Insurance is a funny thing. I sell a product that I hope my clients will never use. Nobody wants to make an insurance claim. The exception is health insurance. People buy health insurance with every intention of using it. Many make plans to use it right away. A large portion of my income comes from selling health insurance, but I have a confession to make: our fundamental reliance on health insurance to pay every medical expense is what’s ruining our health care system.
Let me explain. Modern insurance is a method of risk management that began with merchants shipping goods over seas. An earlier technique used by merchants to minimize risk was to distribute their cargo on to more than one ship. Thus, if one ship sank, they didn’t lose their entire shipment. As risk management became more sophisticated, merchants and ship owners would enter into contracts with parties willing to guarantee, i.e., insure, the ships and their cargos. The idea was simple enough: in exchange for a relatively small premium payment, the insuring party agreed to compensate the merchant or ship owner in the event of a large, potentially devastating loss.
Following the development of these marine policies, other lines of insurance were established including, fire insurance for houses, and life insurance, and today there is an almost countless number of things we insure. But as varied and complex as modern insurance policies have become, there are a few basic conditions that must be met in order for insurance to be an effective means of minimizing risk:
• The potential loss being insured against must be large,
• It must be unexpected, and
• Its occurrence must be rare.
Insurance is too expensive when used as a means of financing small, inexpensive risks. Consider the following. Here in Provo, I can insure a $500,000 house for less than $500 per year. Think of that. For roughly $35-$40 a month, a half million dollar risk is covered. That’s a great exchange. On the other hand, I recently bought a $45 phone for which the vender tried to sell me insurance for $5 per month—$60 a year to cover a $45 risk. Bad exchange.
Neither is insurance an appropriate means of financing losses which we know are going to occur. For example, no insurer would allow me to purchase a new fire policy while a wild fire was burning through my neighborhood. Any loss to be insured against must be uncertain.
Nor can insurance be used to finance losses when they become too frequent. For example, if I am regularly involved in car accidents, insurance companies will decline to cover me or make the premiums prohibitively expensive.
The problem with health insurance today is that we have violated all three of those criteria. We have used insurance to cover planned, routine, and inexpensive care with the result being that the cost of insurance has skyrocketed and even regular office visits now feel unaffordable. Faced with the consequences of our misuse, Congress has enacted legislation to “solve” the problems of health care by actually expanding the role of insurance. Their argument is that when everyone is insured, the price for everybody will go down. Really?
Let’s look at that idea using the ridiculous example of toilet paper insurance. TP is something that I hope everybody uses. What would happen if we had TP insurance? Would it make TP more affordable? Of course not. The cost of financing our TP with insurance would have to include the cost of the TP plus the additional costs of the insurance clerks who process the payments. And that’s just the beginning. As useful as insurance can be, it presents a perverse incentive to waste and destroys any incentive to save. Think it through. If your TP is covered by insurance, do you limit the number of squares you use? Do you buy the discount brands, or only the ultra-soft kind? Do you waste your time coupon clipping?
And let’s not forget about the TP manufacturers. When people have TP insurance, manufacturers don’t have to compete on price anymore. What does that do to cost?
But what if everybody had it? Well then the price would probably just go up faster.
Believe it or not, the same economic principles that apply to TP apply to health care. The fact is health insurance increases the cost of each visit to your doctor by adding extra people, i.e., billing and insurance clerks, into the transaction. It promotes over utilization of health care because the patient doesn’t pay the cost directly. And when was the last time your doctor or hospital advertised their prices? Never. (Can you even name another industry that hides its prices like the medical industry?) But if you think they aren’t concerned with increasing their profits, then explain why the medical industry spends nearly $6 Billion a year in advertising.
So how did we get into this mess? Why did we ever start using insurance to finance planned, routine, and inexpensive care?—especially if, as I’ve claimed, it costs more? The answer requires a little more history. Modern group health insurance had its beginnings in 1929 but didn’t really take off until World War II when government-imposed wage freezes prompted employers to offer other benefits in lieu of increased pay. But by 1954 most people still didn’t have health insurance. That’s when Congress got involved again and made contributions to employer-based health plans tax-deductible. At that time the minimum Federal tax bracket was 20%; the highest was 91%. So getting that tax deduction was equivalent to taking between 20-91% off the price of a person’s health insurance. (It works the same way today.) With “discounts” like that, insurance became the least expensive way to finance all health care—from the catastrophic right down to minor colds and sniffles.
