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The Verizon Wireless cure for health care reform

Improving health insurance requires more, not less, competition.

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Most states force insurers to write health policies that cover a whole variety of medical conditions and needs, even if customers do not want them. This prevents insurers from offering cheaper plans with less coverage, forcing everyone into very expensive so-called Cadillac plans.

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Imagine having no choice but to buy the most expensive phone and data plan for your phone, even if you know you won’t use it. Consumers wouldn’t stand for it. They’d demand better. So why would Americans let that slide with something infinitely more important?

Healthcare insurance companies have little incentive to provide the price and service combinations customers want.

If such incentives existed, we might be able to fine-tune coverage with a half dozen mouse clicks, just as we can with our cellphone plan.

Whether the phone is used only for high-priority emergencies, for constant teenage chitchat, or downloading films, cellphone providers offer plans that match a whole variety of preferences. Regulations and limits on competition prevent health insurers from doing the same.

The cure for this lousy service and unfair practice is more competition.

Sadly, neither version of the healthcare plans in front of Congress allow space for healthy competition. The various health insurance “exchanges” and byzantine combinations of subsidies and penalties that the proposed legislation contains will only further restrict competition. Restrictions force insurance companies to offer only those plans that meet government approval.

If a bill passes, the result would be the equivalent of forcing every American to buy a cellphone, even if they didn’t want one. Those who have phones would see their plan costs soar, spending more for features they don’t want and inferior customer service. Washington should seriously consider the success of the cellphone industry’s model. Making health insurers more consumer-friendly requires competition.

By changing tax law to break the link between employment and health insurance and by abolishing laws that prevent purchasing health insurance across state lines, Washington could turn a doomed system around.

More competition would give consumers more options and enable them to switch providers more easily, which would create much stronger incentives for good customer service than just complaining to a monopoly.

The sooner Congress realizes that the prescription is not more government regulations but a dose of real competition, the sooner we can restore some health to the health insurance industry.

Steven Horwitz is a Mercatus Center affiliated senior scholar and Charles A. Dana professor of economics at St. Lawrence University in Canton, N.Y.


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