A federal health insurance wish list

The main three problems with health care and health insurance are uncontrollable costs, lack of coverage, and fragmentation of the market.  The two key solutions are tax deductibility and federal regulation of commerce among the various states.

Costs are uncontrollable for several reasons: consumers are largely isolated from the cost of the health care products and services they use.  Deductibles place the entire burden of a cost on the consumer who has no ability to negotiate.  Co-pays are fixed and do not give consumers an incentive to look for cheaper policies, products, or services.  A growing number of consumers are also not insured through an employer and individually have no negotiating leverage.  When costs are not being controlled, the health care industry has perverse incentives to concentrate on more expensive products and services.

These problems can all be addressed by making consumers responsible for costs by removing employers as intermediaries and extending tax deductibility to individuals.  In addition, policies should make co-pays a percentage of the covered costs so consumers see directly what the products and services cost and will collectively shop for the most cost-effective alternatives.

Deductibility for individuals and customer cost-control also addresses the problem of lack of coverage: instead of forcing people to purchase something or face a punitive tax, it incentivizes them to buy insurance instead of paying taxes over that part of their income.  It works for home purchases, so it should work for insurance purchases by responsible, productive individuals.  (The same should be done for properly federally accredited education, by the way.)

There will always be a segment of the population that cannot or will not purchase health insurance, and these people will continue to show up at emergency rooms when they get sick.  Taxpayers will always have to pay the part of these costs that are not paid by charitable deductible donations.  But a better functioning free but accountable market has always provided better alternatives than unaccountable government programs.  It is also perfectly acceptable for the federal government to penalize people who defraud taxpayers by being sick but uninsured when they had the means to pay for insurance.

Health insurance companies also face the problem of market fragmentation at the state level and resultant uneconomical risk pools in some states.  The federal government should guarantee to the states that all insurance companies it licenses to sell and service policies across state lines are solvent, follow federal consumer protection guidelines, and are easily comparable to their competitors by consumers.

As corporations, these federally licensed companies should be regulated for solvency, diligence, and reporting, just like other financial institutions.  In terms of products, they should be regulated to make comparison easy: they might, for example, offer up to eight plans: catastrophic, basic, standard, and comprehensive, for genetically male or female customers.  They might also offer discounts for healthy customers, customers who can document an existing insurance history, and organizations who bundle a larger number of member policies.

All insurance, product, and service prices should be published, and all customers who want to purchase a federally licensed insurance plan should be accepted, regardless of their age, condition, or history.  All product and service costs prescribed by licensed professionals must be equally reimbursed.  The companies may be in the business of screening professionals and negotiating prices, but not of practicing health care by screening products and services.  This gives health care professionals an incentive to consider cost, but only as part of their total responsibility of care.

Corporations that sell only within states may continue to do so under existing state law and regulations, but it is unlikely they would operate more effectively than their federally licensed competitors.

All this can be accomplished by small changes in existing tax and corporate governance laws and by replacing the entire Obamacare law-plus-regulation monstrosity with a small new law regulating commerce of a small standardized set of simple health insurance policies among the various states.

The main three problems with health care and health insurance are uncontrollable costs, lack of coverage, and fragmentation of the market.  The two key solutions are tax deductibility and federal regulation of commerce among the various states.

Costs are uncontrollable for several reasons: consumers are largely isolated from the cost of the health care products and services they use.  Deductibles place the entire burden of a cost on the consumer who has no ability to negotiate.  Co-pays are fixed and do not give consumers an incentive to look for cheaper policies, products, or services.  A growing number of consumers are also not insured through an employer and individually have no negotiating leverage.  When costs are not being controlled, the health care industry has perverse incentives to concentrate on more expensive products and services.

These problems can all be addressed by making consumers responsible for costs by removing employers as intermediaries and extending tax deductibility to individuals.  In addition, policies should make co-pays a percentage of the covered costs so consumers see directly what the products and services cost and will collectively shop for the most cost-effective alternatives.

Deductibility for individuals and customer cost-control also addresses the problem of lack of coverage: instead of forcing people to purchase something or face a punitive tax, it incentivizes them to buy insurance instead of paying taxes over that part of their income.  It works for home purchases, so it should work for insurance purchases by responsible, productive individuals.  (The same should be done for properly federally accredited education, by the way.)

There will always be a segment of the population that cannot or will not purchase health insurance, and these people will continue to show up at emergency rooms when they get sick.  Taxpayers will always have to pay the part of these costs that are not paid by charitable deductible donations.  But a better functioning free but accountable market has always provided better alternatives than unaccountable government programs.  It is also perfectly acceptable for the federal government to penalize people who defraud taxpayers by being sick but uninsured when they had the means to pay for insurance.

Health insurance companies also face the problem of market fragmentation at the state level and resultant uneconomical risk pools in some states.  The federal government should guarantee to the states that all insurance companies it licenses to sell and service policies across state lines are solvent, follow federal consumer protection guidelines, and are easily comparable to their competitors by consumers.

As corporations, these federally licensed companies should be regulated for solvency, diligence, and reporting, just like other financial institutions.  In terms of products, they should be regulated to make comparison easy: they might, for example, offer up to eight plans: catastrophic, basic, standard, and comprehensive, for genetically male or female customers.  They might also offer discounts for healthy customers, customers who can document an existing insurance history, and organizations who bundle a larger number of member policies.

All insurance, product, and service prices should be published, and all customers who want to purchase a federally licensed insurance plan should be accepted, regardless of their age, condition, or history.  All product and service costs prescribed by licensed professionals must be equally reimbursed.  The companies may be in the business of screening professionals and negotiating prices, but not of practicing health care by screening products and services.  This gives health care professionals an incentive to consider cost, but only as part of their total responsibility of care.

Corporations that sell only within states may continue to do so under existing state law and regulations, but it is unlikely they would operate more effectively than their federally licensed competitors.

All this can be accomplished by small changes in existing tax and corporate governance laws and by replacing the entire Obamacare law-plus-regulation monstrosity with a small new law regulating commerce of a small standardized set of simple health insurance policies among the various states.