Health Insurance: How We Can Make It Better

The Affordable Care Act (Obamacare) is one of the most debated and hotly discussed topics in Washington—and across the country. Democrats laud it as a step forward for America's health care system, while Republicans criticize it as overbearing and too expensive.

The truth is, when comparing Obamacare to other forms of health insurance, it could be a lot better. Not by much, but by just enough that Americans would know they're getting something for their money. This post will make some suggestions on how to make those changes—without interrupting the free market or otherwise disrupting successful programs like Obamacare's exchanges. It would cost the government, obviously, but it's the tradeoff we must make if we want to keep America's popular health care laws working for all Americans.

The following suggestions build on this article I wrote last week, giving more details that will appeal to politicians and policy-makers who aren't too proud to recognize that a few tweaks are warranted. It wouldn't take many of them to bring America's health insurance system up to a new standard—and that's absolutely worth doing.

1) Let your old plan die: The thing is, Obamacare doesn't do much on plans that were already in place before it was enacted and don't meet the minimum standards of the law (which include things like covering prescription drugs). If you liked your old health insurance before Obamacare, and it was providing you with some decent coverage, let it die.

What this means is if you liked your old plan because it covered everything—and you didn't want to pay more for a new one—that's pretty much the end of that. Unless you think that the older plans have something really special going on—and they don't: If they've survived for five years, so has the Federal Employees Health Benefits Program (FEHBP), which covers federal workers and retirees. That's because almost all federal employees get better benefits than most private sector workers (Platinum plan benefits are better than most Blue Cross plans, for example).

Basically, the problem with letting your old plan die is that the only people who will be buying these plans are people who don't want to spend more on a new one and, as I pointed out earlier this month, that's going to cause insurers to leave these markets because they won't see a profit. If you do like your old plan in its current form, let it die: If you want it, try and get in touch with your senator or congressperson. Tell them why Obamacare is not good enough for you and explain what you really want. If enough people are willing to pony up a little bit more money, insurers will be happy to sell you that policy.

2) Gold is the new Bronze: Bronze plans are the cheapest ones on the Obamacare exchanges, with 60% actuarial value (meaning the average enrollee in this plan will need to pay 40% of their costs). This is basically bare bones coverage—it's a reasonable way for someone who is young and healthy to buy insurance, but it's not going to cut it for anyone else.

The problem with these bare bone policies is that they fail on all kinds of levels. They're not meaningful enough to cover all the costs of serious illnesses or accidents, they don't have enough benefits to pay for pre-existing conditions, and they don't cover the cost of medications. If you're young and healthy (or just lucky!), a Bronze plan is probably all you need to get by. But if you're older or have a pre-existing condition or are using health care services, there's no way your Bronze plan is going to be enough.

This reminds me of where a lot of Europe's worry over health care reform led them: They ended up with a system that's really hard for sick people to afford. And that's exactly what we're creating with Bronze plans.

Health insurance works best when it protects us against the worst-case scenarios—and in America, there are plenty of risky adventures ahead. Things that could happen to you:

A pregnancy that went wrong (and that you couldn't have known about)

A car accident (and you weren't wearing a seatbelt)

A cancer diagnosis (with no history of the disease in your family and no symptoms before)

Being exposed to a biological agent in a terror attack or bioterrorism attack (like anthrax or smallpox). In other words, nothing you can really plan for, but still possible.

These are just a few examples, but they're the most obvious ones. There's a reason that Bronze plans are being touted as the cheapest—not because they're all you need, but because Americans without health insurance will probably only be able to afford them. If you're young and healthy, this might not be a problem for you. But if you're older or have any kind of pre-existing condition, I wouldn't bet on it.

The real problem is that now that Bronze plans are being sold to everyone (instead of only people who don't qualify for an Affordable Care Act subsidy), there's going to be some big gaps in coverage. As I learned back in May, the number of Americans who "could be denied coverage because of a pre-existing condition" was already going up before Obamacare was enacted. The law only helped to tighten things, but it could lead to higher premiums for everyone else.

A better way to fix this would be to give everyone a Gold plan. That's what most of Europe does—the European Union requires a minimum level of benefits in all policies sold on its exchanges (even if they're sold off-exchange). In countries like Switzerland and the Netherlands, you can't even buy any non-Gold plan off-exchange.

The problem with Gold plans is that they're not cheap—and there's no way to know how much money you'll really end up needing to pay out of pocket until you get sick. But I have found that people will actually pay more for a Gold plan if they know exactly what their health care costs will be.

As someone pointed out in the comments section, however, Gold plans can often cost more than Bronze ones (in part because of all the benefits they put in to make them feel safer). So if you don't select a plan based on cost, then it's possible that things could get worse for younger and healthier people.

Conclusion: Gold plans are family car insurance

I do think health insurance should be a lot more generous than it is right now. It's not like there's anything you can do to avoid getting sick, after all—and we're already paying for most of the system.

Some sort of mandatory benefits package is going to have to go with the Affordable Care Act—but I don't think that's a failure. The idea here isn't just that Obamacare needs to make health insurance more affordable. It's also that we need to figure out a way for everyone to get some coverage, and that means making it easier for people who aren't able to afford individual policies today.