My Ideal Health Insurance Policy

Right now my wife and I pay $148 per month for high-deductible health insurance through Assurant. Our rate is locked in for three years.

I was just talking with an insurance broker in Boulder, and he mentioned that a three-year policy is actually unusually long. Usually one must renew every single year.

As my dad and I have discussed, various political controls have effectively outlawed long-term policies.

Of course it's difficult to predict precisely what products and services would become available on a free market. However, I have a good idea of what sort of insurance policy I'd like to buy.

Let's start with some basic facts.

1. Real insurance (as opposed to today's politically mangled health insurance) covers unexpected, high-cost treatments, not routine or expected care.

2. As one gets older, the risks of contracting a serious, high-cost disease approaches 100 percent, and this risk (on average) increases dramatically over the age of about 60. As one clever visual illustrates, one's lifetime odds of dying of heart disease are one in five, and the odds of dying of cancer are one in seven. Stroke is the third greatest risk, and then risks splinter quickly into many competing factors. See also the charts (page 5) from National Vital Statistics showing "percent surviving by age."

The upshot is that, in old age, the risk of high-cost care goes up dramatically. At that point, treatment is more or less expected, so medicine becomes increasingly less insurable. On the other hand, in one's youth and middle age, routine care is the norm and high-cost emergencies are relatively rare, which is a great scenario for insurance.

What I'd like to do, then, is purchase a term health policy with a locked in rate till I'm about 60. I'd like the deductible to start high -- around $10,000 annually -- and increase every year until it reached about $50,000. The increasing deductible should enable rates to remain low even though health risks will increase somewhat over time.

So what happens when the term health policy ends? The point is to pay a low insurance premium and then save money to pay for care when I get old. Just to take an illustrative example, if you're 35 years old and you buy term health until you're 60, that gives you 25 years to save for old-age medical expenses. Let's say a high-deductible premium costs $100 per month, whereas a "pre-paid health care" premium costs $500 per month. Let's further say you pay $100 per month four routine care. That gives you $300 per month to save, which adds up to over $200,000 at 6.5 percent interest. I think it would make sense to save somewhat more than that.

If the sort of insurance I'm describing became widespread (as could only happen if politicians stopped completely mucking up the insurance market), one consequence would be that the large majority of health expenses would be paid directly by patients. This would put patients back in control of their medical care, and it would give patients the incentive to stay healthy and look for good value for their health-related dollars. This would keep health costs under control while achieving good quality. Which is why most politicians won't even consider allowing it to happen.

Gazette: Obama's Republican Health Plan

Today's Colorado Springs Gazette published my op-ed, "Republican plans for health care reform similar to Obamacare." (The print date is later than the online date of September 18).

I point out that the three core tenets of Obama's plan -- mandatory insurance, forcing insurers to ignore pre-existing conditions (and meet other political demands), and expanded subsidies -- have all been endorsed by Republicans.

Meanwhile, the "public option" isn't a central element of Obama's plan, as the other controls alone effectively nationalize the insurance industry. (And, as John Lott suggests via Brian Schwartz, something like the "public option" already dominates the insurance industry.)

Read the entire op-ed. And share it with your Republican friends!

Below is the complete text:

Republican plans for health care reform similar to Obamacare

Democrats pretend that Republicans are just a bunch of obstructionists when it comes to health proposals. Meanwhile, Republicans debate minor aspects of Barack Obama’s plan such as whether it subsidizes illegal immigrants and abortions.

The reality is that every key element of Obama’s plan either came from Republicans or arose with Republican support.

Obama underplays this fact because it is an embarrassment to his self-defined legendary status. This is the man who told Congress, “I am not the first president to take up this cause, but I am determined to be the last.” He wouldn’t have sounded as impressive had he admitted, “My plan cobbles together various Republican-endorsed policies.”

Republicans neglect their role in creating Obamacare because they like to pretend they support free markets and offer a real alternative to Democratic policies. More often than not, when Republicans are not “me tooing” the Democrats, they are taking the lead in expanding political controls of the economy.