It seemed like a great deal, and it really took off. Except the “deal” didn’t last long. For reasons already discussed (over utilization of services, and inattention to prices), the cost of health care rose rapidly. That in turn increased the cost of insurance. Today the cost to insure a family rivals the cost of the family’s mortgage. If you think that’s no big deal because your employer pays it, think again. Remember, group health insurance became popular because it was a substitute for wages. It still is. If your employer has to pay more for insurance, that means less is available to pay you.
As a nation almost 20% of every dollar earned is spent on health care. And that number is growing. We can’t continue in that direction much longer. But what can we do? Congress’s solution was more insurance for everybody. Coupled with that, they had to cap reimbursement for doctors and hospitals. (Yes, our government passed legislation limiting how much doctors and hospitals get paid.) And they’ve discussed “death panels,” i.e., government panels to approve or disapprove life-saving treatment for the elderly, as a way to limit the expenses for end of life care. Is that really what we want for America?
The beginnings of a better solution to our health care “crisis” are already visible in the free market. As insurance prices have skyrocketed, many insurance shoppers have opted for high-deductible, lower-premium plans. These plans may have $5,000 or even $10,000 deductibles, thereby placing the patient as the direct payer for his/her health care costs until the deductible is met. I have seen first-hand a shift toward these types of plans, and as more people are put in the position of paying their own health care costs, over utilization will decrease all on its own. Patients will become price shoppers, and doctors and hospitals will begin to compete on price and quality just as in every other industry.
A technique I used until recently to make insurance more affordable was to split coverage for a family. That is, I would give mom and dad a high-deductible, low-premium plan and put the kids on a more comprehensive plan. One of our local health plans offered comprehensive kids plans with low deductibles and co-pays with premiums as low as $40 per month. I used to offer a student plan for college students for as little as $30 per month. Unfortunately, the student plan and kids plans were discontinued following the passage of the health reform legislation last March.
One of the gems of that new law is that children under age 19 are now guaranteed coverage and pre-existing conditions cannot be excluded. At first that sounds pretty good. One of my best friends has a son who had open heart surgery shortly after birth and now has a pacemaker in his chest. Before the law passed, this boy was uninsurable on any individual/family plan. Faced with situations like his, most people don’t mind regulating insurance companies into offering coverage to children. The problem is, scoundrels like me exist to expertly exploit all your good intentions. My first thought when I heard about the guarantee for child coverage, was to remove my children from our insurance. Why, with guaranteed coverage available and no exclusions, would anyone cover their children before they got sick or injured? I reasoned that as soon as the cost for care exceeded the cost of insurance, I could add them. And I would have gotten away with it, too, if it weren’t for those meddling insurance companies anticipating my plan.
As just mentioned, kids plans were discontinued in September as the first wave of the reform legislation came into effect. Today there isn’t a plan in Utah that offers coverage to children under the age of 19 who aren’t applying on their parent(s)’s policy. Some plans went further declining even to cover partial families. The non-profit BlueCross BlueShield plan in Utah went as far as to discontinue offering their plans to any minors under the age of 19—even as part of a family plan. (You see, the law only said the child couldn’t be denied for health reasons. It didn’t say that children couldn’t be ruled ineligible to apply.) And rates took a sizable increase.
Oh, those big, bad insurance companies: limiting their offerings, and raising their prices. The trouble is that government has limited the ability of insurance companies to perform their primary function which is to assess risk. It would be like saying to a bank, “You can give loans, but you can’t qualify applicants based on income, employment, or credit history.” Such a policy would encourage what we call “adverse selection,” that is, bad credit risks would apply for loans, and as interest rates necessarily went up due to an increased risk of default, the better risks would drop out. That is exactly what this new regulation does to health insurance. Only the sick, i.e., those for whom the cost of insurance is less than the cost of treatment, have an incentive to buy coverage. And as premiums increase, only the sickest will remain, until ultimately the market collapses.
Yes, insurance companies make HUGE profits (net-income for those non-profit plans), and we should be glad they do. They wouldn’t exist, nor could they provide a service without it—just like any other business in America. The eighteenth century economist, Adam Smith, wrote: “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest.” “I have never known much good done by those who affected to trade for the public good.” In other words, more people get better bread when bakers rake in the dough. Why should it be different for insurance companies?
