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THE SECURITY YOU GET from health insurance reform

August 27, 2009

The White house post.

1)No Discrimination for Pre-Existing Conditions
Insurance companies will be prohibited from refusing you coverage because of your medical history.
2)No Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays
Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.
3)No Cost-Sharing for Preventive Care
Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.
4)No Dropping of Coverage for Seriously Ill
Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.
5)No Gender Discrimination
Insurance companies will be prohibited from charging you more because of your gender.
6)No Annual or Lifetime Caps on Coverage
Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.
7)Extended Coverage for Young Adults
Children would continue to be eligible for family coverage through the age of 26.
8)Guaranteed Insurance Renewal
Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won’t be allowed to refuse renewal because someone became sick.

1) Don’t bother buying insurance until you’re sick. This proposal would create a significant adverse selection problem, dramatically raising insurance premiums and dramatically increasing the number of uninsured (note that the uninsured would be so voluntarily and would be fairly healthy).

2) You cannot make your policy more affordable by self insuring for the first few thousand dollars. Ask an actuary: the first dollar of insurance is the most expensive, because everyone will use it. If deductibles are all low, policies will all have high prices. Low deductible is a feature, but not a costless feature.

3) Insurance for things that cannot be insured. Insurance is to protect from the risk of accidents (i.e. the unexpected), not to pre-pay for services. How much is an oil change? How much would it be if your car insurance covered it?

4) Shouldn’t this already be covered by contract law? Perhaps if court reform were enacted that would prevent lines for court time, and make the loser pay the other party’s costs, people wouldn’t be afraid of taking big insurance companies to court. In a well functioning legal system, an abuse of contract should be corrected.

5) If there is a difference in the expected cost of two classes of insurance policies, to legislate that away is simply price fixing. Students of economics should know the problems with price fixing.

6) If people choose to buy policies with such caps, they should be allowed to. A lifetime cap will reduce the cost (and potentially value) of an insurance policy. A policy without a cap will cost more, so as long as people know what they are paying for, they should be allowed to choose.

7) I see nothing wrong with this so long as it is voluntarily agreed on between the customer and the insurance company. However, as a mandated feature I feel it will only impede clear and understandable contracts. The more of these mandated features there are, the more difficult it is to see lines on the contract with features like lifetime spending caps. Again, this might be a feature people are willing to pay for (or perhaps it’s not worth any additional cost to most consumers).

8)This would be a valuable feature, but not a costless one. To make this a mandated feature will increase the cost of everyone’s insurance(everyone who isn’t already paying for this).

If the goal is to decrease the number of uninsured, raising the cost of insurance will only hurt people. If the goal is to make people’s insurance better, they might as well try to make everyone’s car better by buying everyone a Cadillac.

HT: EWOT

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