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The Verizon Wireless cure for health care reform

Improving health insurance requires more, not less, competition.

By Steven Horwitz / February 4, 2010

Canton, N.Y.

Imagine that your only option for cellphone service comes from one company special to every state, and that it costs $300 per month. On top of that, though it promises unlimited minutes and data, it drops calls all the time, provides lousy customer service, offers only a slow network, and forces you to buy a needlessly fancy phone that doesn’t work very well.

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That is the future of health insurance under the health reform bills in front of Congress – unfair, unfriendly, and unhealthy.

My recent experience with Verizon Wireless illuminated this comparison.

After my daughter exceeded our monthly free minutes, I learned that Verizon offers the ability to change your plan. You can increase the number of free minutes at any time. There is also the option of making the change in plan retroactive to the beginning of your current billing cycle. By taking this very consumer-friendly option, I spent $17 on a new monthly plan but saved nearly $100 on overage charges.

Why is health insurance not the same?

Compare the consumer-friendliness of the cellphone industry with health insurance companies. Many of my friends have a horror story about how an insurer refused to certify a legitimate claim, dragged their feet on payment, overbilled them, or, if they even got to talk to a human being, was just plain awful at customer service. Health insurance companies certainly seem to fit a stereotype.

Are health insurance company employees just meaner and more greedy than those who provide cellphone service, or, for that matter, those who provide home and auto insurance? Certainly not.

The difference is that the cellphone, auto, and home insurance industries are highly competitive while the health insurance industry is not.

Verizon knows it has to provide customers with the services and prices they want, or it will lose them to AT&T, Sprint, or T-Mobile.

Because the government has distorted the tax treatment of employer-provided health insurance, many of us get our insurance through our employers. This reduces competition, which causes problems.

If the service is bad, we can complain, but we can’t easily change carriers. This hampers quality and keeps prices high. As new estimates from the government report that health spending climbed to eat up 17.3 percent of gross domestic product last year, we need to make sure that what we’re spending on healthcare isn’t artificially high due to a lack of competition.

Competition is further reduced by regulations that prevent customers from buying health insurance across state lines. Even if you’re self-insured, in many states you may be limited to only one or two choices for coverage.