Other nuggets of health reform include:
• Insurance companies are prohibited from imposing annual or lifetime coverage limits.
• Preventative care is covered 100% (with zero deductibles or co-pays).
• Children can remain on their parents policies until they are 27 years old (regardless of student status and even if they’re married with kids of their own!).
More coverage always feels good from the patient’s point of view. I always tell my clients: “You can never have too much insurance, BUT you can have too much premium.” Did we believe all this was coming for free? Ironically, the net effect of reform legislation, with its stated purpose of making insurance available to more people, may be that fewer people will be able to buy coverage. And those who can will pay more.
So what’s the solution? We’re facing big problems:
1. The cost of health care is going up at break-neck speed, and
2. There are many like my friend’s son who can’t get private insurance and can’t afford care without it.
Let’s look first at cost. We’re in the middle of a health care bubble, not unlike the housing bubble a few years ago or the tech bubble before that. The trend we’re seeing is definitely unsustainable, but if we could let the free market work, the bubble might “pop” softly. As I’ve said earlier, we’re here because of our reliance on insurance to cover any and every medical expense, and insurance lulls us from being smart shoppers. When we go to see the doctor, most of us only pay a co-pay and have no idea how much the visit actually costs, nor do we care. The obvious result is that health care costs have gone up dramatically, which in turn has led to increased insurance premiums. Many of us have even been shielded from any direct cost there because our employers have paid all or at least a good portion of our insurance. But as the increases have gotten higher, our employers have had to shift more of that burden back on us, and that’s actually good news for the market because it’s finally forced us to start shopping.
As mentioned earlier, I’ve begun to see many insurance shoppers choose high-deductible, low-premium plans. The insurance shoppers who buy these plans will also start to become health care shoppers who will compare the price and quality of health care providers just as they compare the produce between grocery stores. It’s time we start asking why MRIs, using 20 year-old technology and about 20 minutes of a technician’s time, cost $1,200. Interestingly, doctors whose services aren’t covered by insurance (or the government) already do compete on price and quality. Drive along I-15 and you’re sure to see a LASIK surgeon’s rates posted on a billboard. His higher-priced competitors use their own advertisements to tout their superior skill, but even their prices have come down in the last five years. At the same time, the technology these doctors use has gotten better and more advanced. It’s proof that in a free market, we can shop our way to a better health care solution.
Still, we have the problem of the uninsurable. Or do we? The fact is, anyone can buy insurance in Utah. If a group/employer-sponsored plan is available, coverage is guaranteed. And we have programs to help with premiums for those who can’t afford them on their own. For those without the option of a group plan, we have the Utah Comprehensive Health Insurance Pool where coverage is likewise guaranteed and premiums are based on income. If even those (reduced) premiums are too high, the individual is likely to qualify for Medicaid. But if the free market is given the opportunity to function, more and more people will be able to afford their own health care.
I have two more suggestions. First, I would personally like to see group/employer-sponsored plans replaced with individual/family plans. We don’t buy auto or homeowners insurance from our employer. Why should we buy our health insurance at work? There are some who continue in jobs they don’t like for fear of losing their insurance coverage. Individual plans are the easy solution to insurance portability. Still, I would also vigorously oppose regulating group plans out of existence. (On the other hand, I could easily be persuaded to eliminate the artificial tax incentives discussed earlier that make group plans so attractive.) Let’s create a level playing field and let the market decide what’s best.
Second, I think there could also be a case made for “Open Enrollment” periods. Medicare enrollees have a seven month window around their 65th birthday within which they can enroll and be guaranteed for coverage in a Medicare Supplement plan. If they do not enroll during that open enrollment period they may never qualify for a Supplement plan again—ever. We could explore the idea of implementing similarly limited windows for otherwise uninsurable adults and children wherein they could apply for coverage on private plans.
