Thursday, December 13, 2007

The Shadegg Bill––A “Health-Insurance Solution” That Is a Waste of Time

Merrill Mathews, writing on yesterday’s Wall Street Journal op-ed page, asks why Representative John Shadegg’s (R-AZ) “Health Care Choice Act” isn’t a “no-brainer” for the Congress to pass.

Shadegg’s proposal would enable consumers to buy a health insurance policy in any state thereby bypassing the states with the most costly benefit mandates. At the top of his costly mandate list are state “guarantee issue” laws that have forced premiums to skyrocket where insurers are required to take all comers.

So why isn’t it a “no-brainer” to pass Shadegg’s proposal and give everyone access to the least mandated state health insurance policies?

It is notable that Shadegg has been pushing this for years—including the six years he had both a Republican Congress and a Republican president and couldn’t get the bill to go anywhere.

The reason the Shadegg bill never went anywhere is that it is a waste of time.

The Shadegg bill is as close to “rearranging the deck chairs on the Titanic” as one can get in health policy.

If the Shadegg bill became law tomorrow individual health insurance might be a lot cheaper in heavily mandated places like New Jersey—a state Mathews points out now has an individual health insurance cost of between $1,726 to $14,062 per month.

But how much cheaper and at what cost to lots of other people?

Mathews points out that the Shadegg bill would effectively come closer to delivering the kind of mandate-free insurance prices that ERISA employer plans deliver.

OK, but the average cost of an employer-provided, ERISA mandate free, health insurance plan is over $12,000 a family.

That $12,000 average employer family cost is just that--an average. A young and healthy twenty-something can probably buy it for much less—maybe as low as $100 a month. But a 60-year-old, if they are healthy, is going to pay a correspondingly larger amount because of age-rating in Shadegg’s market.

If that older person, or even a younger person for that matter, has a medical condition, forget it. They won’t find coverage.

Sure, we could add a big deductible—maybe $5,000—and get costs down another 20%.

But when the day is done what have we achieved?

In the end, the young and healthy would get much more affordable policies and the old and/or sick would be worse off.

So what exactly does the Shadegg bill get us?

Well it would get Mr. Mathews' insurance company trade association, the “Council for Affordable Care” a wild-west market environment to go find all of those young healthy people and sign them up for really cheap coverage.

Young and healthy people would pay a lot less and older and/or sicker people would pay a lot more if coverage were even available to them.

New Jersey is a dysfunctional health insurance market. But fixing that state, and others like it, is a lot more complicated than putting the “cherry pickers” back in charge.

In the presidential debate, some are suggesting individual-based consumer-driven plans while others are offering more traditional group oriented solutions. Both can work. Whichever, many of the candidates are calling for a comprehensive solution to our health care challenges––that includes reforming how health insurance is purchased.

The Shadegg bill is not a serious attempt at reinvigorating the individual health insurance market around consumer-driven principles that would give everyone a fair shot at better coverage.

The Shadegg bill is nothing more than a crass special interest play to carve-out the youngest and the healthiest and leave the older and sicker in the ditch—to dysfunctional state regulated systems like New Jersey whose pools of insured would deteriorate even further and cost even more.

Let’s stay with the debate we have—one that has the potential to make some meaningful change in 2009.
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