If this health plan is 'socialism,' we need more of it
As Obamacare's exchanges take shape in California, true, transparent, capitalistic competition will be seen among insurance firms, going toe to toe to win consumers.
by David Lazarus
May 23, 2013
Source: Los Angeles Times
So this is what socialism looks like: Private companies competing for people's business in an open marketplace.
Californians got their first glimpse Thursday of what insurers plan to charge for coverage to be offered next year to about 5 million state residents who don't receive health insurance from employers.
In southern Los Angeles County, for example, Health Net is charging $242 a month for one of its plans. Blue Shield is charging $287 and Kaiser Permanente $325 for the same coverage.
For the first time, consumers are in a position to make an informed decision about health insurance. They can opt for the lowest-priced plan or they can factor in other considerations, such as personal convenience.
Insurers, meanwhile, are going toe to toe to win customers, keeping prices as low as possible and stepping up quality of service.
Amazingly, the sky hasn't fallen and the world as we know it hasn't come to an end.
Critics of Obamacare have long warned of the dire consequences of reforming the U.S. healthcare system. The federal Affordable Care Act constitutes a government takeover of healthcare, they have said. We might as well be living in Cuba.
In reality, what we're seeing is some much-needed sunlight being cast upon a market that for too long has operated largely in the shadows, denying consumers the information they need to make choices about medical treatment.
Private insurers will have to meet minimum standards for coverage when they begin open enrollment in October, allowing people to compare apples to apples for the first time when shopping for individual or family policies.
Insurers also will have to post their prices in a clear and easily accessible fashion, introducing a long-absent element of competition to the market.
"It will be a one-stop shop for selecting policies," said Devon Herrick, a healthcare economist at the National Center for Policy Analysis. "That should make things a lot easier for people."
Comparison shopping for health insurance isn't a revolutionary idea. You can already go to websites such as eHealthInsurance.com to sample what's available. But that's kind of like going to a department store to shop for shoes.
There may be plenty of choices at a Macy's or a Nordstrom, and prices may vary, but it's hard to know which ones are best. Different pairs of shoes might offer different features, or different workmanship, or come from different parts of the world.
The beauty of the insurance exchanges is that they'll make all participating insurance plans equal. So when one plan is offered at a particular tier — Platinum, Gold, Silver or Bronze — for significantly less than another, you'll know you're getting a better deal, not sacrificing quality for price.
And insurers, at last, will compete by offering the best coverage at the lowest price, rather than trying to sell you as little coverage as possible for the highest price, which is how the market is currently structured.
"It's a completely different way of doing things," said Richard Curtis, president of the Institute for Health Policy Solutions. "Insurers will try to offer better choices instead of trying to avoid people when they get sick."
Princeton lecturer Heather Howard is helping bring insurance exchanges to fruition nationwide as director of the State Health Reform Assistance Network. She said examples already exist in Oregon and elsewhere of insurers lowering their rates to attract customers.
"That's the big story," Howard said. "Competition works."
What a shocking idea: Transparency and competition can improve a marketplace.
Perhaps what has conservatives in such a dither is that it took a strong regulatory push to achieve what the free market was unable to accomplish.
As things stand, the United States now has about 50 million people who are uninsured, as well as average healthcare costs that are twice as high as in other developed countries.
By any reasonable reckoning, that's evidence of a dysfunctional healthcare system. But it's not surprising that this has happened.
Left to their own device, profit-seeking health insurers have every incentive to keep costs down by minimizing the amount of treatment they cover and maximizing how much policyholders pay in rates and deductibles.
Consumers, meanwhile, have every incentive to avoid paying for insurance while they're healthy and to instead wait until they need it.
These self-interested goals are why the free market has failed healthcare — and why the government had to step in with remedies.
Thus, coverage requirements for insurance exchanges. Thus, a requirement that most people pay for coverage or face a tax penalty. Thus, a requirement that insurers cover everyone, including those with preexisting medical conditions.
"You need the whole package of reforms to make the whole thing work," Curtis said.
That's not socialism. Or communism. Or totalitarianism.
It's good old-fashioned capitalism, with a little helping hand from Uncle Sam to overcome personal and corporate considerations.
It's also humanism — an acknowledgment that healthcare, unlike most other products and services, is a necessity that requires all of us to band together as a society.
There is still much to be done. The exchanges remain a work in progress. Some rates undoubtedly will have to be tweaked before being offered to consumers. Insurance plans may need to be revisited by authorities to ensure equitable coverage.
Opponents of change should brace themselves for bumps ahead. The healthcare system is too complex for any overhaul to go smoothly.
But change, in this case at least, is good, and long overdue. Any healthcare system that excludes tens of millions of people, requiring them to fall back on costly and inefficient emergency services, is a system that brings nothing but shame on us all.
On Thursday, California took a big step toward a more honorable way of doing things. We can be proud.