I hear a lot about the health insurance debate in the halls of the insurance companies in which I work. A lot of people are very upset by the idea, which is understandable, because they make their living at the insurance companies that stand to lose the most. I am sympathetic to the health insurance companies, too, because I think that their business is threatened on two sides: by rising medical costs, and by whatever actions the government takes next. Still, I think that the rising costs of health care, including insurance premiums, have made real wage growth negative in the past few years. I think that the lack of affordable health care for so many people is immoral, and allowing it to continue without doing something is unethical.

Fixing these two problems might harm the health insurance industry, and might harm the healthcare industry, but I think that it will mostly change how these industries are structured. People are always going to be able to make a good living in either industry. I support a public option for health insurance, but I would rather see an ecosystem of mutual companies and non-profits rule the health insurance market. I think that health insurance could be reformed by making three very simple changes to the market.

Change #1: Change how employers offer health insurance benefits.

Health insurance is primarily obtained as an employee benefit. Employees pay only part of the total insurance premium; the rest of the tab is picked up by the employer. Purchasing insurance outside of an employer’s plans is prohibitively expensive by comparison. Therefore, for practical purposes, employees do not have many options for health insurance, just whatever their employer offers. Employers don’t offer that many plans these days, so there really isn’t much meaningful choice for employees. Furthermore, if you lose your job for any reason, you stand to lose your insurance after the COBRA period is over.

Employers use health insurance benefits as a hiring incentive, and started doing so when the government instituted wage freezes during World War II. Therefore, they have an inventive to keep their own insurance negotiation or self insurance strategies in place, to differentiate themselves from competitors, and to take care of their own. I wouldn’t want to stop that. I do propose, however, to require employers who offer health insurance benefits to pay the same amount in premiums to an outside plan that it does to those, if any, that it has created or negotiated with an insurance company. If you are unemployed, you should be able to get government assistance for premium payment, if your income is low enough.

Change #2: Allow people to sign up for health insurance from numerous large group plans offered by groups other than their employer.

People should be able to join large group insurance plans offered by affinity groups such as AAA, alumni groups, schools, towns, and so on. This would increase the choice of plans that people have to choose from. Politicians and industry spokespeople who say that people enjoy the insurance plan choices they have overstate their case. I doubt that people have many more than 2-3 choices of health plans these days. I choose between two very similar plans each year, with a third option, a high-deductible plan, that is not financially advantageous for me. That isn’t much choice at all, if you ask me.

If employers offered to pay a certain dollar amount per year toward their employees’ health plans, whether those plans are employer-sponsored or not, and, if people could join large group plans outside of their employer’s offerings, people would have more plans and insurance providers to choose from in the marketplace. This would increase consumer choice, increase competition between the insurance companies, and put the true premium prices out in the open in the marketplace.

Change #3: Eliminate Pre-existing condition exclusions.

I agree with the President’s position on the elimination of pre-existing condition exclusions. This is an area that is rife with abuse and errors within the industry. It also has a chilling effect on people’s movement from one plan to another. To make this work monetarily speaking, insurance coverage would have to be mandatory, and premium payments would have to be subsidized by the government, through tax credits, for people who could not afford them. This is all part of the President’s plan. If bad risks, namely severely unhealthy people, cannot obtain insurance on the private market, there should be an involuntary pool set up, just like in the auto insurance market.

What Would These Changes Would Do?

I believe that these two changes could alter the health insurance market quite a bit, over time. People would have more choices, and would be likely to shop around for the best deal. Premium costs would go down if the insurers had to compete against more companies for each subscriber’s contract. Insurance company profits would probably decrease if these changes are made, but I think that that is a change that is inevitable. Mutual companies and non-profits would start to replace for-profit firms if need be. People who work at health insurance companies deserve to earn a decent living, but profiting from health insurance premiums seems more unethical to me the more I think about it.