The Obama administration’s decision to require religious-based employers to include birth control coverage in their employee health plans has spawned a heated debate. Catholic employers object to being compelled to cover medical services they consider immoral. This has resulted in acrimonious debates over religious freedom, reproductive freedom, and even Rush Limbaugh’s bad language.
The controversy has also made apparent three lessons about America’s current health care system and why we need free-market health care reforms.
1) Health insurance should be uncoupled from employment.
The contraceptive coverage problem arises because most people with private health insurance receive it as a job benefit. Most Americans now take this for granted. But consider how odd it would be to receive, say, auto or homeowner insurance from our workplace.
The current system of employer-based health insurance is an artifact of federal tax rules from World War II. When the U.S. government imposed wartime wage and price controls, employers could no longer compete for workers by offering higher salaries. Instead, they competed to offer more generous fringe benefits such as health insurance. In 1943, the IRS ruled that employees did not have to pay taxes on health insurance paid for by employers, and the IRS made this permanent in 1954.
This law permanently distorted the health insurance market in favor of employer-based plans. If an employer pays $100 for health insurance with pre-tax dollars, the employee enjoys the full benefit. But if the employer pays that $100 as salary, the worker will only be able to purchase $50-70 of insurance after federal, state, and Social Security taxes. Over time, this tax disparity allowed employer-based health insurance to dominate the private insurance market. In 2008, over 90% of non-elderly Americans with private insurance received it through their workplace.
Hence, most workers don’t own their own health insurance in the same way that they own their auto or homeowners insurance. Employers generally decide which health plans their workers receive. When workers change jobs, they must almost always also change health plans. U.S. tax law thus artificially injects employers into decisions about employees’ health benefits. In contrast, note how employers need not become involved with their workers’ choices of auto or homeowner insurance.
2) Mandated benefits will become political footballs.
The current controversy arose from the government mandating coverage of contraceptives. But this problem is not isolated to contraceptives. Rather, any mandated health insurance benefit could ignite a similar political firestorm.
For instance, Massachusetts requires insurers to cover in vitro fertilization, a procedure recently condemned by the pope. Should Massachusetts Catholics be compelled to pay for others’ in vitro fertilizations despite their religious objections?
Under any system of mandatory insurance (such as in Massachusetts), the government must necessarily specify what constitutes an acceptable policy. This creates a giant magnet for special interest groups seeking to include their own favorite benefits in the mandatory package.
As Michael Cannon noted in 2009:
In the three years since Massachusetts enacted its individual mandate, providers successfully lobbied to require 16 specific types of coverage under the mandate. … The Massachusetts Legislature is considering more than 70 additional requirements.
Under ObamaCare, this special-interest feeding frenzy will expand nationwide. At a 2011 Dept. of Health and Human Services “listening session” to help determine the mandated “essential benefits” package, special interest groups openly lobbied for numerous benefits, including:
* Expanded services for autism and phenylketonuria
* Coverage for “eating coaches”
* Expanded coverage for HIV testing
* Coverage for medical nutrition therapy, especially for the African-American population
Mandatory benefits thus allow those with sufficient political influence to compel others to subsidize their favored medical expenses. Yes, it’s wrong to compel Catholics to pay for others’ birth control. But it’s equally wrong to compel women to pay for prostate cancer checks, or teetotalers to pay for alcoholism treatments they do not wish for and will never use.
3) We must fight for freedom as a principle.
As George Will noted:
The Catholic Bishops, it serves them right. They’re the ones who were really hot for Obamacare, with a few exceptions. But they were all in favor of this. And this is what it looks like when the government decides it’s going to make your health care choices for you.
If the Catholic bishops had previously opposed ObamaCare and supported free market health care reforms on principle, they would now have the moral high ground to argue for religious freedom. But having made their earlier deal with the devil to support ObamaCare, they’re now paying the price.
And their current attempts to seek their own ObamaCare exemption merely turns them into just another special interest group lobbying for a waiver, such as labor unions or the politically connected friends of Nancy Pelosi.
The Catholic bishops can recapture the moral high ground by not merely seeking a narrow exemption for themselves, but rather by supporting broader free market health care reforms, including:
A) Eliminating the tax disparity between employer-provided health insurance and individually-purchased health insurance. This would uncouple health insurance from employment and restore a level playing field to the individual insurance market. Individuals could then purchase policies that they kept even when they changed jobs (just as they already do with their car and homeowners insurance). Employers would no longer be responsible for coverage choices made by their employees.
B) Eliminating all mandated benefits — not just contraceptives, but the dozens of others such as orthotics, autism therapy, in vitro fertilization, etc. Insurers should be free to offer to willing consumers inexpensive policies covering only catastrophic accidents and illnesses. Insurers would remain free to offer richer policies that covered varying levels of elective procedures (but cost correspondingly more). Customers could purchase whatever levels of coverage they wished from willing insurers based on their own individual needs and circumstances.
These free market reforms would lower insurance costs for many consumers, allow individuals to keep their insurance when they changed jobs, and free employers from having to pay for medical services that violated their religious principles.
In summary, the root cause of the current controversy is government interference in the marketplace for health insurance. And the only proper solution is to repeal those government controls and move towards a fully free market in health insurance.