The core of Obama’s plan is the mandate: he wants to force everyone to buy politically controlled insurance. But this has already been tried.

Mitt Romney, former Republican governor of Massachusetts and presidential candidate, worked with Democrats to push through just such a plan. Obamacare is little more than warmed-over Romneycare.

What were the results? Last fall Paul Hsieh, a Colorado radiologist, wrote “Mandatory Health Insurance: Wrong for Massachusetts, Wrong for America.” He found “the plan has increased costs for individuals and the state, reduced revenues for doctors and hospitals,” and fallen short of universal coverage.

Last month the Cato Institute’s Michael Cannon checked in on Romneycare. He found higher taxes, exploding costs for insurance premiums, longer waits to see specialists, and “the groundwork for government rationing.”

Obama wants to replicate this failed Republican experiment on a national scale.

Another key part of Obama’s plan is to force insurers to ignore pre-existing conditions. This is again part of Romneycare, but other Republican leaders also endorse the idea.

Colorado Rep. Mike Coffman wrote for the July 30 Denver Post that he wants politicians to “require health insurers to cover those with pre- existing conditions.” In his tepid response to Obama, Rep. Charles Boustany of Louisiana also praised the idea.

Of course, forcing insurers to ignore pre-existing conditions incentivizes people to wait until they get sick to buy insurance, so the position amounts to an endorsement of the mandate, too.

What both Republicans and Democrats like to ignore is that politicians from both parties have created the problem of pre-existing conditions.

Tax distortions push people into non-portable, employer-paid insurance. Ever-changing controls outlaw some insurance options and make others impossible for insurers to offer.

Various federal and state controls undermine the competitiveness of insurance companies, making them largely unresponsive to the needs of consumers. And politicians price some out of the insurance market by forcing up premium costs with special-interest favoritism.

Rather than violate the right to contract for insurance, government should get back to the business of preventing fraud and enforcing contracts, preventing arbitrary denials of claims.

In addition to mandates and insurance controls, the third major aspect of Obama’s plan, expanded subsidies, also came from Republicans.

Obama told Congress, “For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.” These “tax credits” in fact serve as outright handouts for some.

If Obama’s plan sounds familiar, it might be because you read the same proposal from Republican Sen. Jim DeMint. His “Health Care Freedom Plan” proposes the “tax credit” subsidies that Obama endorses.

True, most Republicans don’t support Obama’s “public option.” However, Obama seemed willing to deal away his public option in the spirit of faux compromise. Moreover, between the mandate and other controls, all insurance will be controlled by the federal government, anyway, so the public option isn’t the central element of Obama’s plans.

To their credit, some Republicans, including DeMint and Coffman, do have some good ideas. They support rolling back some insurance controls to make premiums more affordable and expanding Health Savings Accounts to let people buy insurance directly with pre-tax money. Tort reform is less important but still a useful idea.

Unfortunately, many Republicans seem deathly afraid to say what millions of Americans long to hear: that people have the right to live their own lives and pursue their values by their own judgment. That government’s proper role is to protect individual rights. That people should interact through voluntary exchange, not force.

When elected officials are able to articulate the message of liberty, and mean it, we might have something better on the table than different flavors of political controls.

Armstrong publishes FreeColorado.com. He and his wife buy high-deductible insurance and pay for routine care with a Health Savings Account.

Denver 9/12 Rally: Freedom Forever

In my speech at the Denver 9/12 rally, I discussed the fundamental moral and political choices our nation faces. To illustrate these themes I described how the problem of pre-existing health conditions, and the resulting difficulties of buying insurance, is primarily a product of political controls, starting with tax-driven, non-portable, employer-paid insurance.



See People's Press Collective for the report.

Lu Busse, chair of The 9.12 Project Colorado Leadership Team, said the proper response to the cry, "health reform now," is "freedom forever." Of course, real health reform means reestablishing freedom in medicine, so the two goals are wholly consistent.

