Monday, June 22, 2009

How California Uses Health Insurance To Blackmail Its Residents

Sherman Oaks, California

Liberal blogger digby recently posted about the manner in which current health insurance laws provide a disincentive to seek diagnosis and treatment. In short, he and his commenters complain that seeking treatment for a condition makes it harder to retain coverage, and, as would be expected left of the political center, they blame insurance companies.

But state government is the principal villain in this particular drama, not the insurance companies. The state puts its greed for taxes above the health of its citizens.

California is my example. State law makes a distinction between health insurance policies which are issued to individuals and those which are issued to groups. A person who signs onto a group policy -- usually by accepting traditional employment -- must be granted coverage. A person who applies for individual coverage -- usually the self-employed -- can be rejected for any reason.

Why the radical difference in treatment?

It's about tax collection. If you accept a traditional job, the state collects its taxes in the first instance by withholding them from your paycheck. It keeps any excess for up to a year, without having to pay interest.

Self-employed individuals are harder to tax. They may file quarterly, they may wait until the end of the tax year to pay, and, if they are experiencing an income shock, they may pay less.

So, in order to protect its cut, the State of California does a reprehensible thing: It protects a traditional employee's access to health insurance, while placing self-employed individuals at the mercy of the insurance underwriting process.

Sacramento could fix this disparity, but it won't. The public employee unions, which subsist on tax revenues, have captured the Legislature, and it's in their interest to keep the dollars flowing.

There are some problems with the U.S. health care system, and health insurance companies are not saints. But coverage despite the existence of pre-existing conditions is a problem which the state government could easily solve and, in the case of traditional employees, has solved.

But, in the case of the self-employed, they won't solve the problem, because, for all the platitudes praising entrepreneurship, the state prefers that you be a 9-5 drone floating it a zero-interest loan. And it uses the threat of no health insurance to force you into submission.


Anonymous Roger said...

Peter -- I am so happy to see the reinvigoration of this blog. As always the posts are perceptive and entertaining. I hope this pace is maintained. How about a post on that paper you wrote? Roger.

3:07 AM  

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