You Decide

Welcome to the insurance debate

December 28, 2013 

I was expecting a relaxing holiday dinner with family, many of whom I hadn’t seen in months. I was expecting the conversation would focus on children, vacations, hobbies and, for some, their retirement. I was expecting the most controversial discussion would be about rival sports allegiances.

I was completely wrong. While the above topics did come up, the bulk of the conversation was about health insurance and, in particular, arguments between those supporting and opposing the Affordable Care Act, commonly referred to as Obamacare. At some points, I was actually afraid turkey drumsticks might go flying across the table.

I did my best to keep the discussion civil. I put on my invisible “educator hat” and tried to steer the conversation to an examination of several key questions about health insurance, of which there are many. I think I made some headway – at least no punches were thrown, and everyone hugged or shook hands when the dinner was over. And I think I succeeded in having some of my family pull back from entrenched positions and at least consider options for the issues.

Here are four issues I raised. As I did with my family, I’ll present alternative viewpoints and then let you decide on the best approach.

•  Should everyone be required to have health insurance? This is perhaps the core question in the health-insurance debate. Indeed, it is so important that the Supreme Court issued a ruling allowing the requirement to proceed.

Opponents say such a command goes against our freedom of choice over what we buy. If someone wants to forego health insurance – or even health care – shouldn’t they have that right?

Supporters of the requirement use a different logic. They say that in a practical sense, everyone will receive health when they need it, even those without insurance. For supporters, the issue is one of payment. Should everyone be required to pay for their own care by having health insurance?

•  Should insurance rates rise with risk? Insurance companies must collect enough in revenue (premiums) to make payments on claims. This means insurance companies have an incentive to charge people more if they are expected to make more claims. For example, someone owning a home at the beach – where severe storms causing major damage are more likely – would be expected to pay more for property insurance than someone whose home is miles from the ocean.

The same relationship applies to health insurance. Someone with a known heart condition, where the likelihood of treatment and surgery is very high, would make more claims on the insurance company and therefore would be charged higher premiums. Also, as people age, their use of the health-care system increases. Therefore, insurance companies typically charge older individuals higher premiums.

The Affordable Care Act imposes limits on both of these types of premium increases. Yet this means younger people will pay higher premiums than their risk would suggest, and others will pick up some of the tab for those with physical characteristics requiring more health care.

•  Can competition control health-insurance costs? Those answering “yes” say more competition between insurance companies, doctors, hospitals and pharmaceutical companies is the way to keep costs under control and prices lower. Advocates therefore favor fewer government rules and regulations in health care, especially those – such as restrictions on interstate sales of insurance policies – that might impede companies vying for the business of customers.

Those answering “no” say health care and health insurance are different than other markets. They argue that medical information is too technical for most people to evaluate and compare. Also, while communities can still function if a local supermarket fails, the closure of a hospital or the bankruptcy of a health-insurance company could be devastating to patients and consumers.

•  What should be the role of government in health care and health insurance? This is perhaps the most divisive issue in health care. In one corner is the viewpoint that government’s role should be minimal, perhaps limited to providing financial support to help some purchase their own health insurance and making sure effective competition exists. But most health-care and health-insurance decisions would be left to individuals.

In the opposing corner is the belief government should play a major role. Not only should government help some buy insurance, but government should also establish standards for health insurance policies, monitor and perhaps limit premium prices, supervise how insurance companies spend their revenues and help doctors and hospitals evaluate the relative benefits and costs of medical procedures and treatments.

There are many more questions, but these are a start to helping you make up your own mind about the great health-insurance debate. Now I’m going off to have a quiet meal – by myself.

Dr. Mike Walden is a professor and N.C. Cooperative Extension economist at N.C. State University.

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