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Commentary

Capital: Time to Cure the Health-Choice Headache
David Wessel, Wall Street Journal, 12-9-04

This article lauds the principle of consumer choice in health insurance, but notes that there is one important element missing that would make it work: easily available, standardized information that would allow consumers to directly compare health insurance costs and benefits without wading through an ocean of confusing jargon. Wessel says that after reviewing the employer sponsored insurance plans offered by his and his wife’s employers he threw up his hands in frustration. “I majored in economics in college . . . [but] after staring at the grids our employers provided, I surrendered: There was no way I could make a rational choice, and it’s not just because its impossible to predict if someone in the family will get sick next year.”

Wessel discovers that the government’s Office of Personnel Management has found a simple way to help millions of federal employees pick the right plan for themselves. The OPM “told all insurers who want to pitch to federal employees to organize information the same way to make it easier for people to compare [plans and options].” He goes on to ask, “is it so unreasonable to ask big employers and insurance companies to come to a similar compact for the rest of us so they all use the same understandable acronym free-language to describe their offerings?”

It certainly isn’t unreasonable, but one of the forces inhibiting standardization is that employers usually only offer one or two plans to their employees, and thus have little incentive to require standardization from providers. If, on the other hand, as in the federal government, employees could choose from dozens of plans, insurers would have powerful incentives to make their offerings employee friendly. Health savings accounts (controlled by individuals, not employers) should help to spur more consumer friendly insurance information, but additional help from Congress is needed, i.e. creating a single health insurance market for the entire nation. Once insurers could offer plans on a national basis, they’d have powerful incentives to standardize the way they present their policies to consumers.



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