In both the House of Representatives and the Senate, Congressmen are currently debating proposals to solve the healthcare predicament in this country. Some of these proposals, however, will not correct the perversions of the healthcare industries; indeed, they will only exacerbate the current problems they claim to solve and create new problems that will have to be solved in the future. One of these proposals is the so-called ‘individual mandate.’
The Democratic leadership of the House has made its primary goal in reforming the health insurance industry to provide coverage for the roughly 46 million Americans that at any given time in a year do not have health insurance. In order to do this, they want to require all Americans to buy health insurance, either from private insurers or from the proposed ‘public option’. Their justification for such action is this: many people choose not to buy health insurance, primarily because their health expenses are lower than the price they would have to pay for insurance coverage.
Therefore, forcing these individuals to buy health insurance would result in a greater rise in insurance companies’ revenues than in their costs, and also would result in a drop in the average cost of each customer to the insurance companies. This drop would allow companies to offer lower prices, making insurance coverage more affordable for those who previously could not afford it.
But, in the current heath insurance market, such benefits would not ensue from such a policy. Since the health insurance market is uncompetitive as a result of its fragmentation amongst the fifty states, health insurance companies would not pass any decrease in their costs off to their customers in the form of lower premiums—they would merely pad their own profits. Moreover, the monopoly or cartel statuses of many companies and groups of companies would be entrenched.
Currently, individuals and businesses have at least a small degree of choice regarding health insurance: they can either buy insurance from the monopoly or cartel that dominates the market in their state, or they can choose not to buy insurance at all. The ‘individual mandate’ would eliminate the second of these choices, forcing individuals to buy from the monopolistic supplier.
Who would be affected by this situation, and how? Monopolistic insurance companies would love it—they would get to charge as high a price as they wanted without any consequential drop in the number of people buying coverage from them. And indeed, the health insurance lobby supports the individual mandate while it pushes heavily to keep the current state-run regulatory system in place—only law firms have given more money to members of Congress in the past year than the health insurance industry, according to the Centre for Responsive Politics. Members of Congress also gain from this arrangement—they can happily announce that universal healthcare has been achieved, that ‘consumer rights’ have been protected and that the middle class family of four will now get the health insurance that it deserves.
But which consumers would benefit? Those who were already insured? They would be paying more for the same coverage that they already had. Those who were not insured? They would be forced to buy a good they did not find worth their while to buy before and certainly would not find worth their while to buy after a sharp increase in prices. Every private and political interest affected would benefit, but consumers would pay dearly for the policy allegedly passed on their behalf.
The fact is, consumers cannot benefit when governments interfere in free markets, even when governments claim to interfere on their behalf—prices and costs will always be fair, and usually lowest, when potential buyers and sellers have the choice of whether to buy or sell, at what price to buy or sell, what quantity of goods to buy or sell, and from whom to buy and to whom to sell. Governments cannot give consumers these choices—they can only protect the existence of these choices both by refraining from intervening in the market and by ensuring that markets are competitive rather than dominated by a monopoly or cartel. Unfortunately, the federal government has failed to uphold the second part of its obligation, and is at risk of violating the first.
