Individual Affordable Health Insurance Return to Home Page
At the heart of this proposal is the
simple notion of personal responsibility. All individuals should be required to
provide for the health care needs of themselves and their families.
Every individual should have health insurance to cover catastrophic medical
expenses. Insurance should cover low-probability, high-cost events, not routine
maintenance. the minimum health insurance benefit should be a $5,000 deductible
plan with maximum out-of-pocket limits of $7,500 per person and $10,000 per
family. For the majority of uninsured individuals, such coverage can be
purchased today for $100 or less per month for an individual and $200 or less
for two persons.
The primary focus should be to free individuals from the shackles of employer
provided health insurance. Employers do not buy homeowners, life, or auto
insurance for their employees, why should they buy their health insurance? And
if you lose your job, you don't lose your car insurance or your homeowner's
insurance. Why should you lose your health insurance? One reason only—ridiculous
federal tax laws that allow employers, but not individuals, to purchase health
insurance with pre-tax dollars.
Rather than paying an employee $1,000 more in wages, of which $400 will be taxed
away, companies purchase $1,000 in additional health insurance tax-free. In this
way companies funnel more than $140 billion a year in federal tax breaks to
their workers. The tax-free status of employer-provided health insurance
encourages generous coverage that allows employees to ignore the prices of
medical services, which in turn encourages providers to charge more and more.
Employees, seeking to take advantage of their coverage, tend to over-utilize the
system, which also puts pressure on prices.
One more obstacle prevents health
insurance from being tied to individuals rather than to jobs—the feds require
that employers purchase group insurance. The way to fix this problem would be
for Congress to pass legislation enabling every individual to buy his or her
health insurance with pre-tax dollars. Employers then could hand over the money
they've been spending on health insurance to employees who could buy the
policies that best suited their needs instead of the policies that best suits
their employers' bottom lines.
Employers who do not currently offer insurance should be encouraged to set up
Section 125 plans. These are IRS-sanctioned plans to which employees can
contribute pre-tax dollars that they can use to purchase health insurance. This
lowers the real cost of health insurance to individuals by about 40 percent.
What to do about insurance that is already being purchased by employers? There
may be a loophole in federal law in which health reimbursement accounts (HRAs)
could be used by companies to buy individual health insurance policies for their
employees with pre-tax dollars. HRAs are accounts through which employers can
reimburse employees with untaxed dollars for health care expenses, including
health insurance premiums. The chief problem with this work-around of federal
barriers is that if an employee switches jobs to a company which does not offer
a similar arrangement, he can't take his current health insurance and premium
payments with him. We should encourage more employers to use HRAs in this way,
so that employees can more easily take individual responsibility for their
health insurance as they follow their careers.
"There is no economic reason that employees can't enroll in health plans that
meet their needs and retain them as they travel from job to job," "Employers
should be able to buy personal and portable insurance for their employees with
pre-tax dollars, just as they are able to buy group insurance today."
Removing the obstacles that prevent individuals from switching to less expensive
high-deductible individual health insurance policies will encourage smarter
comparison shopping. That alone will go a long way toward reining in rising
health insurance premiums and enabling a substantial proportion of uninsured to
purchase affordable private health insurance.
But what about those who can't afford to buy even at the lower prices? The
government could subsidize the purchase of health insurance for lower income
individuals buy providing them with a means-tested health insurance voucher and
let them purchase whatever private insurance they choose? If it turns out that
they can purchase the minimum required policy for less than the voucher, they
could buy additional coverage or deposit the leftover in a Health Savings
Account.
We can empower the poorest individuals with health care vouchers too and allow
them to buy private insurance. Where would the money come from to pay for
vouchers? Consider this thought experiment. In 2005, Medi-Cal spent $34 billion
providing for the health care needs of 10 million Californians—that averages out
to about $3400 per person. Assuming all the cash were given to a family of four
as a voucher, that conceivably means that the family could purchase a high
deductible policy for about $3400 and leaving them more than $10,000 to cover
the deductible. This rough calculation suggests that boldly moving to a real
individual mandate could dramatically reduce bureaucratic and regulatory hassles
while providing affordable health insurance for all
Individual responsibility for health insurance is the right idea.