The Perils of Compromise


Now that the health care overhaul effort in Congress has collapsed, Democrats are searching for some way to salvage the year of legislative work they put into the issue—hoping to score a field goal in lieu of a touchdown. One thing Democrats will likely attempt to do is attract support from centrist Republicans, and one way they might try to do this is by focusing on the bill's key insurance market regulations. President Obama has also hinted that this might be the next step for health care reform, telling ABC: "I would advise that we try to move quickly to coalesce around those elements of the package that people agree on. We know that we need insurance reform, that the health insurance companies are taking advantage of people."

Given that newly elected Republican Senator Scott Brown has expressed a vague interest in some sort of smaller-scale reform package, it certainly seems like a possibility that Republicans and Democrats could come together on the idea of reforming the insurance market in a way that would be sold as prohibiting discrimination based on preexisting conditions.

To borrow an Obamaism, let me clear: This is a terrible idea.  

Now, I've written harshly about the individual mandate, which would require every American to buy health insurance. But insurance reforms without a mandate would, in their own way, be just as bad, and twice as stupid. 

Prohibiting preexisting conditions entails enacting two different regulations, known as "community
rating" and "guaranteed issue." There are variations on each, but in basic terms, these regulations mean that insurance companies have to charge everyone the same amount for the same policy, regardless of risk factors, and that they have to issue policies to everyone who's willing to pay. 

The problem is that with these regulations in place, there's no incentive to buy insurance until you're already very sick. After all, if the insurance companies can't turn you down or jack up your rates, why buy in early? So what happens is that, in hopes of saving money, some number of healthy people decline to buy insurance, creating a sicker, more expensive pool. That pushes a new wave of the healthy people to jump ship, which creates a pool that's even sicker and even more expensive. Go through a couple iterations of this, and fairly quickly you have a very small, very sick, and very, very expensive insurance pool. 

It's called a "death spiral," and we know it happens because we've seen it in every single state that has enacted those two insurance regulations. We've seen it in the state of New York, where, under community rating and guaranteed issue, the individual health insurance market declined from 4.7 percent of the state's health insurance to 0.2 percent. Meanwhile, premiums skyrocketed; according to an October 2009 report from the insurance lobby, the state's individual market premiums are now the highest in the nation.  

And we've also seen the death spiral in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, Vermont, and Washington. Over and over again, it's the same story. Premiums spike. The market dries up. Everyone who has paid even the slightest attention to the most surface details of health care policy knows that the combination of these two seemingly innocuous regulations is disastrous. 

This is not an argument for a mandate, nor for a big bill rather than a small one. Rather, it's a warning that a smaller, superficially less intrusive bill of the sort that's being talked over now could be just as bad, in its own way, as the proposals we just spent the last year debating. 

NEXT: Politician Gary Johnson Makes Some Sweet, Sweet Sounds

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  1. To borrow an Obamaism, let me clear: This is a terrible idea.


  2. One thing Democrats will likely attempt to do is attract support from centrist Socialist Republicans, and one way they might try to do this is by focusing on the bill’s key insurance market regulations.

    Fixed that for you.

    1. Why didn’t my html tag work? I tried to strike through centrist.

  3. Just great, the Republicans are going to get to contribute to the destruction of a private health system.

    1. We have to destroy the private health care system in order to save it.

  4. HA HA! Brown voters got shafted in less than 24 hours! That has to be a new record.

    1. No no. The reason Brown won is because the voters want health care reform and they are frustrated that the Dems aren’t moving fast enough, or left enough, on the issue.

      Tony has explained it to me several times.

      1. So Tony is really Howard Dean? Now it all makes sense.

  5. Dude, thats pretty whack when you think about it.


  6. You have Brown, a small time politician who has a past record of being a tax and spend nannyist. You elect him to the seat that the King tax and spend nannyists held for decades. You put the little fella in a position where he is THE key vote in the Senate on healthcare reform. A senate which has shown a profound willingness to spend hundreds of millions of dollars to secure votes from fellow democrats. Now you seem surprised when the junior senator from Massachusetts, a man that understands the necessity to please the hometown folks,may be willing to work a deal with the dems? Ray Charles saw this coming.

