America's doctors and medical institutions are the envy of the
world. The level of expertise and the pace of innovation in U.S.
health care are unmatched. Yet, many Americans worry whether they
will have access to medical care when they need it. The reason is
that America's health insurance system does not function very well.
Too many Americans lack health insurance, there are gaps in
coverage, and costs are increasing at an alarming rate.
Some politicians want to put the entire health care system under
government control, but common sense stops many citizens from
embracing that "solution." Other politicians are content to do
nothing, or they defend an increasingly indefensible status
The conservative alternative to "socialized medicine" is to
enact serious reforms in current tax and insurance law that would
expand personal ownership and control of health insurance and
transfer the control of health care dollars to individuals and
families. Citizens can help to achieve that goal by becoming
informed about the best policy alternatives to advance their
Freedom of Choice
Most American businesses operate in something closely resembling
a free market: Consumers are free to pick and choose goods and
services. Thus, consumers have the ultimate say about what succeeds
and what fails in sectors such as cars; fashion; music;
restaurants; and financial services; as well as in other areas of
insurance, such as auto, life, and homeowners insurance. Yet, this
fundamental principle is absent from the health insurance market in
the following ways:
Limited Choice. Free market forces, driven by consumer
decision-making, do not operate in America's private health
insurance system. Soon after World War II, Congress made changes to
the tax code that tied a patient's access to health insurance to
his or her employer. Under the current legal regime, the employer
buys a worker's health plan, determining what it will cover and how
much it will cost. The key decisions are made by employers, not
No Portability of Coverage. In the current system, the
worker pays for the health insurance policy (which is part of his
compensation), but the employer owns it. Therefore, workers cannot
take their policies with them if they change jobs. Even if it
offers the same package of benefits, buying a health insurance
policy outside of work can cost up to 50 percent more than getting
it through an employer. The lack of a tax benefit puts the cost of
individual health insurance out of reach for many people.
Problems of Conscience. Some patients have moral or
religious objections to what is included in their health insurance
packages. According to a 2003 Kaiser Family Foundation survey, for
example, 46 percent of workers getting health insurance from their
employer are also paying for abortions through their premiums.
Workers who find this objectionable are powerless to change it
because, in most cases, they have no choice about the health
insurance they get at their place of work. They get what their
employer gives them.
Federal Steps to Expand Choice
Congress should consider the following steps for expanding
personal choice and portability in health care coverage:
- Create a federal health care tax credit that offers the same
tax benefit for buying health insurance on the individual market
that is currently available only for buying through an
- Allow people to own their own health insurance, without a tax
or regulatory penalty, which would allow them to keep it no matter
where or whether they work. This would enable individuals and
families to carry their coverage from job to job without changing
their health care policy. This would mean true portability in
- Remove statutory prohibitions and any tax or regulatory
penalties that apply when individuals and families want to buy
health insurance sold in another state.
State Steps to Expand Choice
States should consider the following options for expanding
personal choice and portability of coverage within their borders.
It should be noted that some states are already pursuing these
Creating a Health Insurance Exchange. Unless and until
Congress changes the tax treatment of health insurance at the
federal level and creates direct and individual tax relief for
individuals and families, real consumer choice will not drive the
health insurance markets.
In the absence of this kind of federal tax reform, one promising
idea being advanced by forward-looking state legislators is the
creation of a "health insurance exchange." Basically, this would
work like a "stock exchange" for health plans. Consumers would buy
the health plans they want, and employers would make a defined
contribution to the "exchange" to cover the cost of the chosen
Under this approach, the "exchange" would be designated as the
employer's plan under federal law; therefore, the employer's
contribution and the value of the employee's chosen plan would be
tax free under federal law. The key change is that the
employee--not the employer--owns the health plan and can
take it from job to job. Thus, a statewide health insurance
exchange would make health plans both personal and
Reviewing and Repealing State Mandates. State mandates
are laws that require insurance policies to cover specific benefits
or medical services. Nationwide, there are almost 2,000
state-legislated health insurance mandates. Some of them are
ethically objectionable or controversial. In vitro fertilization,
for instance, is mandated in 13 states; contraceptives, in 30.
State officials should identify and repeal costly, outdated,
unnecessary, or ethically objectionable or controversial benefit
and provider mandates.
Taken together, these federal and state reforms would expand
personal ownership and control of health insurance. Needless to
say, these changes would be opposed by many big institutions that
profit under the status quo, especially firms that would be forced
to change their way of doing business. Under such reforms,
individuals and families would become the key decision-makers, and
companies would have to compete for their business. But when
companies compete, customers win.
Although big change would not happen overnight, such reforms
would bring real freedom of choice to health care. The
possibilities would be endless. For example, a faith-based
fraternal organization might decide to sponsor a health insurance
plan consonant with the ethical and moral values of that faith.
Persons from all over the country could buy the health plans that
they wanted. Large, national pooling arrangements would develop,
and costs would come down.
How Individuals and Families Can
The first step toward changing the status quo is becoming
informed. A citizen can learn about his or her health insurance
situation in the following ways:
First, workers should ask their employers whether their
plans require workers to pay for abortions or others services that
they find morally objectionable.
Second, citizens should find out who in the state makes
regulations that affect insurance and how those regulations affect
patients and health plan premiums. In some states, citizens elect
an insurance commissioner; in others, the governor appoints one. In
some states, legislatures enact mandates; in others, the insurance
commissioner simply imposes them.
Third, individuals and families should become familiar
with their states' insurance mandates. These mandates force
patients to pay for benefits or services that they do not want or
find morally objectionable. If a state is considering a health
insurance exchange, individuals, families, and policymakers have an
opportunity to examine the entire insurance system. They can learn
about objectionable mandates and ask their legislators to remove
The conservative alternative to "socialized medicine" is giving
individuals and families the freedom to choose the health care that
they trust. Policymakers at both the federal and the state level
have many options for restoring freedom of choice to the private
health insurance system. Citizens have a critical role to play by
becoming informed and pressuring lawmakers to remove the
regulations and policies that restrict personal choice.
Connie Marshner is a Visiting Fellow
for Domestic Policy Studies at The Heritage Foundation.