We Need A Single, Standardized, High-Quality, Low-Cost-Sharing Insurance Package

Looking around the world, the evidence points to a good way to reduce health care costs is to provide everyone with a single, standardized, high-quality, low-cost-sharing insurance package. Unfortunately, health insurance reform will not follow the solution indicated by ample real world evidence. The Senate bill will allow significant plan design flexibility, and the sale of extremely low actuarial insurance plans. I do not know if this was done to try to win over Republicans, gain the support of the private insurance industry, and/or keep the CBO pricetag low. Either way, it was a terrible decision that will eventually spell the doom this health care reform.

Plan design flexibility will encourage private insurance companies to continue to game the system, create a large amount of administrative waste, and make true comparative shopping difficult. Allowing the sale of low actuarial value insurance will simply replace the uninsured with the very underinsured. High cost sharing will still leave actual health care unaffordable for many. This will discourage people from seeking care until it is too late and the eventual treatment will be much more expensive. High cost sharing is simply not the solution to our out-of-control health care costs.

The solution is to mandate the sale of only a few (or, even, only one) precisely defined, low-cost-sharing, high-quality health insurance policies. In the few first world countries that don't have a single-payer system, they provide universal health insurance by requiring all private insurance funds (almost exclusively non-profit entities) to sell only a few (or only one) precisely defined basic insurance policies with extremely low cost sharing. This is how countries like Switzerland, Netherlands, Belgium, and Germany provide health insurance. All of these countries provide health insurance for a fraction of the per capita cost of the United States and with much lower cost sharing then traditionally found in the American insurance plans.

We do not need to look toward other countries to see the benefits of only allowing the sale of a few precisely defined, high-quality insurance plans. Since 1974, Hawaii has had a law requiring all employers to provide one of a few standardized insurance packages with low cost sharing and low out-of-pocket employee contributions. Because of the structure of their Congressional ERISA law exemption, Hawaii was unable to adopt the high-deductible, low-actuarial-value plans that become popular elsewhere in the country or allow insurers/employers to offer a huge variety of insurance plan designs. This has turned into a real boon for the state.

Hawaii is effectively tied with North Dakota for having the lowest average employer provided insurance premiums and has the lowest employee contribution toward premiums in the country. This is a very impressive accomplishment for a variety of reasons. First, Hawaii basically has the highest cost of living in America. Almost everything except health care costs dramatically more in Hawaii, compared with the mainland. Second, because of the “Prepaid Health Care Act,” the average quality of the employer-provided insurance in Hawaii is substantially greater than the rest of the country. Finally, Hawaii is the state with the second lowest level of uninsured people. None of the other ten states with the lowest level of uninsured are also in the top ten for lowest average single coverage employer health insurance premiums. Based on all metrics (cost, cost growth rate, quality, coverage, life expectancy, etc.), Hawaii has probably the best health care system in the country.

The real world evidence from this country and others points to some clear solutions. Mandating only a few (or one) precisely defined, high-quality, low-cost-sharing benefits packages would help keep costs down. It reduces administrative overhead, helps prevent insurance companies from gaming the system, allows true apple-to-apple comparison shopping, and encourages people to seek early treatment (the more cost-effective kind). Providing everyone with actual high-quality, affordable health insurance is not just morally the right thing to do, but also makes strong financial sense.

This Senate bill gives private insurance companies broad latitude in designing insurance packages, and forces people to buy expensive, very low actuarial value junk health insurance, and, so, will not fix our health care system. It is a recipe for huge private industry profits, but not for a more cost-effective and fairer health care system. Ideally, one day, we will have a Congress and a President that do not try to pass reform that keeps industry lobbyists happy, and instead push for tested solutions that are best for the American people, the American economy, and our international competitiveness. It is not that we don't know solutions to our out-of-control health care costs, it is that the industry lobbyists so completely run Washington, DC, almost everyone is working hard to pretend that proven solutions don't exist.

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