NCPA - National Center for Policy Analysis

A Better Health Insurance System

July 13, 2012

American families need better options for health insurance. A health insurance system needs to be accessible, portable and inexpensive, just like other forms of insurance. In contrast, the Affordable Care Act (ACA) mandates a one-size-fits all, overly-generous plan that, combined with the requirement that people can sign up anytime, will prove to be very expensive, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.

There's no reason that America's economy can't produce more health insurance choices. The economy provides a wide range of insurance products -- home insurance, auto insurance, life insurance, renters' insurance -- which Americans choose to buy without mandates. The health care insurance industry can produce the same options if government can be an enabler rather than a provider.

The following are the tenants of a fully functional, market-based approach to health insurance. It entails individuals purchasing their own plans and cutting employers-as-middlemen out of the picture.

  • The federal government should provide tax credits for the purchase of health insurance, and it should counterbalance this policy by removing the current tax favoritism given to insurance provided by employers.
  • This would allow for a functional market in which health insurance providers court potential customers just as insurers in other fields do.
  • Further, the amount of the credit could be adjusted up or down depending on income.
  • Additionally, insurance providers should be allowed to operate over state lines, thereby overcoming the current fractionalization of the national health insurance market.
  • In order to provide for the 2 million to 4 million people with uninsurable conditions, states should create risk pools for special insurance, supported by the federal government.
  • This concentration and direct support will be much cheaper and more easily managed than the behemoth bureaucracy that the ACA would create.

These are the framework provisions that would pressure insurance providers to lower costs while expanding coverage, especially to those who cannot afford it. Such measures could be supplemented on the state level by additional support/subsidies for those with preexisting conditions who would otherwise be unable to afford insurance.

Source: Diana Furchtgott-Roth, "Beyond the Supremes: A Better Health Insurance System," Real Clear Markets, June 28, 2012.

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