• Is this another new idea for improving health reform?

    In today’s Wall Street Journal, Holman Jenkins offers an idea for improving the ACA.

    [L]et’s permit insurers to design their policies free of ObamaCare’s mandated benefit levels and free of state regulation. Let’s let these policies be purchasable with pre-tax dollars and allow them to satisfy ObamaCare’s mandate requiring individuals to have insurance and employers to provide it. […]

    What’s the first thing the new nationally-chartered insurers would do? Rush out cheap, high-deductible policies, allaying some of the resentment that the mandate provokes among the young, healthy and footloose affluent. […]

    [T]hese folks could buy the minimalist coverage that (for various reasons) actually makes sense for them. They wouldn’t be forced to buy gold-plated coverage they don’t need so the money can subsidize the old and sick (the hidden tax logic of ObamaCare).

    This goes the wrong way in two respects and borrows ideas already in the ACA. First, the tax deductibility of health insurance is not a good idea. The employer-sponsored insurance tax subsidy is costly, leads to inefficient health spending, and distorts the labor market. We need less, not more tax subsidization. (We do have a debt problem and high health care spending, do we not?)

    Second, what is it that people think they’re buying when they purchase insurance? If it’s not a vehicle for the healthy to subsidize the sick, then what’s the point?

    Now, I recognize that it may not seem “fair” or “right” for the young and healthy to fully subsidize the old and sick, but they need not do so under the ACA either. Limited to a 3:1 ratio, age-based rating will be allowed for plans offered in the exchanges.

    Finally, high-deductible plans for “young invincibles” and others of low means are permissible within the ACA’s requirements, as I wrote in a prior post:

    Individuals under 30 can satisfy the individual mandate with a low-cost, high-deductible (~$6,000) plan, whose premiums have been estimated to be about $138/month. Those who qualify for the hardship exemption to the mandate are also eligible to purchase this plan even if they’re over 30.

    What’s left in Jenkins’ proposal that makes sense and for whom? Various arguments could be made, but one thing is clear. Insurance companies would love it!

    • “…but one thing is clear. Insurance companies would love it!”

      You can’t generalize like this. For one, there are a good number of regional insurers (all non-profit) who are not in favor of this because their business model is built around truly managing care rather than avoiding risk. These are the sorts of insurers who belong to ACP and not just AHIP.

      For another thing, you are forgetting that richer benefits mean more premium. Lowering benefits means less premium and less revenue. Why do you treat it as a certainty that insurers want to lower their revenue?

      I think I know what you’re getting at: the large national for profit insurers and some non-profit Blues have become expert at “consumer directed” and high deductible plans. They are good at risk selection, and to one degree or another have not fully reconciled themselves to the idea that they will have to succeed by managing the cost and quality of care better in cooperation with providers. A few of these big insurers are in fact solidly in the camp of wanting to offer the kinds of benefit poor policies that appeal to companies that want to spend as little as possible, and also appeal to the healthiest individuals who can give them the best risk pools.

      But note that in doing so they are shooting themselves in the foot from a revenue standpoint. It actually doesn’t make sense when the government is willing to incentivize people to buy a higher end product from them. Why then the support for weaker benefit options? I don’t see how it is anything other than a free-market ideology of top executives and in the office culture. It shouldn’t matter, but I’m convinced that it does.

      Oh, and disclosure: I work for one of the larger regional insurers.

      • @Jonathan – You make very good points. The thing I presumed the industry would love, on average, is escape from regulation. But, I admit, even that is not a foregone conclusion. Lots of firms favor certain regulations because they provide a competitive advantage.

        I think the answer to this one is to watch what AHIP does and says. Which parts of the package of insurance market reforms will they support? Which regulations will they seek to weaken?

    • Typo: I meant ACHP, not ACP.