Daily News Updates - Health Insurance News

McCain's High-Risk Health Insurance Pools, Pt.2-- Can they work?

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This is very different from Senator McCain’s plan, which goes the other way. McCain is allowing the free market forces to reign, predicting that removing the tax incentives that employers depend on and passing them over to individuals will enable consumers to cause private health insurance providers to “broaden access to coverage”. Of course, the employer-based risk-pool health insurance presence will diminish. The current structure of employer-based health insurance provides for a vast risk pool, covering the spectrum of workers between the ages of 18 to 65 years of age. The “young and old, sick and healthy are mixed together”. The premium costs are homogenized in such a way that those with better health tend to subsidize those who are less healthy. Costs are averaged out.

Current tax incentives encourage employer-based health insurance by giving tax breaks to those who use it. This would all change with McCain’s proposal. He would eliminate the employer tax subsidy and move it to individuals so that they will apply it toward private health insurance companies which, at present, very rarely include risk sharing. In defense of this, Senator McCain touts “this would allow people the freedom to choose any plan they like, not just one of two or three offered by their employer. Healthy, young people would likely see lower rates”. Could be a problem, though…following the rules of a consumer market, today’s private health insurance providers mostly deny coverage to the old and sickly. Their statistics show that this group is not only reduce their profit margin but, even worse, could cause a loss on a private-plan based premium.

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