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POLICY/HEALTH PLANS: The individual market is screwed

Whenever you hear some “free-marketeer” complaining that people with incomes over $50K don’t buy health insurance and so uninsurance is voluntary, think about this woman, featured in the NY Times, who would love to buy health insurance but has cancer and so cannot—unless she comes up with $27,000 a year out of her $60K income.

The individual market is corrupt and evil, and inherently unfair. And the organizations that make their living there (hello HealthMarkets, Assurant, Golden Rule et al) are the kinds that you find on the bottom of your shoe. (I’m awaiting Jon Cohn’s book coming out next month to tell you more…).

It is of course not strictly speaking the insurers’ fault. They live in a world where they’re selected against by both sick people and the competition—so it is a collective race to the bottom. Just to remind you for the one millionth time, individual choices of health benefit plans can only be effective and fair within a universal single pool system that needs its rules and boundaries set very carefully, and has risk adjustment built in the back end. And don’t let the libertarians tell you that if you take away all the rules and regs natural pooling will sort it out, unless they’re prepared to move to N.Carolina, get cancer and see how they get on.

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  1. Your money or your life!
    That is the call of a highway robber. It’s also the ‘free’ market choice of our health care system. Healthcare must be nationalized and payed for by the taxpayer directly instead of the indirect method of charging those who can pay 10 times the cost of health care.

  2. I will pass on the minutia and related special-interest bloviation and get to what I think will happen, no matter what your right/left “so called free market”/”government run” position is. You will have universal single pool health care, and here is why….
    Because of the complete mismanagement of our economy (even Adam Smith from his time states the limits and problems with complete laissez-faire approaches) and the outright theft going on in the name of “Capitalism”, things are about to change in the US. In a few years, we will wish to have had the stroll in the park that October 1929 yielded!
    The Math and Science doesn’t lie. Only people with agendas do.
    The Plutocratic Right has had their way since they melded with the religious right in the mid 70’s – something Barry Goldwater went to his grave concerned about! NASCAR Bubba, the major voting block for the GOP (led by the nose and **** by Atwater and Rove), has been so hooked on the 3 G’s (Guns, God and Gays) that he hasn’t stopped to do the basic 5th-grade math involved in seeing how those that he supports, with such pride and vigor, are molesting him (i.e. Millionaires paying 15% in taxes, Bubba paying 30% in taxes – if you disagree – go try and collect on Warren Buffets bet/challenge with the CEO class). There is a cost to ignorance, many will learn the hard way.
    Bubba is seeing his manufacturing job being sold off to China so a few GOP crooks can make a few bucks more exploiting so called “free trade” with China and India. Bubba will soon be pissed off once the Tough-And-Dumb Rule kicks in (if you are gonna be dumb, you had better be tough) and he realizes how he has been duped for the past 20 years.
    A country that does not produce “tangible” goods, will die! This “service economy” myth is complete BS. What will the consequences be? “Think Bubba”
    Bubba and fiends, pissed off and heavily armed (something the GOP might wish they had done something about, but I personally am a rational 2nd Amendment type) will one day revolt and make the 1917 revolution of look like a Woodstock party. The socialism that you on the supposed “right” fear so much, will come to life, and by and from your very own crowd! The left is too disorganized to do much of anything. But, you on the right will feel good about calling those lifetime GOP’ers, “liberals”, when that time comes. Funny how you pn the right all tend to have such “liberal” behavioral tendencies – Limbaugh’s drugs, O’riely’s strip clubs, Larry Craig’s Ted Haggard’s boyfriends, … I could go on.
    When bubba crowd and the lower executive class….
    [1] are experiencing the massive unemployment, that has been denied for years
    [2] has to give up their SUV’s (that is happening now, look at the repo lots)
    [3] their credit cards are maxed out (that is just around the corner) and their savings all dried up (2 years of negative saving rates now)
    [4] the buyouts have dried up (big 3 type deals)
    [5] Unemployment has dried up
    [6] the welfare (they so often collect) has dried up
    [7] COBRA has ended or become to expensive, and they have no health care coverage
    this crowd will be out for blood.
    YOU on the “right”, will get universal single pool health care, and YOUR political base will be the ones pushing for it. That group will be the most socialistic group you will have ever had to contend with – 1917 will seem like nothing!
    I will not be a fan of government controlled health care, as government tends to screw up most everything it touches. But the one benefit I see is that the population will then know who to go after (and potentially hang). Right now, the Tom Delay and Carl Rove nurtured system allows for responsibility to be obfuscated hidden from sight. In the future there will be 535 relatively easy targets – watch how 300M Americans can get those 535 spineless cowards to flee the country or actually get something done that isn’t completely done for the US Chamber of Commerce. Right there, in the very near future, will be your new form of democracy at work, as it should be! Enjoy the show!
    Now go ahead and tell me that because I don’t support the GOP crooks and their exploitation of our so called Capitalistic society, I must be a socialist or communist! Then Barry Goldwater and I can have a good laugh. This “conservative” crowd that has been in power is the most liberal behaving group to have ever existed! It would be comical if it weren’t so sad.