In a few weeks from now we will go to the polls to elect representatives to various offices in government. Who are they and where do they stand on the issue of health reform? We need to find leaders like U.S. Senate candidate Mike Lee who says, "The real solution to our current health care challenge is found in less government involvement in the process—not more.” It’s not that government is evil or corrupt. Nor do I believe they are out to waste our money. But it is practically impossible to impose market discipline in government: you see, even if the government is inefficient, or (unintentionally) wasteful, or produces unpopular products/programs—even if the government loses money hand over fist, it will never go out of business because it has the ability to tax us to make up for its shortcomings. In other words, it doesn't have to please us as customers; it's going to take our money whether we like it or not.
A friend of mine argued that what we're facing is too complex to simply say that the free market will fix it. My question is, if it's so complex, why would anyone want a one-size fits all solution from the government? Wouldn't the thousands of ideas and solutions offered by private enterprise be the preferred option? Further, Congress unwittingly put in place the incentives which helped to create the problems we're facing. Why should we trust them now to fix it?
I believe our candidates for state office can have as great an effect on health care in Utah as those running for national office because insurance is largely regulated on the state level. Representative Dean Sanpei (Utah House District 63) has by profession been responsible for positioning a $6 billion healthcare organization to understand the implications of health reform and what its impacts will be, and has consulted on health reform initiatives nationally and in the state of Utah. He writes:
Representative Sanpei's opponent, Democratic candidate Don Jarvis, isn't stating his position on health care this year, but in 2008 he favored a “government single-payer system.” And the Utah County Democrats, which Jarvis chaired, state in their platform: “We believe everyone should have access to affordable, quality health care.... We call for efficient and effective public health programs for children, seniors, and the working poor leading to universal health care for all citizens.” Are those the real Utah values Jarvis says he represents?
Now, if you’ve read this far, I’m flattered and I thank you. But don’t stop here or I’ll have wasted my effort. Go now and research the candidates for yourself. I hope you will join me in voting on November 2nd for leaders like Mike Lee and Dean Sanpei who will fight to protect our freedoms in health care.
If you like what you’ve read, please pass it on. Or if you disagree, email me at Chris.Burton@BlueMountainInsurance.com.
Better yet, if you want help with your insurance, call me at
Let me explain. Modern insurance is a method of risk management that began with merchants shipping goods over seas. An earlier technique used by merchants to minimize risk was to distribute their cargo on to more than one ship. Thus, if one ship sank, they didn’t lose their entire shipment. As risk management became more sophisticated, merchants and ship owners would enter into contracts with parties willing to guarantee, i.e., insure, the ships and their cargos. The idea was simple enough: in exchange for a relatively small premium payment, the insuring party agreed to compensate the merchant or ship owner in the event of a large, potentially devastating loss.
Following the development of these marine policies, other lines of insurance were established including, fire insurance for houses, and life insurance, and today there is an almost countless number of things we insure. But as varied and complex as modern insurance policies have become, there are a few basic conditions that must be met in order for insurance to be an effective means of minimizing risk:
• The potential loss being insured against must be large,
• It must be unexpected, and
• Its occurrence must be rare.
Insurance is too expensive when used as a means of financing small, inexpensive risks. Consider the following. Here in Provo, I can insure a $500,000 house for less than $500 per year. Think of that. For roughly $35-$40 a month, a half million dollar risk is covered. That’s a great exchange. On the other hand, I recently bought a $45 phone for which the vender tried to sell me insurance for $5 per month—$60 a year to cover a $45 risk. Bad exchange.
Neither is insurance an appropriate means of financing losses which we know are going to occur. For example, no insurer would allow me to purchase a new fire policy while a wild fire was burning through my neighborhood. Any loss to be insured against must be uncertain.
Nor can insurance be used to finance losses when they become too frequent. For example, if I am regularly involved in car accidents, insurance companies will decline to cover me or make the premiums prohibitively expensive.
The problem with health insurance today is that we have violated all three of those criteria. We have used insurance to cover planned, routine, and inexpensive care with the result being that the cost of insurance has skyrocketed and even regular office visits now feel unaffordable. Faced with the consequences of our misuse, Congress has enacted legislation to “solve” the problems of health care by actually expanding the role of insurance. Their argument is that when everyone is insured, the price for everybody will go down. Really?
