Diary

Will, Reich, Daniels, and Health Insurers

George Will, Mitch Daniels, and Robert Reich have all spoken and written recently about the health insurance debate. It reminds me a little bit of three blind men and an elephant. One touches the elephant’s foreleg, another touches the elephant’s tail, and the third one touches the elephant’s trunk. They each can write truthfully about what an elephant is really like to them, and yet the actual elephant is a lot more complicated.

Let’s start with George Will who recently wrote a column, That rock in the health-care road? It’s called the Constitution. an excerpt:

Would it be constitutional for the government to legislate compulsory calisthenics for all Americans? If not, why not? If it would be, in what sense does the nation still have constitutional, meaning limited, government?

Supporters of the mandate say Congress can impose the legislation under the enumerated power to regulate interstate commerce. Since the New Deal, courts have made this power capacious enough to include regulating intrastate activity that “substantially affects” interstate commerce.

But if any activity, or inactivity, can be declared to have economic consequences, then anything can be regulated or required. Furthermore, judicial review and the Constitution itself is largely nullified by a doctrine of virtually unlimited judicial deference to Congress’s estimates of what is “necessary and proper” for the regulation of commerce.

George Will makes an additional argument in another column, A divided brain in Washington. an excerpt:

Obama’s leitmotif is: Washington is disappointing, Washington is annoying, Washington is dysfunctional, Washington is corrupt, verily Washington is toxic yet Washington should conscript a substantially larger share of GDP, and Washington should exercise vast new controls over health care, energy, K-12 education, etc. Talk about a divided brain.

I like what Will is saying about the slippery slope of growing the government way too much based on Congress’s estimates of what is “necessary and proper” for the regulation of commerce. I also appreciate the truth in what he says about a divided brain about claiming that something is broken and therefore should exercise vast new controls over health care. What I find missing in George Will’s writings is an acknowledgement that a few health insurance companies do get their way with state legislators and insurance commissioners. These companies have even been known to press states to limit how many other health insurers they license. If he acknowledges this, then he can accept that Congressional oversight is needed under the enumerated power to regulate interstate commerce to undo these abuses.

Next we have Robert Reich who recently wrote a column, Bust Up the Health Insurance Trusts. an excerpt:

They were created in part by hospitals to spread the costs of expensive new equipment and facilities over many policy holders. Collaboration was the point, not competition. The 1945 McCarran-Ferguson Act made it official, exempting insurers from antitrust scrutiny and giving states the power to regulate them, although not necessarily any power to regulate rates.

With size has come not only market power but political clout. Big for-profit insurers deploy enough campaign money and lobbyists to get their way with state legislators and insurance commissioners. A proposal last year to allow California’s Department of Insurance to regulate rates, for example, died in committee. These companies have even been known to press states to limit how many other health insurers they license.

And when they can’t get their way, insurers go to court. In Maine, one state that aggressively regulates rates, WellPoint’s Anthem subsidiary has sued the insurance superintendent for reducing its requested rate increase.

Antitrust is no substitute for broader health care reform, but it’s an important prerequisite. If a handful of giant health insurers are allowed to dominate the industry, many of the other aspects of reform (establishing insurance exchanges, requiring people to have insurance, even allowing consumers to buy insurance across state lines) won’t bring down the price of insurance.

Reich provides a somewhat correct history, but I do not appreciate his use of big, for-profit, and giant as adjectives to cast insurance companies in a negative light. Insurers do not get their way with state politicians writing regulations to limit other insurers because they are big, giant, and for-profit. They do it because it costs less money to pay off state politicians than to compete for customers in a large market. Another solution that Reich gets wrong is the idea that the federal government must set the minimum standards for all the insurers because the customers are not smart enough to purchase what they can afford and need.

Finally Gov. Mitch Daniels recently wrote a column, Hoosiers and Health Savings Accounts. an excerpt:

In Indiana’s HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Everything in that excerpt is true. There are things that are not mentioned in this column about the state of Indiana HSA plan that are also true. The $2,750 per year from the state is not deposited until the employee has deposited $2,750 of his own money into the account. An employee will pay all his health bills out of the HSA account, and then pay health bills out of one of his personal accounts if prescription drugs, doctor visits, and medical tests early in the year deplete the money in the HSA account toward the end of the year. The state of Indiana HSA plan for state employees is an excellent plan for some people but not for everyone.

Health insurance is complicated, and some folks may strongly disagree with my ideas more than any disagreement they might have with Will, Reich, and Daniels. Nevertheless I will offer some of my own ideas about health insurance, and try to defend them against any criticism.

I think the US Congress should provide oversight as one of its enumerated powers to regulate interstate commerce and remove the antitrust exemption for health insurers. The US Congress should require states to allow competition from health insurers across state boundaries. The state insurance commissioners and state legislators should limit the rules and regulations to insurers that only require them to meet the same better business practices required of all other businesses.

The US Congress should create a special high risk health insurance pool for folks who live in federal districts and federal territories and are not able to obtain health insurance from any other insurers. Folks must provide a written proof of being denied coverage and proof of residence in a federal district or territory to qualify. A federal tax on transactions occurring in the federal districts and territories will fund it.

Ten regional districts should be created to manage high risk health insurance pools for folks who live in the state of the region and are not able to obtain health insurance from any other insurers. Folks must provide a written proof of being denied coverage and proof of residence in a state within the region to qualify. States in the regional districts will each provide money to fund it.

The increased competition and relaxation of regulations should increase the number of different plans a customer can choose between which will in turn increase the number of people who choose to buy an insurance policy. I do not think any individual should be forced into buying health insurance. There should be oversight and record-keeping of folks going to emergency rooms with no health insurance.

For me a baker and health insurer should both let the free market determine what ingredients are in their products, how much to charge, and how much profit they acquire. The only role I want for government is to have the oversight of a referee and keep somebody from using political clout instead of the market to pick winners and losers.

Cross-posted at The Minority Report