  7. I think the dems will get Brown on their side fairly quick and easy. They will figure out a plan that will fold Masscare into some new healthcare reform lite. That will ease the tax burden on Brown’s constituents without denying them medical coverage. He gets what he wants. The good people of Massachusetts get what they want. The dems and Obama get what they want. I doubt that Brown can see much advantage to what the Rs have to offer. Politics is all about the power and Brown is damn sure in the driver’s seat.

    maybe I’m just too jaded to think clearly.

    1. In the long run, it doesn’t matter. We may have dodged the bullet again, but eventually socialized health insurance (at least) is coming in all places, and will last until everyone is so rich (or health care so cheap) that nobody needs health insurance. Probably a couple of centuries.

  8. hoping to score a field goal in lieu of a touchdown.

    HIPAA was the Clinton’s two-point conversion, I can’t wait to see what these crackpots come up with.

    1. Hmph. Bad analogy. Two-point conversion presumes you first made the touchdown. I should probably refrain from sports-based analogies.

      Clinton’s mulligan maybe?

  9. Years of wasted effort is what I look for in a legislature.

  10. The problem is that with these regulations in place, there’s no incentive to buy insurance until you’re already very sick.

    You mean I can’t decide to finally buy homeowners insurance once my house is on fire?

    With government regulations there is also very little incentive to make choices to minimize your healthcare expenses by living a healthy life. Government interference is already the problem and more regulation, regardless of its guise or intention, does nothing to solve that problem.

  11. You mean I can’t decide to finally buy homeowners insurance once my house is on fire?

    Why not?

    A house on fire is a pre-existing condition and you should not be denied coverage based upon pre-existing conditions.

  12. @Attorney has it right.

    There is nothing that could be* as sweet as the sound of a gavel ending a legislative session in which not a goddamned thing got done.

    *Note subjunctive mood, appropriate for hypotheticals such as a legislative session in which nothing gets done. I should live to see it happen….

    1. That seems to be the overwhelming sentiment lately at Hit & Run — conservatism — having the status quo as one’s best hope, seeking to lose as slowly as possible.

  13. I can’t believe we have any health care regulation at all. You have to be willing to die if you want to be free. It doesn’t matter how many die here from a lack of healthcare – all of these things are garbage.

    I can’t believe for a second that we’re asking for more regulation to deal with other regulations. I’d rather have one than two, the market will figure out the rest. So what if the cost of healthcare goes up? That’s consequentialism, the first step towards authoritarianism. Plus, you know, the broken window theory applies here. So it doesn’t matter if it costs more. At least we won’t have to pay it, cause we can choose not to buy it.

    Now we just gotta convince them to allow everyone that shows up to a hospital without insurance or money to just die. Its not my fault, and for them to live free, they must be allowed to die. Otherwise you’re just stealing money from me to pay for their care, and i’m not free.

    1. Ha ha. You libertarians try to pretend you care about women and children and the downtrodding, but this post is devastating evidence that you really give no thought to people who aren’t like you — the non-white, the female, the non-wealthy — those who don’t have enough leisure time to hang out in a sausage fest blog discussing the next episode of Ballstar Gattica.

      1. Yep, because you know what, we all agree with this and were here posting “right on man, let little babies die because we hate them”… If that were true, you might have a point, but it isn’t remotely true so your “devastating evidence” proves nothing.

      2. Those people all need to be free too. You just want to have some kind of nanny state to take care of everyone. I want to give them freedom to do whatever they want in their own life. It is not my problem to dictate concequentialism on everyone else – if they are allowed to die, then they aren’t allowed to live. Its just that simple.

        1. Wait, correct that:

          “if they aren’t allowed to die, then they aren’t allowed to live. Its just that simple.”

        2. I care about women and children. Just don’t care about you.

          tax eater

      3. Torpid, “You libertarians try to pretend you care about women and children and the downtrodding” No, they don’t even pretend.