Let’s look at that idea using the ridiculous example of toilet paper insurance. TP is something that I hope everybody uses. What would happen if we had TP insurance? Would it make TP more affordable? Of course not. The cost of financing our TP with insurance would have to include the cost of the TP plus the additional costs of the insurance clerks who process the payments. And that’s just the beginning. As useful as insurance can be, it presents a perverse incentive to waste and destroys any incentive to save. Think it through. If your TP is covered by insurance, do you limit the number of squares you use? Do you buy the discount brands, or only the ultra-soft kind? Do you waste your time coupon clipping?
And let’s not forget about the TP manufacturers. When people have TP insurance, manufacturers don’t have to compete on price anymore. What does that do to cost?
But what if everybody had it? Well then the price would probably just go up faster.
Believe it or not, the same economic principles that apply to TP apply to health care. The fact is health insurance increases the cost of each visit to your doctor by adding extra people, i.e., billing and insurance clerks, into the transaction. It promotes over utilization of health care because the patient doesn’t pay the cost directly. And when was the last time your doctor or hospital advertised their prices? Never. (Can you even name another industry that hides its prices like the medical industry?) But if you think they aren’t concerned with increasing their profits, then explain why the medical industry spends nearly $6 Billion a year in advertising.
So how did we get into this mess? Why did we ever start using insurance to finance planned, routine, and inexpensive care?—especially if, as I’ve claimed, it costs more? The answer requires a little more history. Modern group health insurance had its beginnings in 1929 but didn’t really take off until World War II when government-imposed wage freezes prompted employers to offer other benefits in lieu of increased pay. But by 1954 most people still didn’t have health insurance. That’s when Congress got involved again and made contributions to employer-based health plans tax-deductible. At that time the minimum Federal tax bracket was 20%; the highest was 91%. So getting that tax deduction was equivalent to taking between 20-91% off the price of a person’s health insurance. (It works the same way today.) With “discounts” like that, insurance became the least expensive way to finance all health care—from the catastrophic right down to minor colds and sniffles.
It seemed like a great deal, and it really took off. Except the “deal” didn’t last long. For reasons already discussed (over utilization of services, and inattention to prices), the cost of health care rose rapidly. That in turn increased the cost of insurance. Today the cost to insure a family rivals the cost of the family’s mortgage. If you think that’s no big deal because your employer pays it, think again. Remember, group health insurance became popular because it was a substitute for wages. It still is. If your employer has to pay more for insurance, that means less is available to pay you.
As a nation almost 20% of every dollar earned is spent on health care. And that number is growing. We can’t continue in that direction much longer. But what can we do? Congress’s solution was more insurance for everybody. Coupled with that, they had to cap reimbursement for doctors and hospitals. (Yes, our government passed legislation limiting how much doctors and hospitals get paid.) And they’ve discussed “death panels,” i.e., government panels to approve or disapprove life-saving treatment for the elderly, as a way to limit the expenses for end of life care. Is that really what we want for America?
The beginnings of a better solution to our health care “crisis” are already visible in the free market. As insurance prices have skyrocketed, many insurance shoppers have opted for high-deductible, lower-premium plans. These plans may have $5,000 or even $10,000 deductibles, thereby placing the patient as the direct payer for his/her health care costs until the deductible is met. I have seen first-hand a shift toward these types of plans, and as more people are put in the position of paying their own health care costs, over utilization will decrease all on its own. Patients will become price shoppers, and doctors and hospitals will begin to compete on price and quality just as in every other industry.
A technique I used until recently to make insurance more affordable was to split coverage for a family. That is, I would give mom and dad a high-deductible, low-premium plan and put the kids on a more comprehensive plan. One of our local health plans offered comprehensive kids plans with low deductibles and co-pays with premiums as low as $40 per month. I used to offer a student plan for college students for as little as $30 per month. Unfortunately, the student plan and kids plans were discontinued following the passage of the health reform legislation last March.
One of the gems of that new law is that children under age 19 are now guaranteed coverage and pre-existing conditions cannot be excluded. At first that sounds pretty good. One of my best friends has a son who had open heart surgery shortly after birth and now has a pacemaker in his chest. Before the law passed, this boy was uninsurable on any individual/family plan. Faced with situations like his, most people don’t mind regulating insurance companies into offering coverage to children. The problem is, scoundrels like me exist to expertly exploit all your good intentions. My first thought when I heard about the guarantee for child coverage, was to remove my children from our insurance. Why, with guaranteed coverage available and no exclusions, would anyone cover their children before they got sick or injured? I reasoned that as soon as the cost for care exceeded the cost of insurance, I could add them. And I would have gotten away with it, too, if it weren’t for those meddling insurance companies anticipating my plan.
