Saturday, October 10, 2009

Car insurance could provide a roadmap for health care reform

car insurance

One of the arguments that has been made by supporters of President Obama's health care reform plan is that a government requirement for individuals to have health care coverage is comparable to state requirements that drivers have car insurance. One must possess insurance to drive on the nation's roads, they say, so should it be for health insurance.

However, the analogy does not quite work. Nowhere in the Constitution does the federal government have an enumerated power or responsibility to mandate health care insurance. It's not outlined in Article I, Section VIII of the Constitution, nor in any subsequent amendments. Thus, the health care coverage issue belongs to the states and the people, as per our 10th Amendment, which states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Aside from the potential unconstitutionality of a health care mandate on individual liberty, an individual can opt out of paying for car insurance by not driving a vehicle. Living in a big city like Chicago, I find that public transportation pretty much handles my daily travel needs. I prefer to spend my money on other priorities. In addition, the priorities of health insurance and car insurance are different. Unlike health insurance, the often-standard liability insurance is designed to protect other people from negative results of your driving actions.

Despite the differences, however, there are indeed several areas where the health care reform debate could draw inspiration from the car insurance arena, although perhaps not in the way that proponents would think.

Your car insurance is not controlled by the government, nor your employer, but yourself. If you change jobs or even locales, you can keep your same provider. However, when it comes to health care insurers, there are virtual duopolies in many states due to government rules that prohibit them from selling their products across state lines. This inhibits competition, and drives up costs for consumers. The portability of car insurance should be applied to health care insurance.

Rewarding responsible behavior
Car insurance companies often offer discounts after a driver has demonstrated a clean driving record for a period of time, has taken a driving course or has received good grades or credit. These incentives have been shown to have an influence on one's driving record. Yet in health care, those of us who take care of our bodies have no comparable incentives. Given that up to 70 percent of health care costs are due to individual lifestyle choices, why shouldn't healthy individuals be rewarded for choosing to minimize bad health through healthy choices? The absence of such incentives does little to encourage people to make lifestyle changes that would reduce their health care costs.

Focus on catastrophic events
Car insurance typically doesn't cover routine maintenance like oil changes or tune-ups. Rather, it covers catastrophic activities like rear-end collisions. Similarly, the routine maintenance type of health care - dental checkups, annual checkups, breast exams, etc. - should come directly out of our pockets. Taking out the third party payer setup for these activities would bring down costs and stimulate competition, as companies compete for health care dollars.

For individuals with pre-existing illnesses, there can be high-risk pools to provide coverage for folks with costly health problems. Others have recommended a more free-market method that combines covering current expenses with the right to buy insurance in the future at a set price, so that one's premiums don't rise with illness.

The health care market shouldn't be government one-size-fits-all. If people are going to compare health care coverage to the car insurance market, they should take the ability to tailor car insurance to different needs, different behaviors, and different levels of risks and apply that to health care.