Chuck Moe:



Amy Oliver:



Jon Caldara:

Obama Was Against the Mandate Before He Was For It

Back on February 26, 2008, Barack Obama criticized Hillary Clinton for offering the same health insurance mandate that he endorsed just two days ago. (Thanks to Adam Eidelberg for looking up the transcript of the primary debate.)

Obama was right to question the mandate when Clinton proposed it. I've written more about the matter elsewhere (such as here.) For now, as a prelude to the before-and-after Obama quotes, I'll summarize the main arguments against the mandate.

1. People have the right to choose which products to buy. It is immoral for politicians to force people to buy politically-controlled products.

2. The main reason some fraction of "the young and healthy" currently decide not to buy insurance is that politicians try to force the young and healthy to subsidize other people's health care through jacked up insurance premiums. This is especially true in employer-paid insurance, and it is also true for directly purchased insurance due to state benefit mandates.

3. Obama's pretense that the mandate solves the problem of forcing "the rest of us to pick up the tab" is laughable. The entire point of the mandate is to force some people to pick up the tab of other people's health care through higher insurance premiums. That's why Obama must force people to buy it. Without this coercion, Obama's other insurance controls would dramatically increase costs of premiums and thus the numbers without insurance.

4. Real free-market reforms would lower the cost of insurance premiums so that more people could afford it. Roll back controls that jack up premiums. Expand Health Savings Accounts so that people can buy lower-cost insurance (as well as routine care) directly with pre-tax money.

5. The main reason why some people rely on expensive emergency room treatment, rather than seek out less costly alternatives, is that the federal government forces emergency rooms to offer care without compensation. That policy is wrong, and it predictably introduces perverse incentives.

6. People without insurance do not necessarily force others to fund their treatment. Many fund their treatment out of pocket. Again the solution is to legalize insurance they can afford and want to buy.

7. Mandated insurance is expensive insurance. Obama wants to force insurers to cover more routine care, continuing the federal push to pervert insurance into pre-paid medical care. When routine care is "free" (or nearly so) at the point of service, patients have practically no incentive to monitor costs. Also, under a mandate special interests continually try to get more services covered, jacking up premiums, as has happened in Massachusetts.

With that background, let us turn Obama's position on mandates, then and now:

Obama then:

I have endured, over the course of this campaign, repeated negative mail from Senator Clinton in Iowa, in Nevada, and other places, suggesting that I want to leave 15 million people out.

According to Senator Clinton, that is accurate. I dispute it and I think it is inaccurate. On the other hand, I don't fault Senator Clinton for wanting to point out what she thinks is an advantage to her plan.

The reason she thinks that there are more people covered under her plan than mine is because of a mandate. That is not a mandate for the government to provide coverage to everybody. It is a mandate that every individual purchase health care.

And the mailing that we put out accurately indicates that the main difference between Senator Clinton's plan and mine is the fact that she would force, in some fashion, individuals to purchase health care.

If it was not affordable, she would still presumably force them to have it, unless there is a hardship exemption, as they've done in Massachusetts, which leaves 20 percent of the uninsured out. And if that's the case, then, in fact, her claim that she covers everybody is not accurate.

Now, Senator Clinton has not indicated how she would enforce this mandate. She hasn't indicated what level of subsidy she would provide to assure that it was, in fact, affordable. And so it is entirely legitimate for us to point out these differences.

The Democrats now have "indicated" how they would "enforce this mandate:" they would subject defectors to hefty fines.

While Obama claimed "the plan I'm proposing will cost around $900 billion over ten years," he wasn't specific about how much he would subsidize individuals.

Obama now:

For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need... [F]or those Americans who can't get insurance today because they have pre-existing medical conditions, we will immediately offer low-cost coverage that will protect you against financial ruin if you become seriously ill...

