Published: October 17, 2008 10:12 pm         

Fixing the health insurance system

EDMOND — It’s a decision that millions of Americans make every year. They have a car they love, a car they trust. Yet, as the car ages it causes more and more problems. Eventually, the breakdowns become so frequent, so troublesome, that they finally trade the car in for a newer model. We all realize that when things are irreparably broken, starting over fresh is the best way to go.

And so it is with our health insurance system.

Frankly, the current health insurance system is outdated and inefficient. Due to some questionable government policies from the last half-century our health insurance system leaves too many people out, increases health-care costs, and limits consumer choice. In short, our health insurance system is broken — so broken that it is time to start over.

While sometimes families cannot decide which new car they want, when it comes to health insurance most Americans can agree on some basic characteristics of what the ideal health insurance system would do. First, the ideal system would make health insurance more affordable. This year I will pay $9,441.96 on health insurance premiums to cover my wife and two children. While this may seem like a lot, this does not even include the $4,370.88 paid by my employer to cover me.

Economic research clearly finds however, that I am paying these costs too, albeit indirectly, in the form of lower wages. In other words, I will pay a total of $13,812.84 this year for health insurance for my family — and this does not even include the cost of copays and coinsurance. Next year my cost will rise to $16,081.68 — a 16.4 percent increase.

I am fortunate to be able to afford such high premiums. Many Americans cannot. While all Americans have to sacrifice something to purchase health insurance, the high cost ensures that many Americans simply choose to sacrifice the insurance coverage itself. A more efficient system would make health insurance more affordable for every family.

Second, the ideal system would make health insurance more portable. In a time when workers commonly change jobs every few years, it is inefficient to force people to change their health insurance every time they change their job. Yet, that is exactly what our reliance upon employer-sponsored health insurance does. We don’t change our car insurance whenever we change jobs. We don’t change our homeowner’s insurance every time we change jobs. Why should we be forced to change our health insurance?

A more efficient system would make health insurance more portable so Americans could keep their health insurance when they change employers.

Finally, the ideal system would be more flexible in meeting the needs of consumers. All too often in the employer-sponsored health insurance system we have today, employers choose health plans based not on the needs of their employees, but on the needs of the employer. As a result, consumers have limited choices, and limited flexibility, as to their choice of insurance carriers and coverage. A more efficient system would make health insurance more flexible by giving consumers more control over the purchase decision.

Now some might think that with the nature of the political process, the prospects of actually getting health insurance reforms that make coverage more affordable, more portable, and more flexible is just a pipe dream. But we are actually closer than you might think. Both Sens. Barack Obama and John McCain have proposed significant health insurance reforms. While both plans have significant shortcomings, both offer some important steps forward.

Under McCain’s proposal, businesses would no longer receive a tax deduction for offering health insurance. Instead, consumers would receive a tax credit to purchase health insurance on their own. This approach has two important benefits. First, it moves us away from the employer-sponsored health insurance system, allowing health insurance to be more portable. Second, it gives more flexibility to the consumer to choose the carrier and coverage levels they want.

The biggest flaw of the McCain plan though, is that it would force people to purchase individual health insurance — a product that is inferior to the group health plans many consumers now have because they (individual plans) lack many of the safeguards that group plans have. For example, individual plans to do not have to cover preexisting conditions. Plus, when people get sick the insurance companies are able to raise premiums or drop coverage altogether for those on individual plans.

Instead, what we need to do is help people move towards another group plan. This is the greatest benefit of the Obama plan — where everyone can join a group plan to take advantage of the safeguards and lower costs associated with group plans. Ideally, the role of the government would be to establish the group, but not provide the health insurance itself. Instead, private insurance companies could market to the customers of the group.

In the end, we just need to set aside the petty partisanship so common in Washington and embrace the best ideas of both parties. If we do so, we can finally have the more affordable, more portable, and more flexible health insurance we deserve.

MICKEY HEPNER is an associate professor of economics at the University of Central Oklahoma.

     

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