'What to do when Obamacare unravels?'

Great article in the Wall Street Journal by Hoover fellow John Cochrane on what should be the next step after Obamacare inevitably unravels.

Basically, we should get government out of the insurance business almost entirely while encouraging competition and innovation:

Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses.

People want to buy this insurance, and companies want to sell it. It would be far cheaper, and would solve the pre-existing conditions problem. We do not have such health insurance only because it was regulated out of existence. Businesses cannot establish or contribute to portable individual policies, or employees would have to pay taxes. So businesses only offer group plans. Knowing they will abandon individual insurance when they get a job, and without cross-state portability, there is little reason for young people to invest in lifelong, portable health insurance. Mandated coverage, pressure against full risk rating, and a dysfunctional cash market did the rest.

Rather than a mandate for employer-based groups, we should transition to fully individual-based health insurance. Allow national individual insurance offered and sold to anyone, anywhere, without the tangled mess of state mandates and regulations. Allow employers to contribute to individual insurance at least on an even basis with group plans. Current group plans can convert to individual plans, at once or as people leave. Since all members in a group convert, there is no adverse selection of sicker people.

ObamaCare defenders say we must suffer the dysfunction and patch the law, because there is no alternative. They are wrong. On Nov. 2, for example, New York Times NYT +0.86% columnist Nicholas Kristof wrote movingly about his friend who lost employer-based insurance and died of colon cancer. Mr. Kristof concluded, "This is why we need Obamacare." No, this is why we need individual, portable, guaranteed-renewable, inexpensive, catastrophic-coverage insurance.

This is one instance where federalism actually makes a situation worse than it would be if there was one, national standard. State insurance commissions are notoriously open to pressure from various groups and companies who want to see their pet product favored in the marketplace. The riot of different standards and practices prevents insurance from being easily marketed across state lines.

It's an interesting solution but I'm not sure about its political viability. Too many oxes would be gored in crafting and passing such legislation. But anything based on voluntary compliance is far better than the coercive individual mandate in Obamacare and we may be heading for something more along those lines as Obamacare continues to meltdown.



Great article in the Wall Street Journal by Hoover fellow John Cochrane on what should be the next step after Obamacare inevitably unravels.

Basically, we should get government out of the insurance business almost entirely while encouraging competition and innovation:

Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses.

People want to buy this insurance, and companies want to sell it. It would be far cheaper, and would solve the pre-existing conditions problem. We do not have such health insurance only because it was regulated out of existence. Businesses cannot establish or contribute to portable individual policies, or employees would have to pay taxes. So businesses only offer group plans. Knowing they will abandon individual insurance when they get a job, and without cross-state portability, there is little reason for young people to invest in lifelong, portable health insurance. Mandated coverage, pressure against full risk rating, and a dysfunctional cash market did the rest.

Rather than a mandate for employer-based groups, we should transition to fully individual-based health insurance. Allow national individual insurance offered and sold to anyone, anywhere, without the tangled mess of state mandates and regulations. Allow employers to contribute to individual insurance at least on an even basis with group plans. Current group plans can convert to individual plans, at once or as people leave. Since all members in a group convert, there is no adverse selection of sicker people.

ObamaCare defenders say we must suffer the dysfunction and patch the law, because there is no alternative. They are wrong. On Nov. 2, for example, New York Times NYT +0.86% columnist Nicholas Kristof wrote movingly about his friend who lost employer-based insurance and died of colon cancer. Mr. Kristof concluded, "This is why we need Obamacare." No, this is why we need individual, portable, guaranteed-renewable, inexpensive, catastrophic-coverage insurance.

This is one instance where federalism actually makes a situation worse than it would be if there was one, national standard. State insurance commissions are notoriously open to pressure from various groups and companies who want to see their pet product favored in the marketplace. The riot of different standards and practices prevents insurance from being easily marketed across state lines.

It's an interesting solution but I'm not sure about its political viability. Too many oxes would be gored in crafting and passing such legislation. But anything based on voluntary compliance is far better than the coercive individual mandate in Obamacare and we may be heading for something more along those lines as Obamacare continues to meltdown.



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