Now, even if we provide these affordable options, there may be those -- particularly the young and healthy -- who still want to take the risk and go without coverage. There may still be companies that refuse to do right by their workers. The problem is, such irresponsible behavior costs all the rest of us money. If there are affordable options and people still don't sign up for health insurance, it means we pay for those people's expensive emergency room visits. If some businesses don't provide workers health care, it forces the rest of us to pick up the tab when their workers get sick, and gives those businesses an unfair advantage over their competitors. And unless everybody does their part, many of the insurance reforms we seek -- especially requiring insurance companies to cover pre-existing conditions -- just can't be achieved.

That's why under my plan, individuals will be required to carry basic health insurance -- just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. There will be a hardship waiver for those individuals who still cannot afford coverage, and 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. But we cannot have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees.

As I have noted, it is the mandate (not the public option) that defines Obama's current policy. Mandated insurance is morally wrong and destined to generate bad consequences. We do not need more mandates. We need more liberty.

Mandate, Not Public Option, Defines Obamacare

Rather than "hope and change," Barack Obama offers a warmed-over Republican policy -- Romneycare -- that has already failed in Massachusetts. The core of Obama's fake reform (described most recently in his address to Congress) is not, as many conservatives suggest, the "public option." It is instead the proposal to force people to buy politically-controlled insurance. (For details on the Massachusetts fiasco, which Obama hopes to replicate on a national scale, see the articles by Paul Hsieh and Michael Cannon.)

It is the mandate that ties together the various tenets of Obamacare, particularly insurance controls (regarding coverage and pre-existing conditions) and expanded subsidies.

Regarding pre-existing conditions, I've pointed out, "Forcing insurers to ignore pre-existing conditions means allowing consumers to wait until they get sick to buy insurance... The logical consequence of forcing insurers to ignore pre-existing conditions is to force everyone to purchase insurance..."

Obama made the same point in his speech: "Unless everybody does their part [and purchases insurance under compulsion], many of the insurance reforms we seek -- especially requiring insurance companies to cover pre-existing conditions -- just can't be achieved." Just so.

Nevermind the fact that federal policies largely created the problems of uncovered pre-existing conditions.

Obama admits, "More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too." But why is health insurance (and not any other sort of insurance) tied to employment for most Americans? It is because of federal tax distortions that drive expensive, non-portable, employer-paid insurance.

As I've noted (and again), the vast net of continuously changing insurance controls also helps to effectively outlaw stable, long-term policies that would remedy the problem of pre-existing conditions.

For more on this issue, please see Paul Hsieh's outstanding article, "How the Freedom to Contract Protects Insurability."

Obama wants to force insurers to ignore pre-existing conditions and also force insurers to cover preventative care (which would, incidentally, outlaw my high-deductible plan and force my wife and me to buy dramatically more costly insurance). The inevitable result of such controls is to jack up insurance premiums (leaving aside Obama's fantasy that giving people more "free" health care will somehow curb costs).

Mandated insurance requires expanded subsidies. After all, you can't force somebody to purchase a product that they literally cannot afford. If Obama follows the lead of Republicans, his "tax credits" will in many cases be direct subsidies.

Obama hopes to cheat a little on his mandate, claiming "there will be a hardship waiver for those individuals who still cannot afford coverage." (Whether you can "afford" this politically-manipulated "coverage" will be determined by the federal government.) Apparently Obama would subsidize these "hardship" cases through some combination of tax-funded welfare and tax-funded insurance.

With or without the "public option," the core of Obamacare remains the same: force everyone (or nearly everyone) to buy insurance, federally control what insurance people can buy (making it more expensive), and forcibly transfer more wealth to pay for health.

Obama Wrong About Mandatory Auto Insurance

I watched Barack Obama's address on health policy tonight on television at Liberty On the Rocks at the Denver Tech Center. Both NPR and Fox 31 sent reporters to cover the speech and the free-market response to it. I'll have more to say about the speech in coming days. For now, I want to correct but one of Obama's remarks:

"That's why under my plan, individuals will be required to carry basic health insurance -- just as most states require you to carry auto insurance."

