Deregulate, Baby, Deregulate:  McCain’s Health Reform Plan

John McCain wants to do for individual health insurance what banking deregulation has done for our banking system. If you are thinking, "That's OK because I get my insurance from my employer so I don't have to worry about the individual insurance market," think again. McCain wants to push more people like you into the individual insurance market. And, in the process, he will be handing over even bigger profits to the health insurance industry.

Here are the facts.

By an astonishing twist of fate, just as some of the country's largest banks were failing an article written by John McCain about his health care reform plan came out in the September/October edition of Contingencies magazine. In it he explains, "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

What Senator McCain is referring to is his plan to allow insurance companies to sell insurance across state lines. That amounts to eliminating virtually every consumer protection currently in place in the states since insurers would be given the choice of being licensed in the state with the fewest consumer protections and creating stripped-down benefit packages permitted in that state. Then they would be allowed to sell those same stripped-down policies to people in other states. There are very few federal laws that govern the individual insurance market. It is largely left to the states to protect people from predatory insurance companies.

What's wrong with allowing insurers to sell insurance across state lines? Eliminating these state regulations, which are designed to protect individuals would be disastrous to the goal of guarantying quality, affordable health coverage for all. Your state would no longer be able to protect people buying insurance in the individual insurance market, so insurers would likely offer only bare-bones policies with high deductibles and other high out-of-pocket costs, shifting more risk to people, particularly people with costly health care needs.

Why should you care if you have employer health insurance? Because even as rising premiums make it harder and harder for employers to keep providing health benefits, McCain wants to make it even harder. He proposes ending the law that protects employees from paying taxes on the value of employer-provided health insurance, which experts believe will lead to employers eliminating health benefits for 20 million employees and reducing health benefits for tens of millions of others. (See how many people would be affected by state.)

Why would so many people lose coverage from their employer? Not taxing employee health benefits has allowed employers to offer their workers an attractive benefit for more than 60 years: group health insurance that lets everyone in the company be covered regardless of their health status, through a group plan that is generally more comprehensive and costs less than people can get on their own. Since no one has to pay taxes on the cost of the health insurance paid by the company, most employees—young and old, healthy and sick—join the plan. That allows the company to get lower premiums from the insurance company.

The elimination of the tax exclusion will lead an increasing number of younger, healthier employees to opt out of employer coverage to save money on their taxes, thinking they can make do with less comprehensive, cheaper insurance that they buy on the individual insurance market or that they can risk going without insurance for a while. Company-sponsored group health plans will then be left covering an older, more-likely-to-get-sick population and facing skyrocketing premiums. Employers—already struggling with the cost of health insurance—would reduce benefits further or stop offering the benefit altogether.

But isn't there a tax credit? McCain's plan to offer a $5,000 tax credit to families to buy health insurance would barely cover premiums from January to April, leaving you to pay the full cost of premiums the other eight months of the year. Insurance policies for families in the individual market—if available from an insurer—are projected to cost nearly $15,000, $2,000 a year more than employers currently pay for similar coverage. The latest statistics show that the average cost of an employer group health plan for family coverage is $12,680. Moreover, since the tax credit is not indexed to health care cost inflation, it will stay the same while premiums will continue to go up and up. Meanwhile, the tax credit works as a mega-subsidy to the insurers, while providing them every incentive to keep raising our costs. Watch their profits soar if the plan is enacted. That's why America's Health Insurance Plans (AHIP), the trade association of the health insurance industry, supports tax credits.

Who will be most affected? Those who need good, comprehensive health insurance most. The Center for American Progress estimates McCain's plan puts at special risk coverage for the 56 million non-elderly people in the country who are struggling with diseases like cancer and diabetes who are now covered through their jobs. That is because if they lose their employer coverage, they are highly unlikely to be able to find a company in the weakly regulated individual insurance market to sell them—people with costly pre-existing conditions—coverage.

If McCain's plan becomes law, his prediction will certainly become true. He will have done for health insurance what decades of deregulation have done for our banking system.

10-08-08 By Monica Sanchez | Comment (1)