Opinion
Thinking ahead to Insurance Reform 2.0
EDMOND — Health insurance reform took another important step forward this week as Senate Majority Leader Harry Reid introduced legislation that merges competing reform bills that were approved by Senate committees. Unfortunately, the most transformational reform Congress could approve — moving us away from employer-based insurance — is not included.
The Reid bill is a compromise bill between the more progressive bill approved by the Senate’s Health, Education, Labor and Pensions Committee and the more moderate bill approved by the Senate Finance Committee. According to the nonpartisan Congressional Budget Office, the Reid bill would help an additional 31 million people purchase health insurance, crack down on unethical insurance company practices, and reduce the national debt by $130 billion over the next ten years. While certainly not a perfect bill, the Reid proposal would improve the lives of millions of American families.
Most American families, though, will see little improvement. According to some estimates, there are as many as 176 million people who currently have employer-based health insurance. Yet, the proposed reform bills do not allow these 176 million people to participate in the new private insurance “exchanges” or the public insurance option. Instead, they are limited to their employer-based insurance plans. Unfortunately, this reliance on employer-based insurance means that millions of American families are stuck with insurance that is not flexible, portable or affordable.
First, employer-based insurance plans are not very flexible because they are chosen not by the insured (the employees) but by the employer. Since every family has different insurance needs, it is not possible for employers to always choose the best insurance plan for all employees. For example, here at UCO I am limited by the choices that UCO offers and am unable to go find an insurance plan that is a better fit for my family’s needs.
It does not have to be this way.
Second, employer-based insurance plans are not portable because they are tied to one’s place of employment. If I, for example, ever leave UCO I must change my health insurance too.
It does not have to be this way.
Finally, employer-based insurance actually makes health insurance less affordable. This happens in part because the limited number of choices given to workers by their employers actually limits competition. Since workers are unable to shop around for the best insurance plan at the best price, prices are higher than they should be.
There is another reason that employer-based insurance makes insurance less affordable — it serves to hide some of the costs. Many people wrongly believe that when employers pay a portion of a worker’s health insurance premiums, the worker has saved money. However, economic research consistently finds that workers indirectly pay for these benefits in the form of reduced wages. Yet, most do not recognize this cost. Therefore, they believe they are paying less for insurance than they truly are and that leads to over-consumption and higher prices.
It does not have to be this way.
Instead, we need a new approach. We should move away from the employer-based insurance model and make it easier for families to shop around for the best health insurance plans for them. Essentially, we should let people shop for health insurance the way we let people shop for auto insurance, by giving families more freedom and more choices.
The reform bills working their way through Congress will, if enacted, improve the lives of millions of Americans. This reform, let’s call it “Insurance Reform 1.0,” will crack down on unethical practices and reduce the number of uninsured in a fiscally responsible way. Yet, it is not too early to begin thinking about the next generation of reform — “Insurance Reform 2.0” — which would give more choices to more families, would move us away from the antiquated employer-sponsored insurance model and would give us all the flexible, portable and affordable health insurance we deserve.
MICKEY HEPNER is an associate professor of economics at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.
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