  3. Whether your premium goes up depends on the size of your class and on who else in your class gets sick. Some classes are pretty small, and one member becoming seriously ill could make mutual insurance unaffordable for everyone in the class. Of course, the reason people buy into such a small class is that they do not understand the concept of insurance…
    t

  4. To clear up a few inaccuracies here: In the individual market getting sick WILL NOT result in your premium being increased or your policy getting cancelled. As long as you pay your premium the insurer cannot cancel your policy, and any rate increases have to be applied to an entire class, not individual policyholders.
    And while the story in the linked article is a sad one, would anyone expect Allstate to offer me an affordable auto insurance policy if I’d just gotten into a terrible accident? Should Northwestern Mutual sell me a cheap whole life policy after I’m diagnosed with cancer? Too many people today do not understand the concept of insurance.

  5. Vincent the Logician admonishes:
    > Don’t be ridiculous.
    I see: argumentem ad hominem is only illogical when someone does it to you.
    > Since this study has >650k people the INTERGROUP
    > health differences can not possibly account for
    > the different levels of premiums.
    Oh, this is rich! Now Vincent the Logician thinks Proof by Repeated Assertion is logical too!
    Try, Vincent, try hard to follow the following:
    The cardinality of the union of all the groups does not imply homogeneity of the groups.
    If you think it does, try to prove it does. With logic. Formal logic. Squiggly symbols, Upside-down As. Backwards Es. Arrows and dots. The tools of logic.
    > Please don’t tell me that you believe that the
    > higher premiums in smaller firms occur because
    > those people are sicker.
    The article you yourself have cited says that insurers believe there is a risk they might be. What I might believe is beside the point.
    t

  6. Tom,
    Don’t be ridiculous. The data I gave indicated that the larger the group the cheaper the plan, period.
    Since this study has >650k people the INTERGROUP health differences can not possibly account for the different levels of premiums. In other words, given the large cross section of insured, it is highly unlikely that the people who work at firms of <10 are sicker than people working at firms 25-50.
    If you can't follow that simple bit of logic then please don't use the word logician in a derogatory fashion.
    "In other words, the different groups may very well have different underlying health risks because of Adverse Selection. "
    Please don't tell me that you believe that the higher premiums in smaller firms occur because those people are sicker.
    I am not sure that responding to such nonsense is beneficial to anyone.
    Signing off…

  7. Barry,
    Please read what I have been saying. I have repeatedly made one simple point. Employer sponsored health care distorts the market. I have provided the reasons behind this statement. You have yet to directly respond to the arguments I have provided. Oddly enough, you have regurgitated my exact point
    “Eliminating the tax preference for employer provided health insurance would also be helpful because it would increase interest in high deductible health insurance plans and increase price sensitivity on the part of both consumers and providers.”
    Have a nice day.

  8. Another non sequitur from Vincent the Logician:
    > Since this was a study of >650,000 people
    > there could not possibly be an intergroup health risk
    > difference.
    The sum of people covered by the small group plans does not say anything at all about the composition of the groups.
    The referenced article itself explicitly recognizes this and directly contradicts the conclusion drawn:

    “…firms with relatively few employees may be more likely to adjust their health insurance decisions based on the likelihood that certain employees will need health services. As with individual coverage, this phenomenon can cause premiums in small group insurance pools to rise.”

