writing, marketing, sales, billing and other administrative costs that offer no health benefits. More than half of all American employers who offer health-care benefits don't offer their employees a choice. Consequently, most Americans don't have the option of giving their business to insurance companies that treat them well and only cover what they need. This prevents the usual market forces from holding down costs.
Workers are the ones paying for this waste. The money that employers are spending to buy health care for their employees could otherwise go to workers in the form of higher wages, empowering individuals to make their own health-care choices.
The currently available alternative to this employer-based system is even more horrifying. Individuals buying insurance don't have the same purchasing power as large businesses and end up paying much higher prices to cover administrative costs and risks. They also don't get the tax breaks that employers get for buying health insurance. In most states, insurance companies have the right to discriminate against individuals by denying coverage or charging astronomical prices to anyone with a pre-existing condition. It is no surprise that, when given the choice between the employer-based system and buying health insurance on their own, the vast majority of Americans reject the latter. (A Kaiser Health Tracking Poll this summer, for example, found that only 17% of Americans said they would prefer to buy insurance on their own.)
But this is a false choice. It assumes that the current system is the only option. Why can't Americans have the best of both worlds?
In today's Opinion Journal
REVIEW & OUTLOOK
- Business World: The Bailout That Won't
– Holman W. Jenkins Jr.
- The Tilting Yard: Rent-a-Womb Is Where Market Logic Leads
– Thomas Frank
Americans need some of the benefits of the employer-based system: the security of being part of a large group, of not being denied coverage because of age and pre-existing conditions, and the convenience of having experts screen qualified plans and manage enrollment. But Americans also need portable insurance -- coverage that follows them when they change jobs, lose jobs, start a business or whatever else may come. Americans need more choices and the market power to buy the health coverage that works best for them and their families and, in turn, to make insurance companies compete for their business.
Such a system could be implemented today by creating state or regional insurance exchanges that pool individuals and small groups to pay the same lower prices charged to larger employers; that certify that all insurance benefit packages meet minimum consumer protection standards; that manage the enrollment process; that collect premiums; and that require insurance companies to issue and renew coverage for anyone who applies, protecting the insurers by paying them a risk-adjusted premium that pays them more when they enroll sicker, more costly, patients.
Fundamentally, this means that insurance companies would have to change their business model to compete on the basis of quality, price and benefits, rather than by "cherry picking" the healthiest people to cover. It means spending less money on administrative costs and more money on keeping patients healthy. And it means letting everyone keep the health insurance they have if that's what they want, but giving all employers and employees more choices for their health care.
In the coming year, there will be no shortage of suggestions for fixing the nation's health-care system. But what Americans and the president-elect need to ask is whether the health-care system that was founded in the 1940s is the best health-care system for the 21st century. We believe that Americans deserve better.
Dr. Emanuel, an oncologist and chairman of the department of bioethics at the National Institutes of Health, is author of "Healthcare, Guaranteed" (Public Affairs, 2008). Mr. Wyden, a Democrat, is a U.S. senator from Oregon and sponsor of The Healthy Americans Act.
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