As just mentioned, kids plans were discontinued in September as the first wave of the reform legislation came into effect. Today there isn’t a plan in Utah that offers coverage to children under the age of 19 who aren’t applying on their parent(s)’s policy. Some plans went further declining even to cover partial families. The non-profit BlueCross BlueShield plan in Utah went as far as to discontinue offering their plans to any minors under the age of 19—even as part of a family plan. (You see, the law only said the child couldn’t be denied for health reasons. It didn’t say that children couldn’t be ruled ineligible to apply.) And rates took a sizable increase.
Oh, those big, bad insurance companies: limiting their offerings, and raising their prices. The trouble is that government has limited the ability of insurance companies to perform their primary function which is to assess risk. It would be like saying to a bank, “You can give loans, but you can’t qualify applicants based on income, employment, or credit history.” Such a policy would encourage what we call “adverse selection,” that is, bad credit risks would apply for loans, and as interest rates necessarily went up due to an increased risk of default, the better risks would drop out. That is exactly what this new regulation does to health insurance. Only the sick, i.e., those for whom the cost of insurance is less than the cost of treatment, have an incentive to buy coverage. And as premiums increase, only the sickest will remain, until ultimately the market collapses.
Yes, insurance companies make HUGE profits (net-income for those non-profit plans), and we should be glad they do. They wouldn’t exist, nor could they provide a service without it—just like any other business in America. The eighteenth century economist, Adam Smith, wrote: “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest.” “I have never known much good done by those who affected to trade for the public good.” In other words, more people get better bread when bakers rake in the dough. Why should it be different for insurance companies?
Other nuggets of health reform include:
• Insurance companies are prohibited from imposing annual or lifetime coverage limits.
• Preventative care is covered 100% (with zero deductibles or co-pays).
• Children can remain on their parents policies until they are 27 years old (regardless of student status and even if they’re married with kids of their own!).
More coverage always feels good from the patient’s point of view. I always tell my clients: “You can never have too much insurance, BUT you can have too much premium.” Did we believe all this was coming for free? Ironically, the net effect of reform legislation, with its stated purpose of making insurance available to more people, may be that fewer people will be able to buy coverage. And those who can will pay more.
So what’s the solution? We’re facing big problems:
1. The cost of health care is going up at break-neck speed, and
2. There are many like my friend’s son who can’t get private insurance and can’t afford care without it.
Let’s look first at cost. We’re in the middle of a health care bubble, not unlike the housing bubble a few years ago or the tech bubble before that. The trend we’re seeing is definitely unsustainable, but if we could let the free market work, the bubble might “pop” softly. As I’ve said earlier, we’re here because of our reliance on insurance to cover any and every medical expense, and insurance lulls us from being smart shoppers. When we go to see the doctor, most of us only pay a co-pay and have no idea how much the visit actually costs, nor do we care. The obvious result is that health care costs have gone up dramatically, which in turn has led to increased insurance premiums. Many of us have even been shielded from any direct cost there because our employers have paid all or at least a good portion of our insurance. But as the increases have gotten higher, our employers have had to shift more of that burden back on us, and that’s actually good news for the market because it’s finally forced us to start shopping.
As mentioned earlier, I’ve begun to see many insurance shoppers choose high-deductible, low-premium plans. The insurance shoppers who buy these plans will also start to become health care shoppers who will compare the price and quality of health care providers just as they compare the produce between grocery stores. It’s time we start asking why MRIs, using 20 year-old technology and about 20 minutes of a technician’s time, cost $1,200. Interestingly, doctors whose services aren’t covered by insurance (or the government) already do compete on price and quality. Drive along I-15 and you’re sure to see a LASIK surgeon’s rates posted on a billboard. His higher-priced competitors use their own advertisements to tout their superior skill, but even their prices have come down in the last five years. At the same time, the technology these doctors use has gotten better and more advanced. It’s proof that in a free market, we can shop our way to a better health care solution.