    2. SM: While you may believe your caricature of the libertarian position to be on point, be aware that you actually have no understanding of the actual basis of libertarian positions on this issue and are fooling no one with your clumsy trolling. Your every post reveals how little you grasp the concepts of rights or freedom or how a free market may actually function.

      1. First of all, it is of no concequence as to “how a free market may actually function” – that is irrelevant. If it kills everyone, or is utopia, is irrelevant to whether or not we have rights. I’m tired of people even arguing about the “effects” of libertarianism, while arguing the “effects” of other philosophies cannot be considered. Either we have all our rights, or we don’t. This is no “caricature” – this is reality. You’re either with us or against us. I’m tired of “half libertarians” – you’ll take “half” my money and “half” my rights, and long as its “less worse” than now. Its pretty clear you’re against us. How quick we are to abandon that which we claim to support at the first sign of trouble…

        1. Resistance is futile

  14. Very good post. I’m not at the point where I have enough unique visitors yet, but am book marking this for a month or two down the road.

  15. Continuing with the football analogy –

    The Dems are too far out to attempt a field goal, it is time to punt.

    1. No, they’re too far out to punt, they should concede a safety touch. No, wait, they don’t have enough players to field a team, they should forfeit. No, wait, they shouldn’t agree to a game to begin with, they should just chalk one up in their win column. No, wait, wait…they should just get a trophy and engrave it as champions.

  16. It must be nice to be in perfect health and always under the umbrella of someone’s insurance.

    As someone with a pre-existing condition, which is genetic, who deserves health insurance as much as the next individual, I don’t think you understand what it’s like. I am a college graduate, I pay my taxes, I work two jobs to get by and am lucky to live paycheck to paycheck.

    I have done nothing wrong to deserve to die or be further financially destroyed if I get sick.

    If my taxes can go to pay for bloated quagmires overseas, your taxes can help me get some antibiotics.

    What solution do you propose? Any private insurance companies that would insure me average 40% of my monthly income.

    1. You can get insurance*. You will just have to have a clause that doesnt cover any expenses related to your dondition. Insurance is for unplanned events, whatever you have isnt unplanned.

      *depending if your state allows it

      What solutions? Pay cash or pay 40% of your monthly income. Convince the government to not spend your money overseas so you can spend it on yourself. Dont worry, we will all join you in not spending our money overseas either.

      Oh, and by the way:

      If my taxes can go to pay for bloated quagmires overseas, your taxes can help me get some antibiotics.

      Fuck you, that makes no sense at all. Since my taxes are going overseas, I should also support you with more taxes. Fuck you!

    2. This is not my fault and it did not happen to me. You have to accept the possibility of death if you want to live free. Better luck in your next life.

    3. As someone with a pre-existing condition, which is genetic, who deserves health insurance as much as the next individual,

      A health insurance policy is like any other contract – an agreement between willing parties.

      In what sense do you “deserve” a policy if no one is willing to enter into a contract with you on your terms?

    4. My solution is reach out to your community and family. If I don’t have a house, does that give me the right to burn down yours? I’m not happy that you have the problems that you do, but, quite frankly, before I take care of you, I think my hard work and earnings should go to take care of my family (my nephews – some of whom have medical problems and who I help), my town, my community. Your desire for the government to put a cocoon around us not only diminishes my ability to do that, but in the end will hurt us all; I don’t want the same government that gave me the DMV, 30 years of road work on the BQE, exploding pension obligations and bought off politicians, adventures overseas and million dollar toilet seats to be running my health care (or any other part of my life).

      The government the governs best governs least

    5. Is your genetic pre-existing condition a disease from which you are already sick (i.e. hemophilia), or a risk-factor for getting a disease in the future?

      There’s a big difference, and very few people make the distinction.

      If it’s the former, I can’t understand why you think someone whould “insure” you against a disorder you already have. Anyway, if you are already paying more that 40% out of pocket for your health care, why would you expect an insurance company to pick you up for less than that? They’d be taking a guarenteed loss.

