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The Replacement for ObamaCare

A national market for health insurance would lower costs and allow policies to be tailored to the specific needs of various groups.

The Replacement for ObamaCare
Dave Dyer

This ought to be easy. Here are my design goals: first, it needs to provide some transition for the 20 million people currently on ObamaCare; second, it needs to provide some way to take care of people who are uninsurable due to pre-existing conditions; third, it needs to encourage lower costs for insurance coverage; fourth, it needs to preserve both the current private insurance market and the current government-provided insurance system of Medicare; and finally, the additional costs to the government should be small.

The core of my suggestion is to allow private insurance to be sold nationally, not just in a state-by-state regulated environment. Diseases don’t change at state borders and covering the risk of getting them should be the same all over the country. Insurance works best when the pool of insured is larger, and my suggestion provides a national market.

A national market would make it possible for insurers to sell through voluntary affinity groups such as churches, professional organizations, or unions. A large insurance company could approach, for example, the Baptist Church with a deal to offer all members. Perhaps the affinity group would get a tiny percentage from each policy to help them promote it. Good insurance could be an inducement to join a new affinity group, so the groups could use it as a recruiting tool. Marketing costs for the insurance company could be lowered if they came up with policies that were really appealing and affordable to the affinity group members.

Insurance companies would need to be able to design the content of the policies they offer. One of the problems with ObamaCare is that the government decides on and mandates the exact structure of the policies. For example, a 60 year-old woman may be required to buy coverage for pregnancy even though she would not buy it on her own. This just raises the costs and adds no value to the customer. When businesses can’t compete by designing specific products for specific customer groups, the market becomes inflexible and inefficient.

If insurance companies can design the content of the policies, they should also be able to rule out people with pre-existing conditions if they want to. Insurance companies are buying the risk that the client will have an expensive illness. If they already have an expensive illness, that is bound to be a bad deal, unless the rates are increased to cover the risks. This just increases the costs for all the other policy holders. How expensive would car insurance be if insurance companies were required to cover Evel Knievel at the same rate as a driver with a good record?

What can be done with the people who are uninsurable due to pre-existing conditions? Easy. The government already runs a big health insurance system, Medicare, that accepts people without any consideration of their situation, other than eligibility by age. The system is already in place; just make Medicare available on a voluntary basis to those who can’t purchase coverage at acceptable rates in the open market. It would be a social safety net that would allow coverage, at some price, for all and would allow private insurers to select the customers they wish to cover. I realize this would be some extra cost to the government, but it would be the element that allows the system to work without causing harm. Perhaps the Medicare option could be limited to just the specific pre-existing condition or perhaps to just until that condition is cured. This same Medicare option could also be offered to the 20 million people who are currently on ObamaCare and they could keep it until they found a better deal in the private market.

Of course, the Medicare option would not be free; it would need to be priced properly. If someone is really poor and can’t afford any coverage, there is already the Medicaid system in place to cover them.

Why wouldn’t everyone just take the Medicare option? First, it would not be open to all. Only those unable to obtain private insurance due to serious preconditions would be eligible for Medicare. Second, the private insurance should be better or cheaper since the product can be tuned to fit the needs of specific groups. For example, plans sold through the some churches might save money by not covering abortions while plans sold through motorcycle gangs may include extra coverage for accidents.

Health Savings Accounts can be part of the picture, but the real solution is for people to be able to buy affordable insurance coverage that meets their specific needs. An HAS can help pay the deductible, but the high costs of a hospital stay or medical procedure need insurance coverage.

This is a free market solution backstopped by a government safety net. The free market part brings down rates and encourages insurance companies to be creative in how they design and sell their products. The government backstop, which is already in place, assures that no one is left out. Please note that participation by the customer is voluntary; the government should not waste time and money trying to force people to buy health insurance.