A Health Insurance Alternative Solution (Guest Post from Victor)

Thanks to George for letting me scribble on the white board here in Conference Room B.

I was watching things roll across my screen this evening and noticed a news item where Gov. Bobby Jindal of Louisiana had pledged to find a way balance their budget despite the federal government reducing the amount of Medicaid appropriation to the state by millions of dollars.  I then recalled a threat by the federal government to withhold funds because Texans wanted to defund Planned Parenthood.  That’s when I got an idea that could go a long way toward solving this problem for both states.  This requires (to the best of my knowledge) no involvement by the federal government and can be done by the states on their own.  This is a package of suggestions and not all of them could be adopted or different ideas could be adopted that I haven’t presented here.  Mainly this is food for thought.

I call it the Confederated Health Plan and it is not a federal program but a confederation of states that agree to combine resources in a way that makes it cheaper for health insurance companies to do business and therefore reduce costs for everyone involved from the government all the way down to the individual.

For the sake of this illustration we will pretend that Texas and Louisiana are going to form a confederated health insurance program.  The first rule is that the top 10 health insurers in each state plus any insurer providing health insurance in 35 or more of the 50 states may operate as one entity within the confederation.  What this does is removes the requirement that each insurer maintain a separate business entity for each individual state which drives up costs.  Rather than a company such as Kaiser Permanente having a separate business unit for each state, they would require only one business unit to operate within the confederation.

One thing you can spot right off the bat is that this idea gives the confederation an economy of scale.  The more states in the confederation, the lower the operating costs are to provide insurance because the companies can eliminate a business unit and all of the overhead expense associated with it.

The second thing that needs to be done is to standardize some of the laws across the states.  Texas and Louisiana should standardize their pain and suffering, malpractice, and “without merit” limits.  In Texas, for example, if someone brings a lawsuit that a judge rules is “without merit”, the plaintiff pays the legal fees of the defendant.  This prevents people from bringing a suit for a relatively small amount which would be less than the cost of defending the suit.  In those cases the companies usually settle for the amount demanded but it costs insurance companies millions.  This law prevents that from happening because if it is ruled to be without merit before trial, the plaintiff pays the cost of defending against the claim.  Once these rules are standardized, the result is lower cost in providing services because they don’t have different sets of requirements.  Lawsuits in one state won’t be able to drive up costs in another state in an unpredictable way.

Third, any tax incentives given to employers to provide health insurance to their employees should also be extended to individuals buying their own health insurance.  If employers gets a tax deduction for insurance then the individual providing their own insurance gets the same deduction. If the adjusted income from federal taxes after deductions for health insurance to employees is used to figure state tax, then individuals should be allowed to also deduct their insurance from their federal adjusted income when filing their state tax.   The idea here is to make it easier for individuals to have their own insurance that can move with them from job to job and isn’t tied to an employer.   There are too many people in jobs they don’t want just because of insurance and losing a job can make keeping the insurance impossible.  Any help in that regard helps everyone.  Every person able to keep their insurance as a result of these rules saves the states money in having to handle uninsured folks.  It decrease in tax revenue pays for itself in a reduction in coverage the state must provide or assist with.

Fourth, individuals and small employers  too small to qualify for group rates should be able to band together and get insurance on more favorable terms.  These would operate much as credit unions operate in the financial market and would be certified and regulated by the confederation.  These would replace the “exchanges” proposed by the Affordable Care Act and allow people to shop a choice of several to find the one that best meets their needs.  The individual states would be free to sponsor such a coop for the lowest income citizens if they wished. The coops could contract directly with pharmaceutical manufacturers, distributors, and retailers for reduce prescription pricing for their members and to the various health insurers for group coverage.  Again, this adds another way to ease people carrying their own insurance and reduces medical costs.  It also provides a mechanism to care for those at the bottom of the economic ladder by having a coop that is state sponsored that those people may join with some assistance but anyone would be free to join it as well albeit at less or no state sponsored assistance.

The philosophy behind these suggestions is not for government to take a ham-handed approach and mandate how services are to be delivered.  They remove barriers that prevent people providing for themselves by getting the government out of the way, allowing small employers and individuals to work with insurance providers and health care providers and gives the people choices so they can find the coverage that suits them best.  It works in partnership with everyone involved rather than in a patronizing fashion.

Anyway, thanks, George, for letting me post this thought, and I will be interested to know what anyone thinks about it.  Your first comment will likely be moderated but you should be fine after that and you can follow me on Twitter @VictorB123 .