ones who are uninsured because they have been declined by individual health insurance companies.
Although I agree that health insurance should be separate from employment and that the employer-group model is flawed, I can’t envision an unregulated individual health insurance system as a better option. Until we remove the profit motive from health insurance, it will always benefit the insurance companies to find ways to avoid paying claims. And if they can exclude people with pre-existing conditions, that’s a huge number of claims that never even get submitted. If we really want to find a way to insure all Americans, we can’t just include the healthy. And in an unregulated individual health insurance market, that’s what would happen.