Why It’s Good to Own Your Own Coverage

Over at The American Prospect, Paul Waldman is either confused or being intentionally deceptive about conservative ideas regarding health-care coverage: 

My favorite new conservative argument is that the problem with progressive approaches is that they don’t allow you to “own your own health care.” The people who sold us the “ownership society” seem to believe that there is nothing that cannot be owned, and one must necessarily gain when one moves from a state of not-owning to owning. But the idea that we would “own” our health care is positively nonsensical. What if I told you that the problem you have with car repairs is that you don’t “own” your tune-ups and oil changes? Or that you’d be much better off if you could “own” your own protection from fires instead of relying on that big-government fire department? You’d quite rationally conclude that I was some kind of idiot, and you certainly wouldn’t take my advice on much of anything. 

I’ve never heard anyone use that exact phrase, but even if there are people out there doing so, what they mean is “owning your own coverage.” Right now, that’s something that’s pretty rare. Thanks to wage controls imposed during World War II, health insurance is now provided primarily by employers.  At that time, employers weren’t restricted in what they were allowed to offer for wages, so they competed for employees by adding benefits, including health insurance. 

These days, there are tax breaks for employer-provided insurance. These breaks end making it cheaper for employers to provide employees care than for individuals to buy it themselves. So $350 of employer-bought insurance is actually cheaper, thanks to the tax breaks, than $350 of insurance you buy for yourself. This means that there’s very little incentive for people to own their own insurance.  

What it also means is employers end up effectively controlling what sort of care gets offered to people.  Even if an employer offers an option to take cash instead of insurance, there’s no reason to do so (taxes, as we know, have consequences).  That means that the incentive is for employers to offer the most expensive, comprehensive plans possible, which, in turn, push employees to use care—which they pay little or nothing for—without thinking about its cost.  That’s a recipe for a lot of waste, both in care and spending.

On the other hand, if people, especially the young (mid 30s or below) and relatively healthy, were allowed to shop for and purchase coverage on their own (ideally buying from out of state, which is currently prohibited), there would be more of an incentive to use care less wastefully, to purchase cheaper plans, etc. Thus, we’d likely see a reduction in overall costs and a more efficient system in which insurance is not tied to employment. In other words, we’d be better off if people “owned their own coverage,” no matter what Paul Waldman thinks.