    In other words, the different groups may very well have different underlying health risks because of Adverse Selection. Anyone who wants to read the whole report can look here. Its not difficult to understand.
    > Tom, You, like Barry, are using the negative
    > consequences of the current system on the individual
    > market to discredit the functioning of that market.
    I have done no such thing. I have said you are wrong about the facts, including (ironically) the facts about what I have said, and you are wrong that your conclusions follow from the facts in the case where they were indeed facts.
    t

  9. Vincent,
    The fact is that health insurance is expensive, and many of the uninsured just plain can’t afford it, especially if they need family coverage. In 2004, an article about managed competition published in Health Affairs showed the annual cost of five separate family coverage health insurance options offered by Stanford University to its employees. The cheapest was the Kaiser HMO at about $9,500 per year followed by an HMO offered by Pacificare (now part of United HealthGroup) for $9,600. The most expensive option was a PPO costing over $16,000. This was three years ago and for an organization with about 20,000 employees at the time.
    With respect to the uninsured, according to the Aetna executive who runs that company’s individual insurance business, 14% of the uninsured are early retirees between 55 and 64 years old. For someone in this age bracket, even if relatively healthy, insurance is expensive. My own employer allows non-union retirees with at least 15 years service to buy into the company plan and at least get the advantage of group rates. The cost: $650 per month for an individual and $1,300 per month for a couple. Even if this were a fully tax deductible expense, it would still be unaffordable to most people in the $50 – $75 thousand income range. By contrast, homeowner insurance at less than $1,000 or auto insurance at less than $1,000 per car is quite manageable, even without the benefit of a tax deduction. In other words, its affordable.
    At the younger end of the age spectrum, 40% of the uninsured are between 18 and 34 with another 21% under 18. Many of these young adults, even if they can afford insurance, choose not to buy it because they think they won’t need it. The industry calls them the “young immortals.”
    While I personally would prefer to see the tax preference afforded to employer provided health insurance disappear, it is not the biggest issue vis a vis the individual market. Instead, those who have medical issues generally cannot qualify for insurance at a price they can afford and sometimes cannot buy it at any price. At the same time, many of the young and healthy prefer to spend their money on other things even if they can buy insurance for a very competitive price. As for the group market, prices are lower because groups are cheaper to serve (lower administrative costs) and the opportunities for adverse selection are also lower.
    Finally, I disagree with your contention that healthcare is a “normal good.” Doctors drive virtually all healthcare spending through hospital admissions, ordering tests, prescribing drugs, referrals to specialists, consulting with patients and doing procedures themselves. Their training does not put a high priority on sensitivity to costs. They are inclined toward defensive medicine to protect themselves from malpractice suits. And, the more services they provide, the more they get paid. Consumers need robust price and quality transparency tools to counteract these realities. Eliminating the tax preference for employer provided health insurance would also be helpful because it would increase interest in high deductible health insurance plans and increase price sensitivity on the part of both consumers and providers.

  10. Tom,
    You, like Barry, are using the negative consequences of the current system on the individual market to discredit the functioning of that market.
    Hugo Chavez has instituted price controls to make food more affordable. Suppliers are not selling their sugar on that market. A black market has developed in which the price of sugar is even higher than it would be in a free market.
    Your arguments about health insurance applied to this scenario:
    On the black market, the “devil’s” free market, sugar prices are very high. Therefore, we need to strengthen our current market function (ie price control enforcement mechanisms). He actually did this by mandating prison for violators of the price controls.
    This, I should hope, is abhorrent to you. In Chavez’s irrational world, he fails to see the negative effects his contrived market engenders and uses these negative effects to further perturb the market. Mandating prison for price control violators will only make that activity more dangerous and, therefore, drive up the price of sugar on the black market even more. This will give him more incentive to promote his nefarious market control.
    Your assertions, unfortunately, fall into this same logical, or illogical, pattern. The negative effects of the current tax code render the free market for health insurance “too expensive”, therefore the free market for health insurance is “impossible”. Ask yourself why 16% of uninsured in America make more than $75,000. Well they are priced out of the individual market because of the perturbations in this market by the tax code and state regulations. Saying that the individual market fails to pool properly when the incentives or disincentives cause this is absurd.
    Links to Wiki are not a substitute for logic and sound economic thinking.

