FORUM: How to reprivatize health care - Rapid City Journal

In June, the Supreme Court may declare the Patient Protection and Affordable Care Act of 2010 completely unconstitutional. It seems likely to decide that the "individual mandate," the part of the law that requires all Americans to purchase health insurance, cannot stand.

Advocates of liberty, however, risk rejoicing prematurely. They should not rest until America's health care system has been returned to its rightful owners — patients and their doctors, freely interacting in markets protected only by the government's promise to enforce consensual contracts. A strike-down of the health care law is only the first of many steps necessary to reprivatize health care and create a better, less expensive and more personalized system for Americans.

Health care is a complicated market. One consequence of its complexity is that government meddling can easily stymie innovations that could improve patient treatment. Insurance policies and institutional forms that could decrease costs by better aligning the incentives of providers, insurers and patients, for example, are either banned outright, or so unlikely to receive approval in today's highly uncertain policy environment that even the bravest innovators shy away.

When people get sick, they want prompt, effective and affordable help. Entrepreneurs can design enterprises and contracts that meet those needs if government gets out of the way. For example, parents would readily buy individual policies for their children in utero, especially if the policies were issued by mutual health care provider-insurers offering participating life-health policies.

Mutual insurers are owned by their policyholders — not by stockholders who are focused on quarterly returns. Historically, they are among the most stable and longest-lived financial institutions. Both their client-owners and their agents have incentives to think about the long term rather than quick money. The agents who sell their policies earn commissions paid over many years, so they disdain short-term profiteering. And if an insurer has to pay a large death benefit for a sick patient, it has a purely financial motive to do whatever is reasonable to keep him healthy.

Due to their long-term perspective, mutuals charge conservative premiums in order to combat market downturns. But their participating policies also return profits (unneeded premiums) to policyholders. Their policies can look pricey at first, but the life, disability and health insurance policies issued by first-class mutual insurers like Guardian Life and MassMutual are often a better deal than policies issued by publicly traded companies.

If allowed by regulators, combination life-health policies would offer life and health insurance in one package. Insurers would have a financial incentive to provide a level of health care consistent with the patient's condition and death benefit. By combining health insurers and health care providers into one company, incentives to overbill or overmedicate are greatly reduced because both parties share the same pot of expenses, revenues and profits. Similarly, policies that forgive premiums when patients are too sick to work would give providers incentives to provide preventative care and to quickly heal patients.

Instead of forcing Americans to buy something that they do not want, government should make room for providers and insurers to enter into contracts that practically everyone will want.

Rejecting the Affordable Care Act in favor of free enterprise will not end all human suffering. Americans will still get sick and suffer financial hardships. But a restoration of economic freedom in the health-care marketplace will enable innovators to create the lowest-cost solutions to those problems.

21 May, 2012