10.30.2009

What will the health care bill really mean for costs?

I've been thinking about that question quite a lot lately. While I'm concerned about the public option, I don't really think it has a chance of passing. My biggest concern lately actually comes from preexisting conditions.

It seems that everyone in Washington agrees that insurance companies shouldn't be allowed to deny service based on any preexisting ailment or illness, but what would that do to costs? I think that it's quite obvious that many people - especially young people - will skip purchasing any insurance until they get sick. Then they buy insurance for a few months or until they are healthy again and then they'd drop it again.

If you know that the insurance companies can't punish you for poor planning, there is no incentive to purchase inurance.

Of course many people suggest that the solution to this problem would be to mandate everyone purchase insurance, then the risks are spread out and everyone wins. Well, not really. Passing a mandate for everyone to purchase health insurance gives the government the authority to pass minimum coverage requirements. Even then, the penalties for not purchasing insurance must be high enough to make purchasing insurance the cheaper alternative, but the penalties that were discussed during the committee debates in the Senate never came close to that threshold.

The potential result of this was plainly seen in Wisconsin just this year. When the legislature passed increased liability minimums for auto insurance, most people saw their insurance premiums increase. Even though our risk in Wisconsin is spread out, it wasn't enough to prevent government meddling to artificially raise the cost of auto insurance for Wisconsin drivers.

Anyone who thinks the same thing can't or won't happen with health insurance at the federal level is living in a fantasy world. The health care bills in the House and the Senate all add to the minimum requirements of coverage for which insurance companies must pay. That alone will force the cost of health care upward and stifles competition by limiting the ability of insurers to tailor their plans to the needs of the consumer.

By heaping requirements onto insurance companies, Congress would only make the problems of cost and access worse. I don't deny that health care and health insurance in the US needs to be reformed, but in this case it seems to me that the answer is less government intervention, not more.