It is simply not true that states "require you to carry auto insurance." Rather, you must buy auto insurance (or face fines) only if you drive an automobile on politically operated roads.

For example, Colorado's statute 10-4-619 states that "compulsory coverage" applies to "every owner of a motor vehicle who operates the motor vehicle on the public highways of this state or who knowingly permits the operation of the motor vehicle on the public highways of this state."

In other words, if you don't own a motor vehicle, or you don't drive your vehicle on "public highways," you aren't required to buy auto insurance.

It is indeed interesting that Obama sees a politically controlled industry as the model for health care.

Obama's proposal to force everybody to buy politically controlled insurance is not like the requirement to buy auto insurance for public highways. Under Obama's proposal, there is no escape and no exception. If you don't buy insurance that politicians and their appointed bureaucrats approve for you, you face hefty fines. If you want to self-insure, or if you don't like the politically-approved insurance, that's tough. You will be forced to buy it. Because Obama is all about choice, competition, and freedom. And two plus two equals five.

September 10 Update: Wesword's Michael Roberts picked up on the NPR coverage of Liberty On the Rocks and also quoted this blog post. As I pointed out in the comments, this post made a delimited point quickly. I've written much more about mandated insurance elsewhere.

Free Exchange Should Set Insurance Premiums

Should health insurance companies charge people with pre-existing conditions or known health risks more?

Lawrence Jones of Conifer wrote a thoughtful letter for the August 25 Denver Post arguing that higher rates are unfair for conditions beyond one's control. I thought Jones's letter deserved a full reply.

Jones writes:

Letter-writer William Hinckley [see the August 20 letter] thinks that charging higher insurance premiums to people with pre-existing medical conditions is akin to charging higher house insurance rates to dimwitted folks who knowingly choose to live in fire traps. People don't choose to get diabetes. People don't choose to have genetic predispositions to cancer.

Those who knowingly make risky life choices, whether to live in fire-prone shacks or to smoke tobacco, should certainly pay higher premiums as a result of their choices. But why should the boy with leukemia, the woman with breast cancer, the young athlete with diabetes? Why should the innocent be punished for wanting access to health care just because they actually need it?

Jones's fundamental mistake is to ignore the rights of insurers and treat insurance as a collectively owned good. Insurance is a product sold on the market that properly belongs to its producers. Insurers have every right to set the terms of insurance policies, including rates. And consumers are free to buy an insurer's product or not. The government's only proper role is to enforce insurance contracts and prevent fraud, whether by the insurer or the consumer.

Politically controlled insurance rates violate the rights of both insurers and their customers. The key characteristic of free markets is voluntary exchange. A producer cannot sell a product without a willing customer, and a customer cannot buy something that no producer wishes to sell. Producers and customers have the right to reach mutually agreeable terms, free from force.

What Jones ignores is that forcing insurers to charge unhealthy people lower rates means that insurers must charge healthier people higher rates, or risk bankruptcy. The typical result of Jones's policy is that young, healthier, less-wealthy workers trying to get ahead in life must subsidize everyone else.

Jones, then, implicitly means that he wants politicians to force insurers to charge healthy people more. Such political controls are a big reason why insurance premiums cost so much today, and why both Democrats such as Barack Obama and Republicans such as Mitt Romney call for mandated insurance. Some young healthy people decline to subsidize other people's health through politically-manipulated insurance premiums, so they must be forced to do it, the reasoning goes.

Jones misses a number of other points as well. For example, he ignores the fact that politicians have effectively outlawed long-term insurance contracts, as I point out in a recent article on pre-existing conditions.

Of course insurers should NOT charge people with health conditions higher premiums -- IF those people bought long-term insurance before they developed the conditions. But long-term insurance contracts, on the whole, simply are not possible in today's political climate. Real health reform entails restoring a free market in health insurance, so that insurers are more competitive, more responsive to customers, and more free to offer useful products.

