Wednesday, July 11, 2012

"Business Week" hearts mandates

Peter Coy has an interesting piece on the practical reality of mandates in insurance, The Case for Way More Mandates Bloomberg Businessweek 07/05/2012:

Insurance mandates, far from being unique to Obamacare, are all around us. States require drivers to carry liability insurance. Your state government also provides you with—and charges you for—insurance against losing your job. The federal government mandates flood insurance for anyone living in a flood plain who has a federally insured mortgage. Social Security is mandatory insurance against a penniless old age, and the premiums are deducted from your paycheck, whether you like it or not. “This is part of our fabric,” says Ann O’Leary, director of the Children and Families Program at the Center for the Next Generation, a San Francisco think tank.

The logic of getting everyone to jump into the risk pool is powerful: Left to their own devices, many people will choose to go uncovered against fire, flood, car crashes, and cancer. Then, if something bad happens, they throw themselves on the mercy of society. The cruel solution would be to let them live (or die) on the streets. To our societal credit, we are unwilling to do this. A coverage mandate at least ensures that people who create the risks will bear the costs, on average, over time.

People who choose to skip insurance are often more shortsighted than devious. Most Californians who took out earthquake insurance after the 1994 Northridge earthquake have let it lapse, says Howard Kunreuther, a professor at the University of Pennsylvania’s Wharton School. "The biggest challenge we have faced is to convince a person, anyone, that the best return on an insurance policy is no return at all." The point of a mandate isn’t only to protect people from the consequences of going unprotected; it's also to prevent the rest of us from having to pick up the tab. [my emphasis]
A single-payer system, "Medicare for all", for example, would be preferable to the ACA system ("Obamacare").

But my problem with the individual mandates in the ACA is not that they exist. If we're going to have a private-insurance based system, having mandates to make sure people are covered - along with penalties/taxes to make sure wanna-be free riders pay their fair share - we need a public option, a buy-into-Medicare option to provide price and quality competition for the private insurers. If the private options provide better value and service, they will continue to win customers. But if the public option provides better service and value, that's great. If the insurance companies lose business because they can't compete with a public option, it will be because the public option proves itself to be the best way to provide health insurance.

Another thing I like about Coy's article is that he calls Social Security what Social Security supporters should call it all the time, insurance. Social Security is a social insurance system. It's not an investment vehicle or even a retirement system proper, although the severe deterioration of private pensions - another major value of the private sector in the US - has made Social Security the primary source of retirement for many.

Enemies of Social Security have worked hard to re-brand Social Security as an "entitlement" (which in RepublicanSpeak means "something black people use") and to make phony comparisons of potential "returns" on Social Security to returns on an investment account. The latter comparisons become less frequent in times of stock market alarms. But in good times are bad, it's a plainly false comparison. Social Security is insurance, not an investment.


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