Congress is getting ready to bet the farm on health care reform and in their quest to provide universal health care, they are gambling with your health insurance. If they come up short, sweeping new regulations will spell the end of private health insurance as we know it. Americans will be left with a government-run system they don’t want.
Central to the reforms working their way through Congress are new regulations on insurance companies. The first, a rule called “guaranteed issue,” prevents insurance companies from denying coverage for pre-existing conditions. A second new rule, “community rating,” limits how much an insurer can charge based on health status and risk factors.
Despite their obvious populist appeal, these policies fundamentally change the nature of insurance. Under community rating, costs go up for younger, healthier individuals who end up subsidizing those who require more care. At the same time, guaranteed issue eliminates the incentive to buy insurance because people know they will be able to get coverage in the event they get sick or injured.
These policies result in lots of sick people buying insurance and lots more healthy people dropping out. As the insurance companies pay out more benefits and collect fewer premiums, costs have nowhere to go but up, which causes even more people to drop out. This spiral will continue until private insurance is no longer viable.
The only way to prevent the demise of private health insurance is to keep younger, healthier individuals in the system. Congress recognized this, but unfortunately for those of us hoping to keep our current coverage, they couldn’t summon the political will to do much about it.
Congress plans to rely on individual and business mandates to prevent those who are currently in the system from dropping out and to force those who are not to join. Individuals who fail to buy health insurance will be fined $750 per year. Businesses with more than 50 employees that don’t provide insurance will be fined $750 per employee. As part of a backroom deal with organized labor, construction companies were singled out for special treatment and face fines if they have just five or more employees.
The problem is that Congress’ mandates aren’t really mandates at all. We are mandated to buy automobile insurance before we can register our cars, but the health insurance mandate is more like a parking ticket. Just as you can park wherever you want as long as you are willing to pay the tickets, you can go without insurance if you are willing to pay the fines. As burdensome as these fines will be on small businesses and individuals, health insurance is many times more expensive. Most people will just promise themselves to be more careful about whom they vote for next time and pay the fine. Once they actually need health care they will switch to paying for health insurance.
If this occurs, the results are predictable and concerning. Maine enacted guaranteed issue and community rating in the early ’90s. As premiums went up, thousands of Mainers dropped their health insurance. Today, almost one in four Maine people is eligible for taxpayer-financed health care like Medicaid, and most private insurance companies have left the state. The few large insurers that remain are forced to charge some of the highest premiums in the nation and could not survive on their Maine business alone.
If Congress insists on following Maine’s lead and gambling with our health insurance, they should have the political courage to do what is necessary to ensure we do not lose it. This would mean dramatically increasing the fines for those who fail to comply with the insurance mandates. Sure, this would drive thousands of small businesses into bankruptcy and might even send some Americans to jail for not paying their taxes, but it is the only way to save private insurance under the proposed reforms.
Better yet, Congress should just start over. The current plan is not what Americans expected when they asked for health care reform. The vast majority of Americans are happy with their health care — they just wish it cost less. Common sense says the best way to insure more Americans is to lower the cost of insurance, yet Congress has ignored cost control in favor of regulation and expensive new government programs. There are many steps Congress could take that would lower health care costs — steps that would not bet the best health care system in the world on a losing hand.
Doug Newman is the chairman of Associated Builders and Contractors and their health care task force. He owns Newman Concrete Services in Richmond and resides in Hallowell.