      If it’s the lalter, a genetic risk factor, I suspect you are overestimating the difference between you premiums and everyone elses, especially if your talking about comprehensive insurance. Comprehensive insurance costs an arm and a leg on the individual market for everyone, risk factors or not, and could easily consume 40% of an individual’s income if they are relatively poor.

      If you’re really just worried about getting the disease you have a high risk for, just get high-deductible insurance covering that specific thing and pay out of pocket for routine care.

  17. The entire discussion about pre-existing conditions misses the point. It’s that people have been turned down for frivolous reasons completely unrelated to their illness. You had a cyst removed twenty years ago and now you have cancer, but – aha! – it was a “pre-existing” condition!” Make a specific individual personally sign each coverage denial, and make that person criminally and civilly liable for the outcome. Make people spend a year or two (or five) on the insurance plan before being covered for pre-existing conditions.

    And J, nobody “deserves” health insurance. You do not have an inherent right to demand that other people pull together a pool of money to assist you if you need help. None of us do. You have rights, but the right to force others to do things for you is not one of them. You have a right to free speech, but nobody is obligated to disseminate your ideas for you. You have a right to travel, but nobody is obligated to buy you a car. If you do get assistance, you might start by having the decency to recognize it for what it is: charity.

    1. Exactly. You shouldn’t have been born with that disease if you wanted health insurnace. Quit blaming us for the cards you were dealt. At least you’re free…what do you want, a mandate? Nanny state? Amazing how quickly people will give up their rights to stay alive…

    2. Yes, there’s a really stupid failure to make a distinction between “preexisting condition” as in “I have cancer right now” and “preexisting condition” as in “I have gene that increases my future risk of cancer by 30%”

      For the former, I think it’s obvious the insurance companies shouldn’t have to carry them. For the latter, I think it’s the insurance company’s own fault if they fail to (say) do a genetic screening before letting the individual buy an insurance policy.

      I see this as a basic contract enforcement or fair contract issue. Unless you someone were aware that you had this issue and deliberately concealed it, then it’s a random event. You did, after all, uphold your end of the contract by paying premiums, so they shouldn’t be reneging on the contract on some obscure technicality.

      That said I do think insurance companies should be allowed to charge the risk factor guy extra. But they should really do shit like make people get physicals and genetic tests when they sign up, so they will know about this stuff.

  18. Not even worth it.

    Thanks for showing the collective genius of the internets.

    1. j, the responses to your dilemma is precisely why libertarians will never be taken seriously. Can you imagine a libertarian in government proposing health care: The Fuck You And Die Act.

  19. Anything that will destroy the health insurance ‘industry’ is a step in the right direction.

  20. Umm… nothing shows how well-reasoned and thought-out an argument is like a mention on Fark:


  21. his is not an argument for a mandate, nor for a big bill rather than a small one. Rather, it’s a warning that a smaller, superficially less intrusive bill of the sort that’s being talked over now could be just as bad, in its own way, as the proposals we just spent the last year debating.

    I’d like to warn that it’s not an argument for doing nothing either. There are certain reforms that have some support in congress that might actually get passed.

    Try a package like this:
    1) Repeal mcCarren Fergeson, allowing insurance to be sold across state lines and removing anti-trust exemptions.

    2) Add an individual tax deduction for insurance purchase

    3) Prohibit insurance companies from dropping patients after they get sick if they lose their job or can’t pay premiums, unless the insurance company can prove beyond a reasonable doubt that the individual was already sick and knew it before buying in. i.e. if the person had a pre-existing condition, but had no reason to know it existed, and the insurance company sold them insurance them anyway, they can’t be dropped. That would encourage insurance companies to require a physical before signing up.

    That’s a very limited package, but it might actually pass. And it would be reforms most libertarians could support.

    1. Who are you to tell a company who they can and cannot drop? That is between them and their customer, whatever agreement they signed and argued over in court.

      What we need to do: end all public welfare/healthcare, end regulations on all health insurance companies. That will increase competition, and whomever wants to pay money they earned for healthcare can get it. The others can just die and stop stealing my money. Not my problem.

