The Homa Files

Ken’s Take: Last week, I had a couple of posts on this topic. I think this idea – from a Univ. of Chicago finance prof – may be the Rx …

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Excerpted from WSJ, What to Do About Pre-existing Conditions, Aug.  13, 2009

If you get sick and then lose your job or get divorced, you lose your health insurance. With a pre-existing condition, new insurance will be ruinously expensive, if you can get it at all. This, the central defect of American health insurance.

The bills being considered in Congress address the pre-existing condition problem by forcing insurers to take everybody at the same price. It won’t work. Insurers will still avoid sick people and treat them poorly once they come. Regulators will then detail exactly how every disease must be treated. Healthy people will pay too much, so we will need a stern mandate to keep them insured. And this step further reduces competition.

Private, competitive insurance markets are a superior way to solve the pre-existing-conditions problem, and the only hope to lower costs.

A truly effective insurance policy would combine coverage for this year’s expenses with the right to buy insurance in the future at a set price.

Today, employer-based group coverage provides the former but, crucially, not the latter.

A “guaranteed renewable” individual insurance contract is the simplest way to deliver both. Once you sign up, you can keep insurance for life, and your premiums do not rise if you get sicker.

The right to future insurance could be transferrable to another company, for example, if you move. You could have the right that your company will pay a lump sum, so that a new insurer will take you, with no change in your premiums.

Full article:
http://online.wsj.com/article/SB10001424052970203609204574316172512242220.html

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Ken’s Take II: The rub I see is that people who permanently lose their jobs also lose the employer’s subsidy towards health insurance … and, the full price of a guaranteed renewable individual insurance contract might be out of reach for most people.  Think COBRA.

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This entry was posted on August 18, 2009 at 7:45 am and is filed under Health Care / Medical Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.