Monday, June 18, 2012

Let Insurers well Compete

Boston Acupuncture - Let Insurers well Compete
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Advocates of government-run group option condition plan are fond of claiming that the shop "has been given its chance" and that all we need now is for the government to "inject competition into the condition care shop so that [we can] force waste out of the theory and keep the insurance clubs honest."(1) Yes, the President of the United States company force with the market, and option with the government-not the other way around.

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Perhaps the scariest thing is that most of Congress agrees.

With a group option back on the table, Congress is poised to pass what would, in effect, be a heavy new entitlement schedule for the lower and middle class paid for explicitly through a blend of payroll penalties on employers (i.e. Displaced wages) and confiscatory taxes on the rich (i.e. Theft). Since that won't be nearly enough to cover the real expenses of such a plan, the equilibrium will likely be covered through normal taxes and inflation, both of which tend to hit middle-class savers the hardest.

If anything believes the government assurances that the plan will be self-sustaining-after billion in government startup funding, of course-just look at the books of Medicare, Fannie Mae, and Freddie Mac.

Boston Globe columnist Jeff Jacoby recently captured these sentiments and more in a piece calling for less government and more real reforms.(2) Here are his top three insurance reforms. All are desperately needed, and any one of them would be a major breath of fresh air:

Tear down the barriers to buying insurance over state lines. ... When it comes to almost any other stock or service, Americans would find a ban on interstate industry and competition intolerable: imagine being told that you could buy a car only if it was artificial in your state. Consumers in the shop for a mortgage are free to do company with an out-of-state lender; those in the shop for condition insurance should be equally free to do company with an out-of-state insurer. Repeal mandatory benefits that make condition insurance needlessly expensive. Compounding the lack of interstate competition is the way states drive up the cost of condition insurance by making positive types of coverage compulsory. Consumers and insurers should be free to work out for themselves just how wide or small a policy should be. But state mandates preclude such flexibility by requiring insurance clubs to sell a fixed array of benefits that many customers may not want. Individuals seeking plain-vanilla condition insurance-a policy that will cover them, say, in case of major surgical operation or catastrophic illness-may find themselves forced to pay for a policy that also covers acupuncture, in vitro fertilization, alcoholism therapy, and a dozen supplementary treatments. De-link condition insurance from employment. Nothing distorts America's condition insurance shop like the misbegotten tax preference for employer-sponsored condition insurance. Until that preference is removed, millions will continue to rely on their employers' condition plan, rather than buying insurance for themselves. Fix the tax code, and no longer could insurance clubs routinely bypass employees and deal only with their employers. Instead we would see intense competition for personel customers-and the lower premiums such competition would yield.

The shop is not suffering for a lack of government control; it is suffocating from too many controls. How can insurers compete effectively when they have to sell into fifty distinct markets with fifty distinct sets of arbitrary rules? How can patients and consumers shop for what they need, when what they must buy is dictated by federal and state governments? And who is going to expose themselves to supplementary tax penalties by forgoing owner insurance in exchange for buying a policy in the current personel market?

The current insurance shop is so hampered by government controls that it cannot even seriously be called a market. If you went to buy an apple at a fruit stand, and a third party intervened in your transaction telling you which type of apple to buy, from whom, at what price, could you indubitably call that a shop transaction? Of policy not. (And by the way, the intervener also tells you that you have to buy an apple, and that you are not allowed to carry on your diet or hunger in any other way-that's the personel mandate.)

What is needed is not just a defeat of the current House and Senate bills, but the proposal of a fully new bill that enacts real shop reforms. Real shop reforms make markets more free, not less free.

1 Obama, B. "Remarks to the American healing Association" Chicago, Illinois. June 15 2009

2 Jacoby, J. "An option for public: less government, more choice" Boston Globe, November 4 2009

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