Health insurance primarily needs regulatory reform focused on the following areas:
1. Repeal federal and state level mandated coverage of conditions, treatments, and procedures.
As we’ve seen, federal and state level mandated coverage drives up prices because you have to pay to be covered for conditions, treatments, and procedures that don’t apply to you. Repeal will open the health insurance market to inexpensive, catastrophic health insurance options that will make health insurance accessible to the vast majority of people who can’t afford it today, or who spend huge sums on their policies. And it will allow health insurance tailored to specific conditions to emerge. Rather than trying to minimize serving people with severe or chronic illnesses (within the confines of current regulations) to avoid losing money, health insurance companies will embrace opportunities catering to this underserved group, often in cooperation with charitable organizations.
2. Repeal restrictions on selling health insurance across state lines.
Today’s limitations on selling health insurance across state lines has resulted in each state being its own limited marketplace. Repealing these restrictions will enable health insurance companies to create larger risk pools and greater economies of scale, driving down health insurance costs.
3. Decouple health insurance from employment.
Tying health insurance to employment reduces the control you have over planning your health coverage. Decoupling will give you control to shop around for health insurance independently of your employment. Health insurance will become like homeowner or auto insurance, both of which you buy independently of your employer.
Most of this can be implemented relatively quickly. A good way to begin to decouple health insurance from employment is to make personal health insurance tax deductible on a sliding scale over a few years. Initially, we will most likely see different scenarios play out, with many employers continuing the current practice of providing health insurance for competitive reasons, some providing financial benefits but leaving it to employees to shop for health insurance, and others pulling out completely. However, tax deductions shouldn’t be made permanent, as they distort people’s incentives to shop for cost-effective policies, and may delay the downward pressure on health insurance rates.
During a transition period we may also need to finance and manage risk pools for those with pre-existing conditions who cannot immediately find health insurance coverage, perhaps a temporary government-funded but privately-administered program. But this too should be phased out following a pre-determined schedule to ensure the complete transition from welfare statism to capitalism in this area. During the transition, as more people turn their attention to the health needs of the disadvantaged, those people will develop charity programs to provide care for the remaining few at risk of falling through the cracks.
Together, these and other reforms will enable a thriving, accessible, affordable health insurance marketplace for individuals and families with a wealth of choices for virtually all possible needs.
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