Another Modest Proposal on health insurance

Follow the logic of ACA repeal and ban employer health insurance (irony alert).

I am shocked, shocked to discover that no less than 155 million Americans are forced by employers to take a substantial part of their pay (or the family breadwinner’s pay) in the form of health insurance. Health insurance they have not chosen, but has been forced on them. Republicans cannot be content with the repeal of ACA and the cutting of Medicaid down to size. As Avik Roy points out, Medicare cannot be ignored for long. Nor should the cancer of employer health insurance. The same sound conservative logic points inexorably to its abolition.

The loss of freedom is on a positively Soviet scale. Consider these well-known facts.

  • Employer health insurance covers the healthy and the unhealthy alike, and at the same rates. That’s totally unjust. Why should a 25-year-old trainee who runs a mile every morning, never smokes or drinks, and shops entirely at the farmers’ market, hand over part of her hard-earned pay to subsidise the asthmatic 55-year-old chappie in Accounts who smokes, drinks, never takes any exercise and alternates between McDonalds, KFC and Dominos for his daily injection of cholesterol-, sugar-, and additive-laden food? It’s positively un-American, and removes the vital incentive to make good lifestyle choices.
  • Male employees have as much deducted from their pay as women, and the single as much as those who have children. Nothing wrong with children of course, but it’s a personal choice just like preferring a new car to a holiday in Tahiti, and people should assume the consequences of their actions. If a woman has a child without previously arranging for a husband, that is likewise her lookout.
  • Employer health insurance is a form of bondage that ties the employee to her employer independently of the mutual benefit of a free labour contract. The costs of losing a job include, as they do not in America’s competitors, the loss of health insurance. Many American workers are trapped in jobs they are not suited for, or have gone sour on, through this fear.
  • Employers are also faced with a heavy cost their competitors in other countries do not bear. In a world without employer health insurance, cash wages go up of course. But the employer would still gain on balance: from not keeping on the unhappy workers whose main motive for staying on is assured health cover, and the high administrative costs of running the scheme. Danish businesses don’t employ a team of people in Human Resources to look after employee health, what would be the point?
  • The public policy win comes from bringing back that vital “skin in the game” when individuals buy insurance for themselves. In employee health insurance, it’s not so much a principal-agent problem as the absence of an identifiable principal. Firms know little about health insurance. They buy it because it’s expected by new hires and valued long-serving core staff alike, and everybody else does. They will buy “good enough” and then stop looking. Unleashing the power of the free market to lower prices implies real competition in every sale. This means each individual or family unit must be an agent in a vigorously contested market.

Employer health insurance must go, with the massive tax break transferred to individuals. Some of my more radical libertarian friends think that’s far from enough. All insurance is morally flawed, as it removes the “skin in the game” by spreading risk across large pools. Insurance breeds carelessness. Beyond that, the whole concept of employer and employee is suspect. The Marxists are right, they say, in condemning the wage relationship as servile and alienating: you are not selling something you have made to another, but selling him your very will, accepting a temporary but still abject bondage under which your master controls what you do. In a truly free society, the only employees are women and children naturally subject to the authority of the male head of the family. Should slavery be reintroduced, an idea on which I offer no opinion, it would complete the salutary restoration of the Roman paterfamilias.

We must reluctantly postpone these fascinating debates to another day. For now, Republicans must use their possibly short-lived control in Congress to strike off the tentacles of employer health insurance slowly strangling American business and American freedom.

The “American Employee Freedom in Health Care Act” would be very short. It only needs two operative articles, leaving aside the changes to the tax code.

Article 1. With effect from 1 January 2019, it shall be prohibited for employers to provide health insurance to employees, under pain of a fine of $5,000 for each employee and year of service for which such insurance is provided.

Article 2. The date of entry into force laid down in Article 1 shall be brought forward to January 1 2018 where the employer is a media organization, registered lobbyist, think tank, political party, or other organization engaging in political advocacy or policy analysis as its principal activity, and the employee is a journalist, columnist, presenter, analyst, or regular commentator.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

29 thoughts on “Another Modest Proposal on health insurance”

  1. I think you don't fully grasp the advantages that accrue to Job Creators from having health insurance tied to corporate employment. Instead of abolishing this link, a True Conservative would demand that it be strengthened, so that underlings will be constantly reminded of their place. Percentage of expenses covered should be pro-rated by salary to give employees an incentive to work smarter. (At the highest levels of management, 150% coverage would be ideal, just to make sure that the most valuable creators didn't short-change their health or that of their families.)

    The real threat to America's greatness is instead COBRA, which allows those who have become takers to continue their medical coverage by paying a mere pittance, maybe even less than their unemployment benefits. Not only should COBRA be abolished, but loss of coverage should be made retroactive for six months or a year, to match the point at which the former employee realistically stopped being profitable to the company.

    Modest enough for you? (I expect to see it as a GOP policy proposal any day now)

    1. I can't figure out whether conservative ideologues are truly sound on feudalism. The inequality and hierarchy are fine, but the scheme does imply obligations going both ways.

      1. It's the New Feudalism. Comparative advantage and the law of the marketplace dictates that one-way flows of any particular commodity are more efficient. Bonus: Disruptive!

    2. I've always felt that it is we who should be paying the job creators for the privilege of being allowed by them to suckle at their work-teats.

  2. Oh THANK YOU for this lovely piece. Have sent it off to an Irish uber-libertarian fellow that I've rubbed shoulders with over the years. We aren't really friends, rather we have a cordial loathing for each other's principles, each thinking the other has flabby neurons and is only marginally in touch with reality. I particularly key off the reference to good master Swift, the fellow here being Irish and all….given the irony of being Irish and libertarian and pulling the ladder up behind you….when the "no drunks & Irish need apply" trash attitude towards them in the past is now replaced with not wanting to associate with the poor and afflicted. I'm alright, Mick.