The entire purpose of health insurance, as I've argued, is to allow people to voluntarily pool their resources to protect against unexpected risks. If a risk is expected, such as if somebody knows prior to getting insurance that they have cancer, then the risk is simply not properly insurable.

Jones suggests that the "innocent" are "punished" when politicians do not force others to subsidize their care through higher insurance premiums. But this presumes that healthier people are somehow guilty. They are not. A free exchange between an insurer and a customer does not somehow "punish" a party outside that exchange.

Does this mean that people with pre-existing conditions and no health insurance cannot get health care? Obviously not. The idea that all health care must be funded through health insurance is ludicrous. The wealthy may fund their own health care out of pocket. The poor may look for voluntary charity, whether provided directly by hospitals or indirectly through charity groups. (Obviously today people have access to a wide array of health welfare programs. I favor gradually replacing welfare with strictly voluntary charity.)

Jones is also partly wrong about which diseases are impacted by personal behaviors. He mentions cancer and diabetes as examples. Yet both cancer and diabetes are often largely caused by one's choices.

The American Diabetes Association states, "Type 1 and type 2 diabetes have different causes. Yet two factors are important in both. First, you must inherit a predisposition to the disease. Second, something in your environment must trigger diabetes." What you eat can dramatically impact your likelihood of developing diabetes, as it can dramatically impact your ability to deal with the disease.

Likewise, cancer is partly genetically determined. For example, some women have genes that make breast cancer more likely. Nevertheless, our foods, activities, and chemical exposures can dramatically impact our risks of cancer.

I have two general points to make about this. To the extent that disease is impacted by personal behaviors, it is a very bad idea for political policies to encourage damaging behaviors. Laws forcing insurers to fund pre-existing conditions reduce the incentive of people take care of themselves. The inevitable result is more disease.

The second major point is that one person's unluckiness does not impose some sort of duty on a more-lucky person. The person without a genetic predisposition to get cancer is free to donate funds to treat cancer patients but should not be forced, under threat of imprisonment, to do so. The proper purpose of insurance is to protect ourselves against unexpected risks, not to equalize luck after the fact.

Health care is not a right. It is not some collectively owned good to be distributed by political whim. Health providers and health consumers have a right to negotiate mutually beneficial trades and to donate whatever they wish to charity. It is that right which government must consistently protect, if we value or lives, our liberties, and our health.

Should Politicians Force Insurers to Ignore Pre-existing Conditions?

Should a life insurance company "discriminate against" an 80 year old smoker with lung cancer by declining to offer the same policy available to healthy 20 year olds?

Should a home insurance company "discriminate against" a home owner whose house is on fire by refusing to offer a policy on that house?

Should a car insurance company "discriminate against" a five-time convicted drunk driver by failing to offer the same policy available to safe drivers?

Anyone who suggests that such "discrimination" is wrong should be deemed insane.

Yet, when it comes to the health debate, various politicians and pundits pretend it's perfectly sensible to force health insurance companies to ignore pre-existing conditions.

On August 15, Barack Obama said in Grand Junction: "A recent report found that in the past few years, more than 12 million Americans were discriminated against by insurance companies because of a preexisting condition."

Democratic chair Pat Waak wrote for the August 19 Denver Daily News, "There should be no discrimination for pre-existing conditions."

But this is not merely a Democratic phenomenon.

Jeff Crank, Colorado director for Americans for Prosperity, said at a July 28 rally in Denver that the "right kind of health care reform" includes "eliminating the pre-existing conditions exclusion."

And in a July 30 op-ed for the Denver Post, Republican Congressman Mike Coffman wrote that he wants to "require health insurers to cover those with pre-existing conditions."

Such insurance controls are wrong because insurers and their customers have a moral right to voluntarily associate and create contracts, according to their own best judgment. Forcing insurers to ignore pre-existing conditions violates the rights of both parties. The only proper role of government over insurance contracts is to prevent fraud and ensure fulfillment of contract.