  11. Barry,
    You are not responding to my arguments directly and you are using the negative effects of the current system as premises to attempt to discredit my arguments against the current system. This is evasive and illogical, respectively.
    I think that we can unconditionally agree that there must be effective risk pooling, so neither of us needs to address that basic point again.
    I would also agree with this part of your statement
    “Overall, the insurer makes money if coverage was priced properly”
    Now here are the things that are not true.
    1)”Under the normal insurance model (homeowner, auto, etc.), most people will pay more in premiums over the course of their lives”
    a)I have no idea what you mean by “normal” except to somehow qualify it in order to subsequently exclude health insurance as normal because it is inappropriately treated differently.
    b)Your presumption and insinuation that insurance companies somehow take a given person’s lifetime contribution into account when they are calculating their rate for a given YEAR is preposterous. Are you really suggesting that Geico assumes that a given person will buy insurance from them next year and the following year in order to do their actuarial calculations for this year’s rate? Don’t insult me and everyone reading this with sophistry.
    2)”Finally, auto and homeowner insurance works fine as a normal market because it does not cost a lot in absolute dollars”
    a)So market efficiency and effectiveness is a function of the absolute dollar amount. This is equally ridiculous.
    b)This statement, once again, refers back to your “affordability” statements. Again, I would say, emphatically, that the aggregate costs of health care (excluding improved efficiency etc for now) is NOT going to be lowered by manipulating the market forces in order to attempt to provide lower insurance rates. In fact, the lower the cost the more health care will used. Health care is a “normal good” in the strict economic sense. The real issue , AGAIN, is to distribute those costs appropriately.
    I will reiterate and qualify my prior arguments. I hope that you can respond to them directly.
    Facts:
    1)The group market must comply with individual state mandates for coverage ( eg massage therapy, IVF etc)
    2)The group market is regulated by states such that there is a limited range of prices that the insurance companies may charge for the individuals in the group.
    The effects of these two policies are
    1)mandated benefits drive up the cost of policies and care
    2)the prices of policies in the gorup market do not accurately reflect and are artificially less responsive to the underlying costs of the health risks of the individuals in those policies.
    Here is some data from 2006:
    # in group avg premium monthly
    650,000 people there could not possibly be an intergroup health risk difference.
    In any free market, prices reflect underlying costs. In the insurance market, prices reflect underlying risk and the prices will be sensitive to changes in the underlying risk.
    Since the group market is regulated such that the ability to adjust prices based on risk is limited, the individual market becomes overly price sensitive to risk changes. Not only that, but the price advantage given to the group market, based soley on purchasing power as shown above, inappropriately foists that burden on the individual market. Finally, group market plans are purchased with PRE-TAX dollars, whereas individual policies are generally purchased with much more expensive POST-TAX dollars. This gives an unfair advantage to purchasers of group plans and makes the individual plans much more expensive.
    Your repeated statements about “affordability” in the individual market, adverse selection, and the price sensitivity of that market ignore these factors. The individual market is in disarray because of the current tax code and group market regulation. Your use of the perturbations caused by these factors as an argument against a free market, or “normal market” as you put it, is a logical fallacy.

  12. Vincent writes:
    > Well, the [employer based] group will get a
    > preferential rate [versus the individual market]
    > because of their purchasing power. Not because
    > of their underlying risk.
    This ignores the problem of Adverse Selection. Oncology isn’t the only complex field.
    > The overall cost of insuring the 100,000 is the same
    > [whether via all together, or with 50,000 individual
    > policies and a group of 50,000] and the overall
    > expenditures for the 100,000 will be the same.
    This isn’t true. Part of the cost of insuring anyone is the cost of marketing the insurance product, and this includes collecting the premiums. Whether the loss experiences for both groups are approximately the same depends on the extent to which Adverse Selection is avoided with the 50,000 individual policies versus the 50,000 member group.
    Marketing to “natural” groups (as through groups of employees) reduces marketing costs and the probability of Adverse Selection versus marketing to individuals. Buyers for a big group are also likely better informed than a individual is — this is one thing that puts them in a better negotiating position versus insurers.
    > To then say that individual insurance policies are
    > unfair because of the results inherent in the system
    > is illogical.
    In a very real sense, an individual health insurance policy is impossible. Anyone who buys a health insurance policy is buying it with other people — paying dues to join their club, so to speak. The societal dispute we are having revolves around whether the club should be a voluntary one, on whether one may remain in the club when too ill to earn sufficient ongoing income to continue paying dues, and if the clubs should be voluntary, on what should be done with/for someone who has not joined a club. Most everything you will read on THCB about policy can be traced back to these three questions.
    For anyone who’s interested here’s a little primer on Insurance Theory.
    t

