Friday, February 20, 2009

Fix The Health Insurance System, Fix The Economy

I'm reading Harry Dent Jr.'s latest book "The Great Depression Ahead" and it occurs to me that a significant cause for the pending deflationary economy according to Dent is the reduction in generational spending. As the baby boomers age, they are contributing less and less to the GNP. I can remember thinking in college that the limited number of births that occurred between 1961 and 1981 creates a gap in economic contributors. However, I also believed, and it seems now incorrectly, that situation would open up opportunities for individuals born between those years because there would be more jobs than workers. I did not anticipate that the reduction in GNP would also create an economic disaster removing those job opportunities.

So, the question becomes, what can the US do to bolster the GNP in light of this situation? The answer is obvious, but not simple to solve; increase productivity among the 28-48 year old. This cannot occur given our current heavily-weighted, "Big Corporation" mindset. We need to become lean and distributed in order to achieve our goal, which entails tearing down big corporations and creating smaller, more focused business units. It also means we need a more agile and transportable workforce; yet another constrast to big corporation design.

Now, the hurdle is how do we enable workers to leave big corporations for smaller, leaner pastures? We need to remove the one piece of leverage that big corporations hold over most of its personnel--benefits; specifically, health benefits. With the recession/depression in full-swing, retirement benefits and bonuses have already been impacted, so health insurance is the one major benefit companies can use to keep their indentured servants in their cubicles and not out on the street selling their services to the highest bidder.

Health insurance providers, states and big corporations have been in cahoots for years limiting the potential of small and individual business owners. The name health insurance isn't even accurate any longer, it's pre-paid health plans with a provision for major medical expense coverage (barely). Providers of these plans offer large corporations better benefits coverage at better prices than an individual or small business can buy. In some cases, they won't even offer small businesses and individuals comparable plans to those of the large corporations, with notable exceptions for things like flexible spending. Worst of all, this practice is protected by individual State's laws governing health insurance carriers.

There's an easy fix to this--national regulation of pre-paid health plans.

1) Pre-paid health plan providers must offer the same plans at the same price to everyone
2) Plans need to start being held by individuals and not by the employers;
3) This will:
a) allow people to take plans with them as they move between jobs
b) drive competition between pre-paid health plan providers
c) lead to health care providers normalizing prices
4) Once individuals take control over their own plans, they will no longer be beholdant to their corporate employers allowing them more freedom in job selection and allowing them to change more frequently
5) The government needs to make provisions for tax rebates for individuals paying for their own health care plan. This is key. Instead of handing out cash to spur economic growth, here's a valid use of a tax rebate that will spur change.

#4 and #5 above directly lead to greater productivity and faster economic growth. Indeed, it will spur an entirely new market. Best of all, once corporations get over the fact that this is no longer a control point for them over their employees, they will benefit from the reduced overhead associated with bringing employees on and dealing with their loss after they leave.