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National Review Online


Insuring America

October 06, 2003

By David Gratzer

With a new Census Bureau report showing that 43.7 million Americans lack health insurance, the usual suspects make shock-and-awe comments—shock that the numbers are so high and awe that the government doesn't do something dramatic. Most favor the federal government spending copious sums of money to rectify the situation. But the issue needs a more sober consideration; the surprise is that there aren't more uninsured Americans. And if we're serious about doing something about it, government is going to have to do less.

Census Bureau studies don't usually lend themselves to great excitement, but when the topic is the uninsured, all bets are off. With news that the number of uninsured Americans has risen by 5.7 percent, front-page stories in newspapers across the country report similar factoids, like the observation that the total number is higher than the combined populations of 24 states.

The problems of the uninsured are different than those portrayed by the shock-and-awe crowd. The uninsured don't lack health care; they lack health insurance. As a study by Blue Cross-Blue Shield noted earlier this year, about a third earn more than $50,000 a year. The situation isn't necessarily dire for the rest—fully another third is eligible for Medicaid or some other type of assistance.

But for some working poor, the lack of insurance leads to a patchwork of free clinics and emergency rooms, expensive and government-subsidized alternatives to insurance. There are good reasons to worry about the uninsured working poor. For families without medical coverage, there is the stress of uncertainty and a lack of consistency in medical care. For the taxpayer, there is huge financial burden, approaching perhaps $100 billion a year.

Why are some Americans lacking insurance and what can be done? If you want to understand the basic problem, look no further than the predicament of small business. A Californian recently explained how expensive it is to insure the employees of his family's business. With five healthy employees and their families, the annual bill for medical coverage sits at just under $100,000 per year. Granted the plan is generous and includes limited co-pays—but the price tag is stiff. Even less generous plans are expensive. The average cost of a family health plan rose from $8,000 in 2002 to more than $9,000 this year.

And for small businesses struggling to make ends meet, there is a temptation to simply cut all health benefits. Not surprisingly, the biggest drop in coverage this year occurred with Americans having employer-provided insurance. Indeed, excluding those eligible for Medicaid, most of the uninsured are employed by companies with fewer than ten employees.

Many now want the federal and state governments to step in by expanding public programs or providing tax relief to business—or both. All of the major Democratic presidential candidates, for example, offer sweeping (and costly) health reforms.

But looking to a government solution overlooks the profound role government has played in creating this problem in the first place. Consider California. Legislators have passed reams of regulations designed to make health insurance safe and fair by tying the hands of small businesses in their choice of plans. The end result is that even the most basic policies are expensive and overly comprehensive. Mandated coverage—those illnesses and treatments that must be included—requires second opinions, off label use of prescription drugs, and diabetic self-management in every Californian policy.

Further complicating the situation in America's largest state is two more regulations: guaranteed issue (everyone must be sold insurance) and community rating (price must be based on age, not health). Together, guaranteed issue and community rating undermine the very principle of insurance, allowing people to get sick and then buy health insurance without financial penalty.

California is hardly the exception. Regulating the insurance industry has become the cause de jour in many states. There are more than 1,500 mandates on the books across America. A recent study suggests that in some states, mandates account for 40 percent of health-insurance costs. And legislators haven't just targeted the small group market (businesses with fewer than 50 employees) but, in several states, have turned their attention to the individual market. The result is similar. In New York, a gentleman in his 30s must pay $250 or more a month for health insurance; over in Connecticut, he can gain similar coverage for an eighth of the price. Given the obstacles placed in the way of affordable health coverage, it's surprising that there aren't more uninsured Americans.

Ideally, mandate-heavy states should deregulate health insurance. Since this is unlikely, there is a straightforward alternative: The federal government should step in and allow out-of-state health-insurance purchases. The Internet provides a perfect venue for this new health-insurance market. Washington could thus help undo the extensive damage wrought by state politicians eager to legislate first and ask questions later. Such a move would be, in fact, entirely consistent with the Commerce Clause in the Constitution.

It would also be a reasonable first step in reestablishing market choice in health care. Thanks to the barrage of regulations, businesses, and individuals find themselves with limited and expensive options in most states. In Vermont, for example, there are just three carriers offering plans to small businesses; two, in the individual market. Thus, people in Vermont have more choice when it comes to yogurt than to insurance carriers.

Congress needs to step in. Just as Americans can shop around for mortgages, they should be allowed to look beyond state lines for health insurance. This would allow cheaper insurance—and more insured Americans.

Original Source:



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