  13. Vincent,
    We must be talking past each other. Let me try again.
    First, I agree that, as John Fembup (a poster on this blog) often points out, health insurance is expensive because healthcare is expensive. The cost of insurance has to reflect the cost of healthcare (claims) plus administration and profit. Strategies to reduce the cost of healthcare are a completely different set of issues and could include such approaches as malpractice reform (to reduce defensive medicine), more widespread use of living wills (to reduce futile and often unwanted care at the end of life), greater use of interoperable electronic medical records (to reduce duplicate testing and adverse drug interactions), and robust price and quality transparency (to make it easier to steer patients to the most cost-effective providers).
    Organizing people into large pools can reduce the administrative costs associated with selling insurance and spread the risk and cost of covering those with high medical costs across a large population that includes lots of healthy people.
    People who, for whatever reason, need to buy their insurance in the individual, underwritten market find that insurers are quite skillful in identifying those who already have high medical costs or are likely to in the future. United HealthGroup, for example, within its Ingenix Division, has five year prescription drug history on 240 million people. They prefer not to insure high risk individuals. To avoid them, they will either refuse to insure them at any price or place them in their highest risk tier and quote a price that very few people can afford. Conversely, if you’re young and healthy, with no prior health issues, they are quite happy to take you on for a competitive rate. Just don’t get sick because as soon as you do, they don’t want your business anymore.
    I don’t understand how you expect a person with less than perfect health (say, a history of heart disease, diabetes, asthma, etc.) to buy insurance at reasonable cost without community rating. Suppose they had employer coverage and then lost their job. Even if they can afford COBRA coverage, it expires after 18 months. Then what are they supposed to do? It sounds like you are suggesting that each individual should be charged enough to be profitable for the insurer. This defies the principal behind insurance. Under the normal insurance model (homeowner, auto, etc.), most people will pay more in premiums over the course of their lives than they will ever collect in claims (or have paid out on their behalf for hurting someone else or their property). The profits from the many cover the losses of the few. Overall, the insurer makes money if coverage was priced properly, and all customers, including those who happen to incur high claims, get insurance for a reasonable price.
    Finally, auto and homeowner insurance works fine as a normal market because it does not cost a lot in absolute dollars. For most people, homeowner insurance is less than $1,000 per year, and auto insurance (per car) is as well. There are exceptions, of course. Moreover, one can live without a car and can rent an apartment instead of buying a home. It’s hard to get by without healthcare unless you are that rare person who remains healthy until the end and then dies peacefully in your sleep.

  14. Barry,
    I think you are missing the underlying issues.
    1)You keep talking about insurance being “affordable”. This misses my point entirely. The price of the insurance is a reflection of underlying costs. These costs exist regardless of who is paying for them. You want the insurance to be “affordable”, but this has no meaning in the overall scheme of paying for care. Someone has to pay for it. The real issue here is how that cost is distributed. I would urge you to look into any historical record of any attempt to make some good or service “affordable”. You will find that it just doesn’t work. There is rationing, misallocation, decline in quality, and secondary markets. Google Sweden and rent control or better yet read Sowell’s Basic Economics.
    2)I am doubtful of your contention that people are dropped or put into an “ultrahigh” risk group. I would ask for some data on that issue. After 8 years of treating cancer patients, I have yet to see this scenario personally. Your use of the term “ultrahigh” implies some unfair or disproportionate use of risk stratification. Again, this stratification would simply reflect a rational assessment of the underlying costs. So you can’t imply that the stratification is unfair. Your only real argument is that the specific person should not be responsible for it. But trying to make insurance more “affordable”, by setting a price or getting someone else or everyone else to pay for it doesn’t change anything.
    3)The individual market is especially susceptible partly because of the employer-based funding. Yes, it probably is cheaper fro an insurance company to insure a block of 50,000. But if you look at this in the aggregate things are different. Say there are 100,000 people. 50,000 get insurance through their employer as a group and the other 50,000 through the individual market. Well, the group will get a preferential rate because of their purchasing power. Not because of their underlying risk. This skews the market and results in the non-group 50,000 effectively subsidizing the group. The overall cost of insuring the 100,000 is the same and the overall expenditures for the 100,000 will be the same. To then say that individual insurance policies are unfair because of the results inherent in the system is illogical.
    4)”People who are unfortunate or unlucky enough to get sick need to be part of a pool with large numbers of healthy people so insurance is affordable” Well how is this precluded by abolishing employer based health insurance. If you subtitute house fire or car accident for sick and fire-safe and accident-free for healthy, then your conclusion must be that there is inadequate pooling in these insurance markets. Absurd.
    4)I can only assume that you would like to have car insurance and homeowner’s insurance linked to employment.After all, the worker has to drive to work and live somewhere. If the employer based health market is so beneficial and the individual market so detrimental why hasn’t this occured.
    4)Thank you John.

