Consumer choice can’t make health insurance industry happy

It is not surprising the health insurance industry is critical of this new opportunity. It means the industry can no longer force millions of Americans to purchase higher-priced insurance products.

BY KEN BRAUN

What they said:

Trump administration proposes rules for health plans without certain ACA protections

The Washington Post, January 4, 2018

Small businesses and associations will be able to obtain lower cost health coverage for millions of employees because an executive order from President Trump will allow them to circumvent the coverage mandates of the Affordable Care Act (aka Obamacare).

The Washington Post report implies this isn’t all good news:

“Proponents say the association health plans would be less expensive and enhance consumer choice, while critics — including the insurance industry — fear they would promote substandard coverage and weaken the ACA’s already fragile insurance marketplaces.”

What should be said:

Two critical points are missing from media coverage of this issue:

(1) Increasing the number of choices in the healthcare marketplace is economically and morally superior to the ACA policy of requiring Americans to purchase government-designed coverage at higher prices; and

(2) Real insurance covers catastrophic costs, not routine costs.

It is not surprising the health insurance industry is critical of this new opportunity. It means the industry can no longer force millions of Americans to purchase higher-priced insurance products.

The ACA requires most employed Americans to either obtain health insurance from their employer or pay for it themselves. Importantly, the law also stipulates 10 benefit categories that must be included, such as maternity and newborn care, routine pediatric care, routine preventive and wellness medicine, lab tests, and substance abuse counseling.

These coverage mandates drive up both costs and profits for the insurance industry. As originally written, the ACA imposed a financial penalty on those who refused to obtain health insurance with all these mandates. (The penalty was effectively removed by the tax plan passed by Congress in December of 2017).

Americans wishing to purchase lower-cost insurance and pay out-of-pocket for services such as newborn medical expenses and basic office visits have not had that option since the creation of the ACA. This was a terrific deal for health insurance companies; not only did they have a law forcing people to buy their product, they also had a mandate (enforced with a financial penalty) requiring us to buy a lot of expensive features added on.

Properly understood, “insurance” is a financial tool that protects against rare and expensive risks. People pay homeowners insurance to replace the house if it burns down or is severely damaged.

But insurance is a terribly expensive and inefficient method of paying for typical and expected needs. When it’s time to replace the roof, we pay out of pocket. If homeowners insurance paid for new roofs, we’d not care about the price and nothing would keep prices under control.

Paying less for catastrophic insurance means more money available to pay for routine needs. This puts patients — rather than insurance bureaucracies — in charge of when and how to spend most health care dollars.

Failure to understand this distinction is a major reason for the steeply increasing cost of health insurance. Very few Americans “shop around” when it comes to routine office visits, lab procedures, and so forth. If “the insurance” pays these costs, patients have little incentive to police prices, and insurance premiums become very expensive.

Health insurance that does not require coverage for routine spending, such as that proposed by the Trump administration’s new rules, is a very important step in the direction of true insurance. It promises to protect millions of patients against catastrophically expensive costs that few could afford, and yet do so at a price that is much more affordable than the ACA’s expensive government-designed plans.

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Additional information …

How Health Care Should Be
Check out Think Freely Media’s video series explaining what is happening to prices and care when government and private insurance bureaucracies are removed as barriers between real patients and their doctors.

How American Healthcare Killed My Father: ReasonTV Q&A with David Goldhill
Singapore spends just 4 to 5% of its annual GDP on health care – about half of what every other wealthy nation spends and less than a third of the 18% spent by Americans. It’s also the only rich nation to put patients in charge of most of the money and spending decisions. Coincidence? Watch this fascinating video to understand what went wrong with American healthcare and how we can fix it.

What Happens When Doctors Only Take Cash – Time Magazine
A patient shops around for a knee replacement and finds he can cut his costs in half, saving almost $20,000.

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Ken Braun is the director of policy and communications for Think Freely Media. He has served as a public policy and communications professional for four different free market policy organizations, and as a chief of staff in the Michigan Legislature. He has also been a freelance political columnist for one of Michigan’s largest newspaper chains. Ken can be followed on Facebook, and when he has something really clever to say he will even use Twitter.

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What Should Be Said shows effective ways of communicating freedom principles by using a storytelling approach, taking the moral high ground, and staying hopeful and aspirational. Media, politicians and thought leaders often fail to include the freedom perspective at all by omitting critical facts. Alternatively, when they do make a sincere attempt to sell the freedom philosophy, they often do so with a stale and defensive approach that is missing stories that humanize the dry facts and figures. Here we show examples of how storytelling and emotionally compelling changes in message will make all the difference for those trying to advocate for liberty.

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