Uproar over cancelled plans also poses obstacle for free market health reformers
Critics of President Obama’s health care law have understandably pounced on news that millions of Americans are receiving cancellation notices from their insurance companies due to the law’s onerous new requirements.
This is understandable. Obama promised repeatedly when selling his health care law that nobody would lose their health care plans if they liked them. It was a blatant lie at the time that deserves, at long last, to be exposed.
But as I wrote in my column this week, there's a reason why Obama lied in the first place. When he was making his pitch, an overwhelming majority of Americans were insured and liked their coverage. This reality had cemented a status quo bias that had long been an obstacle to any sort of health care reform. And that also extends to market-based reforms.
Even if free market health care reformers were able to pass the plan of their dreams — which would involve tweaking the tax code to end the bias in favor of employer-sponsored insurance — it would likely mean a lot of people would get dropped from their current plans.
To be sure, it wouldn’t be for the same reasons. It wouldn’t be because the government mandated the type of coverage that every individual must have.
And at the same time, there would be many benefits from moving away from the employer-based insurance model.
To start, it’s unfair that individuals who buy their insurance on their own don’t get the same tax advantages as those purchasing insurance through their employers.
If employers scrapped insurance coverage, they would be able to increase wages and salaries.
Removing the tie between employment and health insurance would also allow individuals to take their plans with them from job to job.
Individuals would have a wider variety of choice as to the types of plans they want, rather than be limited to whatever their employers offered them.
This reform would also bring down costs in the broader health care system, because individuals would have more control over their own health care dollars, thus they’d have more of an incentive to shop around for the best quality at the lowest cost.
At the same time, insurers would have more of an interest in the long-term health of their beneficiaries. Right now, insurers assume that people will change jobs every few years, switching policies and insurance providers. Therefore, they don’t have much of an interest to invest in that person’s long-term health. But if suddenly, an insurer thought of a 25 year-old as a potential client for 40 years, then they’d have a reason to reward healthier behavior — which would also bring down health care costs.
For all of these benefits, however, there's no denying that if the federal government got rid of the employer bias in health care, it would change the existing incentive structure and as a result, a certain share of employers would drop insurance coverage. And right now, roughly half of Americans are insured through their employers. So that could potentially affect a lot of people.
There’s no doubt Obama lied to the American people by suggesting that major changes to the status quo aimed at helping some people were possible without disrupting the status quo for anybody else.
During the October 2008 town-hall-format presidential debate with Sen. John McCain, candidate Obama said of McCain's plan to replace the exemption for employer-based health insurance with a universal tax credit, that it “would lead to the unraveling of the employer-based health care system.”
In the same debate, Obama said that under his proposal, “If you've got health care already, and probably the majority of you do, then you can keep your plan if you are satisfied with it.”
He later added, “let me just repeat, if you've got a health care plan that you like, you can keep it. All I'm going to do is help you to lower the premiums on it. You'll still have choice of doctor. There's no mandate involved.”
Republicans are understandably jumping at the chance to hold Obama accountable now that millions of Americans are realizing they were lied to. Already, Sen. Ron Johnson, R-Wis., and Rep. Fred Upton, R-Mich., have introduced legislation aimed at making sure people can keep their health care plans if they like them.
But there’s also a danger of making the idea that nobody’s coverage will ever change as a result of reform a tenet of Republican health care policy. Such a starting position would make true market-oriented reform impossible.
It would be better, instead, to emphasize that under Obamacare, changing coverage means being forced to purchase an insurance policy that federal bureaucrats like. While under a market-based reform, changing coverage would mean Americans gaining the freedom to choose the type of health insurance they liked.
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