  15. Thought I’d pitch in with the point that Robert Pear of the NYT missed asking some important questions that would inform this discussion, especially, everything about this woman’s health insurance status before he interviewed her!
    Was she insured when she got cancer before? How? Was she employed by a company and just became a realtor a year ago because she had to leave her job due to illness? Or, has she been a realtor since she was 25 and has just never bought health insurance? (Which invites the question of who paid for the cancer treatment.)

  16. Vincent,
    I don’t agree with you. The individual underwritten market is essentially worthless for anyone who incurs catastrophic expenses because they will either be cancelled at the first opportunity of reclassified as ultra high risk and charged a premium that they can’t afford. If it were community rated and couln’t be cancelled once issues (as long as premiums are paid), it would be a different matter.
    People who are unfortunate or unlucky enough to get sick need to be part of a pool with large numbers of healthy people so insurance is affordable. They cannot be expected to cover their high costs after disaster strikes and they cannot be allowed to wait until disaster strikes before they try to buy insurance just as they cannot expect to buy homeowner insurance after their house burns down.

  17. Barry,
    I am glad you agree with me.
    “While my own preference is for taxpayer funded vouchers and managed competition (Enthoven approach) as a replacement for the employer based system”
    I would like to see the data you have regarding the insurance policy cancellations.
    Finally, the prices of insurance policies simply reflect the underlying costs. I am sorry that Matthew can’t comprehend this. Simply getting the government to pay for it doesn’t make it any less costly, just less transparent.

  18. Vincent,
    While the tax preference currently afforded to employer provided health insurance is an accident of history, the employer insurance model has two significant advantages over the individual market – natural pooling (plenty of healthy people as compared to the number of sick folks) and much lower administrative costs – it’s a lot cheaper to sell one policy to cover, say, 50,000 employees than to sell (and collect premiums for) 50,000 individual policies.
    Moreover, suppose I had a policy in the individual market that was relatively affordable at the outset. I pay my premiums for 10 or 15 years, and then I get sick (cancer, heart attack, serious accident) and require very expensive medical treatment. What do you think the insurer will do when the policy comes up for its next annual renewal? If it doesn’t cancel the policy outright, it will put me in its ultra high risk tier and demand a premium that very few people could afford to pay unless there is a community rating requirement in place, in which case young, healthy people will pay considerably more for their coverage than they would in an underwritten market.
    The employer model, which does provide insurance for some 150 million people, could be built upon if there were a default policy that people would automatically be entitled to if they (1) lost their job, (2) retired but are not yet eligible for Medicare, (3) want to leave their employment to start a business but will make little or no income at the outset, or (4) are currently uninsured. Perhaps a dedicated VAT of 5%-6% could finance such coverage while employers who do not currently provide coverage could be required to pay a reasonable percentage of payroll into the fund that finances the default coverage.
    While my own preference is for taxpayer funded vouchers and managed competition (Enthoven approach) as a replacement for the employer based system (with Medicare left in place), it might be easier to get something that builds on the employer based system through our political process. Either one would be a significant improvement over what we have now which is no security for those who are currently uninsured, lose or leave their jobs or retire before becoming eligible for Medicare.

  19. > Using this premise as a basis to discredit my
    > argument that we should not have insurance
    > linked to employment is illogical.
    Vincent, Matthew argues every day that we should not have insurance linked to employment. Usually several times.
    So far, you have said “If the government had not made it cheaper to get health insurance as a benefit of employment, then there would be a roughly competitive market for health insurance, and therefore health insurance would not be linked to employment.”
    Beginning with your major premise, Matthew argues that the prerequisites for a roughly competitive market for health insurance cannot exist. If you think you can prove that a competitive market for health insurance can exist, by all means, go ahead and try. That there isn’t one today is entirely beside the point, and a fine logician like yourself surely understands this.
    When you’re through proving your major, we can consider whether your conclusion follows.
    t