Still, we have the problem of the uninsurable. Or do we? The fact is, anyone can buy insurance in Utah. If a group/employer-sponsored plan is available, coverage is guaranteed. And we have programs to help with premiums for those who can’t afford them on their own. For those without the option of a group plan, we have the Utah Comprehensive Health Insurance Pool where coverage is likewise guaranteed and premiums are based on income. If even those (reduced) premiums are too high, the individual is likely to qualify for Medicaid. But if the free market is given the opportunity to function, more and more people will be able to afford their own health care.
I have two more suggestions. First, I would personally like to see group/employer-sponsored plans replaced with individual/family plans. We don’t buy auto or homeowners insurance from our employer. Why should we buy our health insurance at work? There are some who continue in jobs they don’t like for fear of losing their insurance coverage. Individual plans are the easy solution to insurance portability. Still, I would also vigorously oppose regulating group plans out of existence. (On the other hand, I could easily be persuaded to eliminate the artificial tax incentives discussed earlier that make group plans so attractive.) Let’s create a level playing field and let the market decide what’s best.
Second, I think there could also be a case made for “Open Enrollment” periods. Medicare enrollees have a seven month window around their 65th birthday within which they can enroll and be guaranteed for coverage in a Medicare Supplement plan. If they do not enroll during that open enrollment period they may never qualify for a Supplement plan again—ever. We could explore the idea of implementing similarly limited windows for otherwise uninsurable adults and children wherein they could apply for coverage on private plans.
In a few weeks from now we will go to the polls to elect representatives to various offices in government. Who are they and where do they stand on the issue of health reform? We need to find leaders like U.S. Senate candidate Mike Lee who says, "The real solution to our current health care challenge is found in less government involvement in the process—not more.” It’s not that government is evil or corrupt. Nor do I believe they are out to waste our money. But it is practically impossible to impose market discipline in government: you see, even if the government is inefficient, or (unintentionally) wasteful, or produces unpopular products/programs—even if the government loses money hand over fist, it will never go out of business because it has the ability to tax us to make up for its shortcomings. In other words, it doesn't have to please us as customers; it's going to take our money whether we like it or not.
A friend of mine argued that what we're facing is too complex to simply say that the free market will fix it. My question is, if it's so complex, why would anyone want a one-size fits all solution from the government? Wouldn't the thousands of ideas and solutions offered by private enterprise be the preferred option? Further, Congress unwittingly put in place the incentives which helped to create the problems we're facing. Why should we trust them now to fix it?
I believe our candidates for state office can have as great an effect on health care in Utah as those running for national office because insurance is largely regulated on the state level. Representative Dean Sanpei (Utah House District 63) has by profession been responsible for positioning a $6 billion healthcare organization to understand the implications of health reform and what its impacts will be, and has consulted on health reform initiatives nationally and in the state of Utah. He writes:
The cost escalation for healthcare expenses is unsustainable, however the solution lies in addressing cost incentives before increasing access to a broken system. Federal reform efforts are moving with the cart in front of the horse. They will increase access into a system where costs are already out of control thereby resulting in a debt explosion.
Rather we need to:
1. Change the incentives such that value is rewarded. Currently payment is received for care regardless of outcomes and quality.
2. Close the gap between who is paying and who is receiving the benefit. Individual accountability is lost when everything is paid for by a third party.
3. Recognize that the Federal Government has mandated a system to behave like healthcare is a right, but is not funding those mandates so that the private sector has been picking up the shortfall. We need to move our system away from the drivers of cost shifting.
Representative Sanpei's opponent, Democratic candidate Don Jarvis, isn't stating his position on health care this year, but in 2008 he favored a “government single-payer system.” And the Utah County Democrats, which Jarvis chaired, state in their platform: “We believe everyone should have access to affordable, quality health care.... We call for efficient and effective public health programs for children, seniors, and the working poor leading to universal health care for all citizens.” Are those the real Utah values Jarvis says he represents?
Now, if you’ve read this far, I’m flattered and I thank you. But don’t stop here or I’ll have wasted my effort. Go now and research the candidates for yourself. I hope you will join me in voting on November 2nd for leaders like Mike Lee and Dean Sanpei who will fight to protect our freedoms in health care.
If you like what you’ve read, please pass it on. Or if you disagree, email me at Chris.Burton@BlueMountainInsurance.com.
Better yet, if you want help with your insurance, call me at
801-373-SAVE!
