Posted from the Examiner

President Obama and congressional Democrats this week, following focus group testing, altered their rhetoric by beginning to refer to their proposed health insurance exchange as a the creation of a health insurance marketplace. The change in rhetoric is simple enough to understand, as the term marketplace is more soothing to a general public that has grown accustomed to more than 200 years of a capitalist based economy. But, the question remains as to whether the term marketplace is an accurate depiction of the proposed Health Insurance Exchange or rather just creative marketing designed to create a false perception.

A marketplace, by 200 years of evolving definition, is a forum that promotes healthy competition between businesses offering a diversity in products and services at varying prices. A marketplace is the the ultimate exercise in capitalism as the public, not the operators of the forum or businesses, determine which products are purchased and which companies survive. The best example of a marketplace is simply a flea market, whereas any vendor is allowed to sell the products they design or choose and the consumer has the ability to determine what products they will purchase and at what price. If the administration wanted to create a true health Insurance marketplace they could do so in three very easy steps:

#1) The largest factors in Health insurance premiums are the size of the insurance pool and the claims experience of those insured. The more individuals covered under a policy, the more manageable, predictable and stable the claims payouts become. However, the federal government does not allow health insurance companies to offer policies across state lines and does not allow small groups or businesses to create associations in order to increase their insurance pool. As a result, the insurance pool of a policy is limited by the number of individuals covered within a single geographic location and in the case of employer-sponsored coverage by the number of employees. A simple change in federal regulations allowing companies to sell policies across state lines and allowing small businesses to combine their plans would dramatically increase the size of insurance pools and provide more manageable and stable premiums.

#2) Under the current system, not only are plans limited to an individual state, but the government controls which plans may be offered within the state and which companies will be allowed to sell policies in the state. As a result, the marketplace is limited by the government and regulations greatly vary from state to state. By removing regulations that prohibit interstate selling and uniform standards companies new competition would enter into most states, creating a diversity in options and ending a practice of preferential treatment of companies by state regulators.

#3) Creating a uniform system of small business and low income tax credits designed to encourage inclusion to the health insurance marketplace at a minimum coverage level, rather than a penalizing tax structure or mandated benefits level, will encourage small businesses and the uninsured to purchase at least catastrophic coverage while maintaining the right to choose a level coverage based upon individual preferences. The adoption of such simple steps would create a true health insurance marketplace designed to promote competition and allow the public the opportunity to determine coverage levels and premiums. Within a true health insurance marketplace, the consumer has the ability to determine what benefits and coverage levels they will purchase while choosing what premium is acceptable for that coverage.

So can the proposed health insurance exchange be considered a marketplace?

No, the Health Insurance Exchange, as currently written neither promotes competition nor public choice.

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This entry was posted on Thursday, September 17th, 2009 at 7:50 am and is filed under Health Insurance Exchange. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.