Why health care isn’t like cupholders (or, why essential health benefits make sense)

Apparently the Republican effort to drastically weaken the Affordable Care Act isn’t dead after all, maybe. So I thought it would be a good idea to take a look at one of the issues that came up last time – getting rid of essential health benefits.

Essential health benefits are a list of 10 things that every health care plan is required to cover. (this was a new requirement under the Affordable Care Act) They include things like:

  • hospitalization and emergency care
  • maternity/newborn care
  • prescription drugs

and more. The libertarian/small-government conservative view of this is presumably something like:

Why should the government mandate what you can offer in a health plan? Let the free-market figure it out – if people don’t like what’s in a plan, they won’t buy it and the company will change it to improve sales.

or something along those lines. (I’m trying to make a good-faith representation here – if an actual libertarian wants to correct me, feel free!)

Here’s what I don’t think that makes sense.

Let’s say the government wanted to pass a law (because everybody loves cupholders!) that requires every new car sold to have at least two cupholders. This seems unnecessary for the following reasons:

  1. People know whether they want cupholders in their car
  2. It is exceedingly obvious how many cupholders a car has
  3. There are many car companies, so if a car company refuses to make a car with cupholders other car companies will step in to make cars with cupholders, because they will make more money doing so

Now, back to health care.

  1. The problem with health care insurance is that it’s not a good. If you never have to use your insurance, you’re happy! But you don’t know what kind of health problems you’re going to have over the next year, so expecting people to predict what health care problems they’re going to have and buy the appropriate insurance is pretty unreasonable.
  2. There were many stories before the ACA about people who bought insurance and then were surprised when it didn’t cover something catastrophic. Now, you could certainly argue that it’s the person’s fault for not reading details about their coverage closely enough.

    Here’s another way to think about it. In some poorer countries the water they get is contaminated with various microbes, and aid groups distribute chlorination tablets to make the water drinkable. People in those countries have to remember to use the tablets every time, or they’ll probably get sick. This is a mental burden on them even if they never forget to treat their water. In the US we can afford to provide clean water to everyone, and everyone benefits from it. (I think this example is from Why Nations Fail but I’m not sure)

    Having insurance that doesn’t cover what you think it covers can literally send people into bankruptcy. Yes, this makes premiums more expensive, but that’s why the ACA includes subsidies to help lower-income people afford insurance.

  3. There aren’t a ton of insurance companies, but more problematic is the idea of a “death spiral”. Let’s say company Gold provides a generous insurance plan that covers all sorts of treatments, etc. with a higher premium, and company Bronze provides a very bare-bones insurance plan with a lower premium. If I think I’m a healthy person with a Gold plan, this will make me want to switch to a Bronze plan since the premiums are cheaper. That means that the average person on the Gold plan is now less healthy, which means company Gold will have to raise their premiums to compensate. That will in turn drive more healthy people to leave the Gold plan, and the spiral has begun.

Hopefully this gives you an idea why essential health benefits are a good idea!

1 thought on “Why health care isn’t like cupholders (or, why essential health benefits make sense)”

  1. I think one big difference that is really important, to expand on your last point, is that insurance companies aren’t selling a product, they are selling a slot machine. They get their profit each month and then they never want to have to pay out a jackpot. BUT different slot machines pay out for different conditions. The companies specifically * don’t want to sell their product to sick people or likely to become sick people* while say Walmart wants to sell their shit to everyone. So insurance companies don’t want to sell full coverage because of the high chance of having to pay out… Those plans are of course expensive, but then no well person wants to buy an expensive plan, so only sick people buy it, which is terrible for the company… So they usually don’t even sell it anymore or it’s crazy expensive (because only sick people buy it) so even well people who want good insurance coverage can’t afford it.

    It’s exactly like the car insurance for Geico. They tell you their competitors’ rates because they only want to sell to safe drivers and they want to dump the bad drivers onto other companies.

    Liked by 1 person

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