NCPA - National Center for Policy Analysis


August 13, 2009

The White House is priming to revive ObamaCare, and its new strategy is to talk about "health insurance reform," rather than "health care reform."  Sounds like a good time to explain a few facts about the modern insurance market, says the Wall Street Journal.

Let's start with the reality that nine out of 10 people under 65 are covered by their employers, most of which cover all employees and charge everyone the same rate:

  • If you develop an expensive condition such as cancer or heart disease, and then get fired or divorced or your employer goes out of business -- the individual insurance will be very expensive if it's available.
  • Obama wants to wave away this reality with new regulations that prohibit "discrimination against the sick," but if insurers are forced to sell coverage to everyone at any time, many people will buy insurance only when they need medical care.

Another proposed reform known as "community rating" imposes uniform premiums regardless of health condition:

  • New York, New Jersey and Massachusetts have both community rating and guaranteed issue, and, no surprise, they have the three most expensive individual insurance markets among all 50 states.
  • In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family; ObamaCare would impose New York-type rates nationwide.

There are better ways to go, says the Journal.  Tax credits to individuals to buy insurance would make it more affordable and thus strengthen the individual market.  Other tax rule changes could also make it easier for people to form their own risk pools beyond their employers.

In turn, that would free insurers to compete for the business of all patients, including those with pre-existing conditions, because then they could charge enough to cover the costs -- instead of passing them to others, says the Journal.

Source: Editorial, "The Truth About Health Insurance," Wall Street Journal, August 12, 2009.

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