Forcing insurance companies to ignore pre-existing conditions forces those without such conditions to subsidize others through higher insurance premiums. One consequence of such political controls is to price many out of the insurance market altogether.

Forcing insurers to ignore pre-existing conditions means allowing consumers to wait until they get sick to buy insurance. By the same logic, a home owner could wait until his house was on fire or in the path of a tornado before buying an insurance policy. Likewise, a person might as well wait until he gets cancer or some other medical condition to get insurance.

Such controls destroy the very purpose of insurance, which is to enable a group of people to pool resources in advance to cover unexpected high-cost risks. (See my previous article, "What Is Health Insurance?") For instance, we know some of us will get cancer, but we don't know who will get get it, so we voluntarily agree to spread the risk of paying for treatment.

The logical consequence of forcing insurers to ignore pre-existing conditions is to force everyone to purchase insurance, so that people don't wait to buy insurance until they get sick. That's what Republican Governor Mitt Romney advocated in Massachusetts, and that's what Democrats now advocate nationally.

As I argued previously, there is indeed a problem with pre-existing conditions with respect to health insurance. This problem was caused by political interference in medicine. Tax policy drove most Americans into expensive, non-portable, employer-paid insurance. Various insurance controls discourage long-term health policies. Politicians have mostly destroyed the market in long-term health insurance. Now, failing to take responsibility for the problems that they and their fellows caused, politicians wish to try to "solve" those problems by imposing yet more political controls on health insurance. The result would be only more distortions, more unintended consequences, and renewed calls for politicians to "do something" to solve the new problems.

The alternative is to restore a free market in health insurance, roll back insurance controls, and offset the tax-supported employer-paid system by allowing people to buy insurance through expanded Health Savings Accounts.

We need fewer political controls on health insurance, not more. We need more protection of individual rights in medicine, not more violations of our rights. If we value our health and our lives, we need liberty.

What Is Health Insurance?

Why does Colorado Democratic Chair Pat Waak want to outlaw my health insurance?

With Barack Obama demonizing health insurance companies and various politicians (both Democrats and Republicans) calling for more insurance controls, now is a good time to review what insurance is.

Insurance (on a free market) is simply a voluntary agreement to pool resources to pay for high-cost risks.

Let us take a simplified example. Let's say we live in a community with 50 people total, and we figure that, within the next few decades, one of our houses will probably burn down. We don't know whose house it will be, but we're all at risk. None of us wants to bear the full costs of replacing a house. Therefore, we decide to share equally the cost of paying to replace the house that burns down. We might agree to split the costs of a new house once one is destroyed, or we might agree to contribute monthly to a fund. That's insurance.

In the same community, we might agree to insure against the risks of premature death, unexpected car crashes, and unexpected health costs.

In real life, most people purchase insurance to cover their lives, homes, cars, and health. There are two main differences between real-life insurance and the insurance of our simplified example. First, insurance companies pool many more people, making it easier to calculate and manage risks. Second, insurance companies are managed by professionals who do the work in order to earn a living, just as you earn a living in your specialty.

For whatever reason, today some people demonize "profits" -- earning a living -- in the insurance industry. This is strange, for, as my friend Justin Longo has pointed out, few think it's evil to "profit" by selling food. Do those who decry insurance profits also demand an end to for-profit grocery stores? In a free market, profits drive a company to offer better products and service at lower cost. Profits are good. A company that does not profit goes bankrupt.

Unfortunately, there is no free market in health insurance. (Indeed, as Tim Carney points out, insurance companies have been a major player in destroying the free market in insurance.)

Have you ever wondered why you purchase life insurance, home insurance, and car insurance on your own, but you buy health insurance through your employer? The reason is that tax policy has driven non-portable, expensive, employer-paid insurance. One consequence is that people do not buy long-term health insurance policies, as they do with life insurance. Lose your job, lose your insurance. This is the major reason why pre-existing conditions, which so upset Obama and other politicians, have become such a serious problem. Politicians have almost completely destroyed the market for long-term health insurance.

