Part II: Incentivizing Health Care: Another Solution

This is not the first time I've addressed the health care reform package that President Obama is championing. However, today I feel a little bit torn about it.


The conservative and the economist inside of me knows that if this health care bill passes, it will dramatically change our health care system as we know it. As I have previously stated, a government option that offers health insurance with lower premiums than private insurance will eventually lead to the end of private insurance as we know it.


And that's where I'm torn. Private insurance companies, by design, were intended to help individuals obtain health care when they need it most and not avoid bankruptcy for doing so. But recently, it seems that health insurance companies are more worried about their bottom line profitability.


And that's what has always scared me (and maybe even you) about health insurance companies and the health care system. It's part of the reason I avoid hospitals at all costs and minimize my dealings with health insurance companies. I'm always afraid of something being considered a "pre-existing condition" or a procedure not being covered by insurance.


As much as I despise the rhetoric of the Obama administration and the Democrats who are fighting for this health care bill, I have to admit I have heard these horror stories more than once; people being dropped from health insurance coverage or being denied a life-saving surgery because a health insurance company considers such a procedure as "experimental".

Some pressure needs to be put on these insurance companies, but not so much that it will cause them to fall like a house of cards. Insurance companies are essential to health care. Without insurance companies, who pay for the full cost of health care (minus premiums and out-of-pocket costs), essential medical advancements will discontinue. Scientists don't research and develop advancements in health care because it makes them feel better about themselves, they do it in part because the procedure will net them a return on their investment (as well as recognition and fame).


Some action does need to be taken to correct the problems with insurance companies addressed in Part I of this column. One of the first steps in correcting this problem is to introduce a national not-for-profit (NFP) health insurance company. This company will not be publicly traded and will not seek to exclude the "uninsurable" to retain profitability. In essence, it would act much like heath insurance companies were originally intended to act.


This national NFP insurance company would have lower premiums (due to a minimized focus on profit) and would entice individuals (both healthy and sick) to obtain coverage with this new company. This would increase competition with other health insurance companies, making private insurance companies decrease their premiums to appear more attactive to consumers.



There are currently local NFP health insurance companies. All I'm arguing for is a national NFP insurance company that everyone could be insured with. Have the government provide this company with additional tax breaks (more than the traditional 501(c)(3) not-for-profit) so a local NFP establishes itself nationally to compete with the private insurance companies. This government investment would be a considerable amount less than the current price tag of the bill in the Senate. With this private solution to the market problem, a government solution would not be needed (i.e., the proposed health care bill). Let me be clear, this is not a government run health insurance company, this is a government incentivized private health insurance company.



If the government still wanted to mandate health insurance coverage, they could. If the government mandates that all insurance companies have to accept applicants, regardless of pre-existing conditions, it would probably just mean more business for the NFP health insurance company.


With an NFP insurance company that has lower monthly premiums, more individuals with less income would be able to afford coverage. The government could even further incentivize the success of the NFP health insurance company by offering individuals that take out coverage with the NFP a tax break or rebate for their coverage. The government could go further and still create a government run option so long as the option was designed only for those individuals who fit between the gap of those covered by Medicaid and Medicare and those who can afford the NFP insurance company premiums (an even smaller subset of those estimated to benefit from the health care bill). This way, only these individual can obtain coverage under the government run plan and people could only obtain coverage if they meet income qualification criteria.


The point is, rather than push forward a bill that is very cumbersome and dramatically reforms our current health care system, our Legislature and President both need to look at incentivizing better health care rather than legislating it. The price we would pay for incentivized care is far less than we would pay for the heath care bill as it stands.