Even without subsidies, those paying higher premiums because of pre-existing conditions get a good deal. Professor Pauly found that high-risk customers pay “on average, about 1.6 times those of lower risks” while incurring four times more expenses.
Absent destructive price controls, insurers could address the pre-existing conditions problem with innovative products that guarantee your future insurability. For example, “health status insurance” would pay for increased medical insurance premiums that result from your getting sick. UnitedHealth’s Continuity rider is a version of this.
The best way to avoid having a pre-existing condition is to buy insurance when you’re healthy and avoid lapses in coverage. But politicians make this difficult by enforcing an unfair tax code that favors job-based insurance over individual insurance. With job-based insurance, losing your health can mean losing your job, and your insurance.
Not so with insurance you buy directly from insurers. Based on his research, Professor Pauly concludes that job-based insurance “leaves a person who becomes high risk more vulnerable to dropping or losing … coverage than does individual insurance.”
For many years — and without government mandates — many individual policies have been guaranteed renewable. Insurers could not increase your premiums or drop coverage when you got sick. This would be illegal, a violation of the insurance policy’s contract. A 1997 regulation mandated that all plans have such provisions. This makes the ObamaCare’s redundant “consumer protection” on this matter a fraudulent selling point.
Another way to mitigate pre-existing condition problems is to repeal controls that make insurance unaffordable for many. To different degrees, states outlaw economical policies by requiring that all policies cover treatments you may neither want nor need. University of Minnesota economists estimate that allowing people to buy cheaper policies sold in other states would make insurance affordable for twelve million uninsured Americans.
Like a hammer that sees every problem as a nail, many politicians think the solution to every problem is legislation that erodes our liberties. Instead, they should consider how such controls contribute to these problems, and how free markets provide solutions.