If you’re a regular reader of this column, you might have noticed that it isn’t unusual for me to find both positives and negatives on many issues. That is the case with Trump’s recent executive order on health insurance. In October, President Trump issued an executive order on health insurance creating reforms intended to open trade across state borders, strengthen the availability of big company plans to the little guys, and to widen the availability of employer-sponsored health accounts that provide money for employees to use on various, more open, health expenses that even include money to purchase their own plans. The order directs the proper government agencies to develop ways to accomplish these tasks and gives them a little latitude to figure out how to go about doing it. It is expected that most of the changes will come about sometime this summer.
The primary opposition I have to this order is that it is an executive order. While I support most of what it does, I do not support ruling from the White House as if the US were a monarchy or dictatorship. I get that the precedent has already been established with former administrations and this is, in some ways, simply reversing previous executive orders. However, it isn’t rectifying a true problem that circumvents the purposes of checks and balances established by a system of government where one branch is not supposed to act on its own without other branches having a say. It’s a loophole that needs to be addressed. Many times, there is good reason for an executive order, but not in circumstances that induce material change in significant economic systems.
That being said, since we already have the order in place, I do applaud that the order offers measures that open markets up more for competition. By allowing a greater number of groups to purchase insurance, both inside and outside whatever state in which they reside, people are able to look for insurance in markets that will offer better pricing for coverage that people find to better suit their needs. Restricting health insurance markets for individuals and small businesses to in-state coverage has created many problems in manipulating the efficiencies of open markets. While the order does not allow individuals to shop across state lines, it does allow more opportunities for groups of small businesses and trades to form groups to act in the same manner as a large company in order to shop across state lines and purchase insurance in the same manner, with all the same power, as an employer that operates in multiple states. It would have been better if individuals were also able to shop across state lines, but at least it is a positive step.
The order drops most of the minimum required coverage for these groups that were required by the Affordable Care Act. This is not a bad thing. It allows small businesses and trades people to associate with groups that allow more affordable coverage options by allowing them to eliminate coverage they believe that they can do without. Don’t like what coverage a small employer offers? Work somewhere else. It’s better that more small employers will be able to afford to offer coverage to employees than what was being offered before, than it is to have fewer small employers offering coverage at all.
The negative effect of this is that more healthy people will be drawn away from insurance pools that currently cover people who need greater coverage, thus necessarily increasing premium costs for people with a little worse health. As with most things, problems are created when government gets involved in managing things, and this is one of those problems. By encouraging health coverage to come from employers, the government has created problems with high risk pools of individuals who are “encouraged” to leave their jobs when they become too expensive to employ. Also, it has created a problem with preexisting conditions. If you lose your insurance when you change jobs, you may already have an existing condition when you get new coverage. You have gone from covering a risk to covering a certainty, which increases the costs. It’s a little bit similar to purchasing insurance on your car after you have already had a wreck.
The best piece of this executive order is the part that encourages employers to offer reimbursement funds that allow for employees to set aside money to be reimbursed when medical costs come up. This includes the ability to use these funds to purchase your own individual insurance. The reason this is a good thing is because if you carry your own insurance, no matter where you go, there is never an issue with preexisting conditions unless you decide to change careers on your own. Additionally, if the government were to allow you to select coverages you need or to eliminate the coverages you don’t want, then the market operates more efficiently, supplying you with just the coverage you desire. If everyone were to have individual coverage rather than coverage from an employer, the costs for individual coverage would plummet, as risk pools become more open. Allowing individuals to shop across state lines would also increase market efficiencies.
Unfortunately, Trump did not address individual coverage enough. Without addressing any of the other complicated reforms that would reduce the costs of healthcare in general, the single biggest issue with the cost of insurance premiums is the fact that we depend too much on employers for coverage. If we were to focus on that last part of Trump’s executive order and encourage all employers to offer a sort of stipend to cover individual costs, rather than have the employer purchase insurance, then many of the problems with rising insurance costs would be far more thoroughly addressed. If we are going to circumvent the legislative process intended in the US, then let’s at least more fully address the real root of the problem that exists in health insurance.
Featured image: Cracked.com
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