Another consequence of tax policy is that health insurance has evolved into pre-paid medical care. People have no problem dropping $30,000 on a new vehicle, but if they're asked to cough up a $15 co-pay for health care, they think the sky is falling. This has largely undermined the very purpose of insurance, which is to protect against unexpected risks.

Imagine you purchased car insurance through your employer, and this insurance covered new auto purchases, oil changes, tire rotations, and everything else related to your car. What would be the result? People would be a lot less careful with their cars, and they would use a lot more car services. That's basically what has happened in health care, thanks to federal tax policies.

In the tiny non-employer-paid insurance market, politicians have placed so many controls on policies that they are dramatically more expensive than they would be on a free market. Moreover, because insurers are subject to ever-changing political controls, they can neither calculate long-term costs nor (for the most part) offer long-term insurance policies.

The purpose of insurance is to cover long-term, unexpected risks. Because of political interference, health insurance no longer meets either goal. Because insurance is tied to one's job and insurers generally cannot offer long-term policies, we get the problem of people developing medical conditions and then losing their insurance. Because politicians encourage pre-paid health care, "insurance" premiums are dramatically more expensive.

And yet, in the name of "reforming" insurance, various politicians want to continue to undermine the very purpose of insurance. For example, Pat Waak, chair of the Colorado Democratic Party, wrote for the Denver Daily News, "Insurance companies should cover annual exams and tests that prevent illness. How about mammograms, pap smears, eye exams and other tests that will promote wellness?"

Why doesn't she demand that auto insurance cover tire rotations and oil changes?

Waak misses two obvious points. First, if you force insurers to cover routine, expected costs, the premiums will grow much more expensive. Because holders of this alleged "insurance" bear no direct costs for their health decisions, they are less thoughtful about how they use medical services.

The second point that Waak misses is that people can pay for preventative medicine without using insurance. This is what my wife and I do. Just this week my wife went to her physical and paid for it out of our Health Savings Account. Just a couple weeks ago I got blood work done at the local King Soopers pharmacy. (This blood work was free of charge, but I've spent our own money on other sorts of health care.)

Do people get oil changes or tire rotations even though those things aren't covered by insurance? Sure they do. Why? Because routine maintenance reduces long-term costs. The same holds true with health, if only politicians would leave people free to act on their own judgment.

Right now my wife and I pay $148 per month for high-deductible health insurance. This covers both of us. (Our insurance would cost less and cover us for much longer if there were a free market in health insurance.) We save money in a Health Savings Account, which we use to pay for routine expenses.

What Pat Waak wants to do is outlaw our health insurance. A likely consequence of Waak's policy is that my wife and I would no longer be able to afford insurance at all.

That is my biggest fear right now: if Barack Obama and Pat Waak get their way, the likely result is that my wife and I will go from having insurance we like reasonably well to not being able to afford insurance at all. That's not "reform." That's outright thuggery.

Rep. Mike Coffman Wrong to Demand More Insurance Controls

In a July 30 article for the Denver Post, Rep. Mike Coffman criticizes "increasing the government's involvement in our health care system." Why, then, is that what he promotes?

Coffman wants politicians to "require health insurers to cover those with pre-existing conditions." But prior political interference is precisely what created the problem. Tax policy pushed many Americans into the expensive, non-portable employer-paid system. Lose your job, lose your insurance. Politicians burden insurers with reams of ever-changing controls, undercutting their ability to offer long-term policies.

Forcing insurers to ignore pre-existing conditions only encourages people to wait to get insurance until they get sick, leading to Massachusetts-style mandates.

Coffman is right to want to limit frivolous legal suits and ease the tax burden for individual purchases of health care. The solution is not more political control but liberty.

(Note: The Denver Post declined to publish the above letter. I'm sure it is merely coincidence that the Post's pro-Obamacare editorial content has vastly outweighed the material critical of Obamacare, particularly in the letters.)