  20. Matthew,
    Thank you for resorting to ad hominem attacks. This is the bastion of those who care not to address the argument presented in order to forward an agenda. So I will lay it out for you again.
    1)the current tax code, which is an historical accident, effectively forces people to obtain insurance through their jobs
    2)if this were not the case then
    a)there would in fact be a competitive individual market as there is for car insurance , home insurance etc.
    b)there would not be a loss of insurance simply because your company went out of business.
    3)it is well known that 2007 America is extremely mobile
    therefore the government is responsible for shaping a distorted market which puts people at risk for losing their insurance in a very well known environment. that sir is not religion, but simple logic.
    Your second logical fallacy(the personal attack “cuckoo” being the first):
    Your initial assumption or premise “Most people in America get insurance via their job.” is one of the root causes and symptoms of the problems we face. Using this premise as a basis to discredit my argument that we should not have insurance linked to employment is illogical.
    Finally, the price of this particular woman’s proposed coverage at $27k is a reflection of the underlying costs of her treatment. That is a basic economic principle and I should hope this is understandable. Her treatment costs are likely to add up to much more than 27k per year. That is the additional point I was making. Someone has to pay for the care – it is unavoidable. While I would agree that paying 27k per year is a bit ridiculous, the costs don’t simply go away because i have said that.

  21. Vincent.
    Most people in America get insurance via their job. They move jobs/get fired/their company goes bust, and now they’re in the individual market. They had insurance before and were paying for it (receiving it as part of the ir employee benefit). Now usually based on health status it can be gone….unless of course you are prepared to pay some incredible amount. The woman in the NYT was quoted $27K a year.
    Nobody has a consistent individual policy over a long time. You are living in cloud cuckoo land if you think that, and need to go analyze the RAND study I mention and link to in my comment.
    Quite what this has to do with “the government” is beyond me. But if you think everything is their fault that’s a religious conviction not a rational one.

  22. Mr Holt,
    Can you clarify a couple of things.
    When you say “denied insurance” and “unable to get it”, do you mean that the insurance carriers won’t insure these people? More likely you mean that insurance companies won’t insure them at a preferred rate.
    The real question is why would these people need NEW insurance for the pre-existing conditions. The conditions would NOT be PRE-existing if they had been paying for insurance all along.
    So once again we have the negative results of the current system engendered by government being used to heap on yet more government intervention.

  23. I don’t usually to respond to Mr. Browning for obvious reasons. But this time I must. If we accept his number that 1% of Americans are denied insurance because of pre-existing conditions–and the Georgetown study showed it was much greater, and the RAND California study suggested much the same–then we have ~3 million Americans in that group. Pre-existing conditions aren’t a factor in the group market or the government market but they only really apply in the individual insurance market. So almost all those 3 million are people who want to buy individual insurance but cannot. Which probably means that a significant share of those uninsured earning 50K+, who also tend to be older and less healthy than the average uninsured individual, and more likely to need insurance–are in that number. Let’s assume that it’s 2m of them, then 2/17m is about 15%. Which means that in that group earning 50K+ a year the percentage wanting insurance and unable to get it, is likely to be the same as are actually sick. What a beautiful system–for a an underwriter at least if not a patient.
    Sadly I can’t really argue from good data and prove that what I’m saying is right, as no decent study following the uninsured through market has ever been done (as I explain here). But then again that’s never stopped Mr Browning.
    Most sensible libertarians (Arnold Kling, for example) realize that even within their preferred system some form of pooling, subsidy and guaranteed issue needs to regulated for the sick. Mr Browning just thinks they should feel lucky they’re not Canadian.
    Still I see from his site (where I go for the odd chuckle) that Mr Browning is having fun speaking to the underwriters across the US. I hope that they’re paying him well. Other than apparently he doesn’t need the money, so he must be doing this for love?

  24. “Even if she had an individual insurance, the moment she got sick her cost is likely to go up.”
    Assume that this is true. Are you suggesting that the cost of her care, now that she is sick, is unchanged? Regardless of who pays for the increased cost associated with her care, SOMEONE has to pay. That is the real point that is missed so many times. Everyone wants to pay for insurance AND get out more than they put in. This can’t occur, it just won’t work. Even if the federal government pays for the extra cost, we still pay for it.
    Now I am not saying that this poor woman should be responsible for all of her bills or that this is in any way her fault. But the fact remains that the increased costs exist. So either she pays for them, the other people in her plan pay for them, everyone in the country pays for them, or some combination. The real issue here is striking a realistic balance which helps everyone. Simply saying increasing her premiums is unfair neglects the fact that someone has to pay for the cost.
    “In addition, individual insurance is likely to be more expensive than employment-based insurance, at least for those working for large corporations.”
    Now it is because of the way the government has forced the market to function. So you are using a negative consequence of the current system to justify the existence and persistence of the current system. Odd.

