Here We Go Again

By Doug Thompson

The only reason millions have good health insurance is a loophole.

I forgot that. Then I watched the fight about health care — again. This is not a new issue.

What follows is crude, but vital.

I’ve reported news for a living since 1981. Health care comes up a lot over the years. Each time, small businesses and others complain they need the right to form bigger groups. This time, it’s part of the “nonprofit cooperatives” debate.

Suppose a small group of 10 people who aren’t rich want to buy insurance. The agent looks at them and asks himself: “If one of these people gets cancer, can the other nine cover the cost?” The answer is no.

If small bands of people could join each other and make deals as a big group, they’d have clout. The latest numbers I saw is that you need 25,000 members to spread risk and get economies of scale. You need 500,000 to have any bargaining power.

The exact number doesn’t matter. Size matters. The bigger the better.

Long ago, only big factories with all their workers in one state could broker deals like this. Other firms had many, many workers but they were spread out among the states. U.S. law forbade defining them as one group for insurance reasons.

Then Congress decided to make an exception for pension plans. They passed ERISA, the Employment Retirement Security Act of 1974. It was a long, long process that started in 1961. That’s when some big pension plans couldn’t cover their debts.

Some smart lawyers looked at ERISA and decided it could apply to health insurance, too.

If you have pretty good insurance from a multi-state company, you caught a lucky break. That’s all. The only reason anybody has good, affordable insurance is a loophole.

Now President Barack Obama comes out and says that maybe nonprofit health care groups could do. Maybe we don’t need a costly new government insurance plan. The reaction so far is “Huh?” Well, banding into bigger groups is what he’s talking about.

Obama’s foes don’t like it because they don’t like anything. His fans don’t like it because they want a “public option.” What’s that? That depends on who you ask. Simply put, it’s an insurance plan backed by taxpayer money. That plan would be available to anyone. It might even be required if you don’t have private insurance.

Suppose there’s a need for public option. OK. That need might be a whole lot smaller if there was coverage from co-ops for millions of people.

All I’m saying is that the president’s idea deserves a good look. The guy can’t do anything without making the Right mad and the Left angry.

Like it or not, our current pattern of health spending is killing us. Forget about the advantage foreign companies have where the government picks up health costs. Big companies between our own shores have a killer advantage over small ones. Big boys can offer health plans you can afford. Little guys can’t.

Why would anybody leave a big company with a good health plan to start up a small venture of his own?

What’s less American than a situation like this?

Take a paycheck stub. Get a piece of paper. Write down how much you pay for health insurance. Now, look at your federal tax withholding. Figure out your share of Medicare. Look at your state withholding. Figure out your share of Medicaid.

Now let’s figure in federal and state employee insurance coverage, which we pay for. Now go to your bank statements and add in your out-of-pocket expense for health care.

Add all that up. You will have what you’re really spending on health care. Keep in mind that a whole lot more is coming adding to our national debt.

At the current average rate of increase, that cost you just figured for yourself will double in nine years.

East Timor is half an island north of Australia. It is the only nation in the world that spends a higher percentage of its Gross Domestic Product on health care than we do, according to a 2009 study of health statistics from the U.N.’s World Health Organization.

Looks like we’re catching up.