  3. The article shows a thorough lack of understanding of libertarian principles. Libertarians opposed the employer mandate and would also oppose prohibiting employers from providing health insurance. Let all flowers bloom and let everyone seeking a job select the sort of company they want to work for, or for no company at all. A one size fits all policy dictated by a handful of people whose only concern is raising cash for re-election is no way to run an economy.

    1. You mean I ought to read Atlas Shrugged again? Wild horses. On second thoughts, I might reread Candide for Dr. Pangloss' salutary advice.

  4. If Atlas Shrugged is what comes to mind when you see the word "libertarian", I fear your political science and economics background is too impoverished to make any judgments at all, let alone publish a column regarding it.

    1. I'll take a stab at what you mean by libertarianism. A libertarian believes that someone (or organization, cf corporations) with coercive power, economic or otherwise, over another person, or persons, should never be restrained, because that would be impairing the freedom of the entity with coercive power. This principle holds because the historical context for the structure of current power imbalances is immaterial: the current configuration of power wrt humans and the social structures they inhabit is right now the best of all possible worlds, with the caveat that it was always better in the past. C.f., expropriation of native American lands and genocide, African slavery, &c.

      1. Are you serious? Just asking, because I would feel foolish giving a serious response if you are not, and you are merely trying to get in some cheap shots. I can ignore cheap shots.

        If you are serious, please provide examples of libertarians advocating coercion, no restraint thereof, the immateriality of history, or expressing Panglossianism or declinism.

        1. If you can't generate a trivial example using the individual health insurance market, a preexisting condition, and a family medical emergency in the days before Obamacare, then your economics background is too impoverished to make any judgements at all, let alone publish a comment regarding it.

    2. The piece is offered as a satire on arguments that have been made by conservatives to defend Trumpcare or attack ACA. I really have very little interest in the question whether No True Libertarian would label them orthodox.

      1. It misses. Just as would a conservative attempting to satirize liberalism by mocking the views of a few twisted campus radicals.

        1. With the difference that James is taking the exact points Republicans have been making in this debate, and applying them to group health insurance, too. One of the main differences between the Democrats and the Republicans is that the latter have adopted the values and arguments of the radicals on their side, while the Democrats continue to shun those on the left.

    3. My impression is that libertarians are pretty much in love with Atlas Shrugged, and the rest of Rand's work. Judging by Internet comments many seem to have no other source of information about economics or justice or the like.

  5. If you abolish health insurance, providers will no longer be able to charge exorbitant prices that their customers can't afford, and as a result prices will be forced down. Of course, you'd have to do away with the artificial scarcity induced by the medical school cap and the Certificate of Need system too. It will be horrendously chaotic for the first decade or two, but in the end the system will be on a much stabler footing.

    Heck, if you set aside all the unnecessary death and suffering that would result, I might be able to suggest this unironically.

    1. I don't see that we have to abolish insurance, but something has to happen to allow more competition in the insurance market. That should bring down insurance prices and give the insurers an incentive to hold down provider costs.

      The best ideas for a government plan is more likely to come out of crowd sourcing with input from reputable economists than from Congress, methinks. We should pay more attention to those and less attention to politician's proposals, which are more about manipulating voting blocs than they are about a sustainable health care system.

      1. Alternatively we could pat attention to what actual experts like Harold Pollack have been writing for years, based on mounds of evidence, disciplined thought, and direct experience.

      2. I see the main problem as provider networks, which mean a provider can charge a different amount based on which insurance card is in your pocket. That throws a wrench into market forces. Get rid of it and prices can reach their "natural" levels based on supply and demand.

        1. You are right, but as far as I know, the existence of contract purchasing does not eliminate effective price signals in most other markets, so I doubt that it is a huge problem here.

          Eliminating insurance would mean that charges might be less but a lot of people would be in danger of going bankrupt. At the very least, this would be hugely disruptive to credit markets and thus to pretty much all markets.

      3. "I don't see that we have to abolish insurance, but something has to happen to allow more competition in the insurance market. That should bring down insurance prices and give the insurers an incentive to hold down provider costs."

        That's a very strange argument. You seem to think that, somehow, reducing the amount of market power that insurance companies can exert will result in them being able to better hold down provider costs. That makes no sense at all.

        It's made even stranger given that this goal of forcing down provider costs is being advanced by someone who has decried price controls.

          1. As soon as you posit an entity that has enough power to be able to force prices down, you have a major deviation from a free market. That's aside from the fact that you have misidentified the party that would increase its market power if we produce more competition among insurance companies while holding the number of health care providers constant.

          2. Also, as soon as you have a product that is highly differentiated you have a major deviation. This is, quite literally, something you learn early in a first course in economics, when the notion of a competitive market is introduced.

            And health care is highly differentiated. I have seen the same doctor for about fifteen years. Am I supposed to switch to save five dollars on the copay? We are not talking about bushels of wheat here.

          3. I think the way that health insurance markets work is that insurers negotiate prices with providers, and the more patients they can deliver to providers the lower the prices they can get. Having anything resembling a competitive market level of insurance companies in a given market will reduce each one's bargaining power.

  6. James,

    Some of my more radical libertarian friends think that’s far from enough. All insurance is morally flawed, as it removes the “skin in the game” by spreading risk across large pools.

    This strikes me as obviously inconsistent. Most non-health insurance is a voluntary arrangement between a buyer and an insurance company. and some health insurance is the same. How can a libertarian object?

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