  25. “if her insurance were not linked to her employment because of the current tax code, then she would not have had this problem.”
    Even if she had an individual insurance, the moment she got sick her cost is likely to go up. There is nothing to prevent an insurance company from increasing premiums as it sees fit. Also, I don’t know, but don’t the insurance companies have a right to terminate the coverage? So even without employer-sponsored plan the woman could’ve easily ended up in the same situation.
    In addition, individual insurance is likely to be more expensive than employment-based insurance, at least for those working for large corporations. When the majority of people in a pool is young and healthy, the insurance for a group is less. In addition, when you buy something in bulk as a group, you are always likely to get better deals than when you buy individually.

  26. Mr. Holt omits the fact that 37% – more than 17 miilion people – make over $50K a year and can afford insurance – while the number of people like the unfortunate woman in the NY Times story are very small – %1 of all Americans are denied insurance because of preexisting conditions.
    The woman in the NY Times story is a charity case. However the system he envisions makes all 300 million Americans into charity cases at the mercy of government rationing of medicine.
    But it doesn’t take a “free-marketer” to point this out. All it takes is a small bit of digging to find out that the “crisis” of the uninsured is actually just a smokescreen used for cover by the collectivist reformers who work tirelessly for government financing of all health care.

  27. as far as cadillac policies go. most states have mandated so many “benefits” which drive up the cost of premiums. my guess is that if you look at your own policy there will be numerous “benefits” that you never would have agreed to pay for had the government not forced you.
    so the “cadillac” nature of the policy has nothing to do with its relative cost to other policies , but indicates the added amenities.
    examples: IVF, podiatry, chiropractic services, pastoral care. the list goes on.
    you may or may not want these things, just like you may or may not want a sun-roof or cruise control. however, you get them regardless. the “evil” insurance companies don’t care because they just tack on their adminstrative expenses. the premiums rise and who is to blame? the “corrupt” insurance companies, not the politicians who are “helping” us by increasing our benefits. it is nonsensical until you realize that the politicians only care about step 1 which is providing some plausible benefit so they can get elected. they disregard step 2 which is the resulting premium hikes. they blame that on greed of the insurance industry. nice

  28. susan,
    you are correct i missed the fact that she had prior employer based insurance- i apologize for the cursory reading.
    however, my essential arguments still stand. her insurance was linked to her employment. that employment ended and she had to buy cobra which was temporary.
    1)if her insurance were not linked to her employment because of the current tax code, then she would not have had this problem.
    2)if regulation were not so excessive she would not have needed employer subsidies and tax-sheltering to purchase an affordable plan

  29. Read the article, v cifello. She had always had insurance, and before she got sick she had it with the job she was working at. But for whatever reason, she knew that coverage was going to end so she started looking for an individual policy–like a good consumer–way ahead of time. One month into her search she was diagnosed, so she had insurance with her job for a few more months but then it terminated, as she knew it would, but no one in the individual market wanted to take on her “pre-existing condition” for less than an arm and a leg. I don’t know anyone anymore who has a “cadillac” policy, except perhaps for our elected representatives in Washington. Most people in this country, including those with “good” insurance are a major illness away from financial ruin. That is not risk pooling, that is catatrophic certainty. The insurance industry has been getting away with murder, almost literally, for a long time now.

  30. This woman’s plight is terrible. However, what does this have to do with the fact that she chose not to purchase health insurance until she got sick?
    This was an economic decision on her part. Blaming the “evil and corrupt” insurance market is ridiculous.
    Ask why she never had insurance despite her income? Blame the politicians who heap on regulations that increase the price of premiums. Blame the government which has failed to update the tax code. There is no reason for health insurance to be linked to employment in a society as mobile as 2007 America. This is the exact scenario that speaks to allowing markets to function properly, not for more government intervention. If the markets were unfettered, then this poor woman would likely have purchased a catastrophic and relatively cheap plan to cover her for such an unlikely event. Instead, we have government fiats forcing cadillac policies down our throats. Unfortunately, she is paying the price.
    As far as your risk pooling, just look at NJ car insurance to see how that one has worked out. There is ample evidence that the risk pooling occurs properly in the free market.

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