In my humble opinion it would be extremely easy to solve the pre-exiting conditions issue without current government regulations chaining the industry hand and foot.
1. Why is that a person with pre-existing condition can get health insurance through his employer but not individually? Because the employer insurance is a group plan. All the employees are pooled into one group, and the health insurance company provides pricing for, and accepts the entire group.
2. Why do people prefer getting health insurance through employer? Because it is a form of compensation. The employer won’t give you extra cash if you do not accept the health insurance. Forgoing health insurance means you get less pay, and then still have to go out and buy health insurance.
3. Why do companies provide health insurance plans? Because it is a form of compensation that is tax deductible for the company.
You may or may not be seeing where I am going with this. The vision is basically individuals joining group health insurance plans outside of their employer. We can easily get there by working backwards.
3. Make the compensation involved with health insurance deductible even if given in cash. This will remove the incentives for companies to insist on compensating their employees with insurance rather than cash income . The individuals will now be able to get cash or health insurance form their employer, and the employer won’t object to either of those preferences.
2. Make health insurance expenditures tax deductible for individuals as well, not just companies anymore. Employees can already chose to get cash, now they would be able to deduct the money they spend on health insurance from their taxes. This eliminates the final government incentive for individuals to get health insurance from their employer, many will now purchase their own health insurance.
1. In case it is currently illegal, which it probably is, make it legal for organizations to join people into pools, which then can apply for group health insurance plans.
So how would this work, and why would it actually happen? Currently 80% of people with health insurance get it from their employer. With the incentives to stick with the employer provided coverage removed, vast amounts of people would now start shopping around. Given that this action would now be legal, organizations would pool people together into groups, and then have health insurance companies bid and provide group coverage plans for these groups. The pool organizations wouldn’t care if someone may have a pre-existing condition since they will not be the ones paying the claims. Insurance companies would view the pooled groups the same way they currently view the employer pooled groups. The risk would be diversified, and they would provide pricing for the entire group, incorporating the risk into that price. People with pre-existing conditions would now not have to worry about leaving their job, since their group insurance has nothing to do with their employer. Problem solved.
