An esteemed finance professor agrees with me

There was an excellent opinion piece in the Wall Street Journal today from John Cochrane, finance prof at the University of Chicago.

In it, Cochrane repeats something I wrote in 2009 about the root cause of one key problem in health insurance: pre-existing condition restrictions.  This is Cochrane:

When the administration affirmed last month that church-affiliated employers must buy health insurance that covers birth control, the outcry was instant.  Critics complained that certain institutions should be exempt as a matter of religious freedom.

Critics are missing the larger point. Why should the Department of Health and Human Services (HHS) decree that any of us must pay for “insurance” that covers contraceptives?

I put “insurance” in quotes for a reason. Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill.

Insurance is a bad idea for small, regular and predictable expenses.

How did we get to this point? It all leads back to the elephant in the room: the tax deductibility of employer-provided group insurance.

The pre-existing conditions crisis is largely a creature of tax law.  You don’t lose your car insurance when you change jobs.

Here’s what I wrote in 2009:

President Obama proposes to fix the problem of health insurance companies not providing coverage to people with pre-existing conditions by forcing insurance companies to cover these people.

What’s the root cause of this problem?

The tax advantage companies have in purchasing health insurance plans over individuals.  Without this tax advantage, the health insurance industry would look more like the auto and home insurance industries.  We’d buy policies directly from insurers instead of being covered by employers and stay with those companies much longer.

In the last fifteen years, I’ve changed my health insurance provider ten times, twice due to changing employment and the other times due to my company changing providers or me switching from one plan to another within the company.  Luckily I haven’t had a pre-existing condition to worry about.

I use the same auto and home insurance company I used fifteen years ago, same agent too.  My choice to stay with this company has been wholly independent of my employer.

I recommend reading the whole thing.

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