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New Yorker Would Have Done Better With Individual Insurance To Start
By: John R. Graham
11.28.2009
Yesterday’s Wall Street Journal ran a letter by a New Yorker, who was appalled at a contributor’s criticism of New York’s regulation of health insurance. As discussed frequently in this blog, NY imposes guaranteed issue and community rating on individually purchased health insurance. These rules allow people to wait until they become sick to buy health insurance. Laurie Rippon notes that (s)he lost his job after being hit by a car while crossing the street, which resulted in traumatic brain injury. After timing out of COBRA coverage, he would not have been able to buy an individual policy because he would not have passed underwriting. Mr. Rippon is grateful for NY’s regulations, because they insured that he could buy individual health insurance.
In fact, Mr. Rippon was ripped off. Rates in NY for individual insurance are higher than in states that allow underwriting, because they allow people to wait until they become sick to buy policies. Mr. Rippon notes that “pre-existing conditions” are not all caused by lifestyle choices, like smoking or those that lead to obesity. True enough, but actuarial tables do not care how you got a pre-existing condition: It has to be priced accurately, whatever the cause.
Mr. Rippon’s tragedy was compounded by the government’s driving us into employer-based benefits, instead of individual insurance as the default. This would have resulted in a market such as the one described by Professor John Cochrane or Professor Mark Pauly and colleagues (which I discuss here).
Mr. Rippon would have bought an individual health-insurance policy, for which the premiums would not have increased after he was injured. This would have resulted in lower premiums than he’s paying today.
This blog post originally appeared on State House Call.
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