Saturday, April 21, 2012

Wolf on Mandates, Sebelius, and Kansas

Dr. Milton Wolf has a new OpEd in the 4/20/2012 Washington Times, "Kathleen, I’ve got a feeling you’re still in Kansas".

He notes that too often both Republicans and Democrats favor mandated insurance benefits, even though such compulsory spending hurts innocent people. He offers some informative contrasts between highly-regulated health insurance and less-regulated auto insurance:
Kansans are allowed to purchase car insurance directly from any provider across the country, and you won’t find state mandates that force your auto insurance company to cover windshield-wiper blade replacements or oil changes. You also won’t find tax penalties that coerce you into buying auto insurance through your employer rather than on your own, but that’s another story.
So which is more effective at keeping costs lower and serving Kansans - the big-government health insurance mandates or the auto insurance free-market approach? Is there a single person who believes we have an auto insurance crisis in America?...
State mandates, by their very nature, eliminate competition. It’s ironic that supporters of mandates don’t realize - or perhaps they do - that their approach creates oligopolies within each state where only a few large companies can operate and artificially drive up prices. The free-market approach, on the other hand, opens the door to innovative companies like Geico and Progressive, which have revolutionized auto insurance.
Every state faces this dilemma between destructive but poll-driven big-government mandates and demonstrably effective free-market reforms...
(Read the full text of "Kathleen, I’ve got a feeling you’re still in Kansas".)

Insurance companies get a bad rap from the public. Some of it is deserved, if they fail to live up to their contractual obligations -- but that's not "greed", that's fraud.

In a free market, honest insurance companies provide a valuable service, allowing customers to share risk on mutually agreeable terms. Some people will want lean "catastrophic only" coverage with lower premiums, whereas others may wish a more "gold plated" plan that covers more services (but has correspondingly higher premiums).

The beauty of a free market is that it allows prospective insurance customers to find other like-minded people to voluntarily share the risks they want, without compelling others to do so against their will.

For more on this, see: "How the Freedom to Contract Protects Insurability" (The Objective Standard, Fall 2009).