      1. You’re right that it’s a matter of a contract between the insurance company and the individual.

        However, right now the insurance market has been perverted by the fact that it’s dominated by the third party payment system. Since it’s usually the *employer* buying the insurance, the individual has little choice about what goes into the fine print.

        That introduces perverse incentives for insurance companies to try to get rid of individuals as soon as they lose their job or are too sick to work. After all, it’s not like the *individual* is going to be able to shop for insurance that doesn’t have obscure clauses that let’s the insurance company out of the contract. And it will be allow them to offer cheaper insurance to employers. Most individuals probably don’t even read their own employer-provided insurance policies.

        Moreover, even the employer will have an incentive to buy those policies, since (a) once the patient is too sick to work, he’s of no benefit to the company, and (b) insurance premiums will be cheaper if they dump individuals too sick to work.

        IMO, if people were buying their own insurance, the insurance market would rapidly rid itself of these bad practicies. Unfortunately, we’re *not* going to get rid of employer-based insurance immediately. So the measure would be a kind of fix to get the market back to where it would be without the perverse incentives faster.

        Secondly, An insurance contract has to be upheld by *both* sides, and there’s a lot of legal precendent for the idea that a contract (or an element of one) isn’t valid if it’s unfair to one side. IMO, if the insurance company inserts obscure clauses that allow it to renege on the main purpose of the contract for trivial reasons, that counts as unfair. I suspect the courts would probably work this out on their own eventually, given enough lawsuits to establish precedents. But there are lots of laws that formalize legal precendent, so I don’t see anything wrong with saying “don’t renege on your contracts” to the health insurance industry.

  22. Mass requires its citizens to buy health care. This report is just factually UNTRUE. My understanding is that health reform would provide incentives for people to buy health insurance, and some sort of penalty if they don’t (in some versions). Congress is trying to address this issue as has Massachusetts. This report is just trying to scare people, once again, so that all reform can be blocked. Bought and paid for by big insurance!

    1. My understanding is that health reform would provide incentives for people to buy health insurance, and some sort of penalty if they don’t (in some versions).

      I’m comfortable saying that, whenever the state will penalize you for not doing something, it has enacted a “mandate” to do that thing.

  23. J,

    I sympathize with you and what you are going through.

    Yes, it is true, you will not get much sympathy from a lot of folks posting to this sort of site.

    As someone in the medical profession, I would strongly encourage you to visit or make enquiries at an institution affiliated with a University medical school. In these environs, physicians and administrators are more apt to find ways to circumvent or restructure payment plans, especially in cases such as yours.

    You were dealt a crumby hand with your condition through no fault of your own. But it is within you to take your health into your own hands, and come out OK – even in this backwards system we have.

    1. joeschmo, I don’t know who I have less respect for: a fool like ROBC or someone like you who must no better.

      1. a fool like ROBC or someone like you who must no better.

        joez law strikes again.

        1. Does that make you feel better?

  24. Yes, it is true, you will not get much sympathy from a lot of folks posting to this sort of site.

    Thats not true. If he posted about his condition and how he didnt expect a damn dollar from the other taxpayers to subsidize it, he would get a lot of sympathy.

    I will admit, not much sympathy for slavers around here though.

  25. I was born with a heart condition that makes purchasing individual insurance in my state impossible. My father has Parkinson’s and was layed off from his job when a competitor acquired his employer and closed his office, and lost his employer health insurance as a result. I am in complete agreement with Mr. Suderman’s post. For those of you who find yourselves in a position similar to mine or my father’s: make the most of what you have, grow a spine, and accept that it isn’t right to force the rest of the world to insulate you from the consequences of bad fortune. I have always believed I have a personal moral responsibility to help people less fortunate than me, and have acted on that belief, and I may someday have to hope for the care of like-minded people, but I’ll be damned if I’m ever going ask the government to force it from them.

  26. I would like to present you with the Ellie Light Award. Should I drop it off at Reason tv or Reason magazine?

  27. *The others can just die and stop stealing my money.*

    Sorry fella, if it’s a choice between dying or stealing your money, I’m stealing your money.

    My morality stops short of my survival. No hard feelings.

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