Wednesday, February 22, 2012

The Contraception Mandate And Eroding Liberty, Part II

Pleased to meet you,
Hope you guessed my name.
Ah, what’s puzzling you
Is the nature of my game.
—The Rolling Stones, Sympathy for the Devil

Continuing with last post’s discussion of the erosion of liberty flowing from the contraception mandate, I want to turn from the attack on our religious freedoms and our right to be secure in our persons, and look at the private property aspect of this, and of Obamacare more generally.  In particular, I want to focus on the fundamental misunderstanding—or deliberate misrepresentation, depending on how you spin it—of what insurance is, because that misunderstanding appears to drive a lot of this debate.

First, it’s not “health care,” and it’s not “health insurance.”  Those are monikers deliberately crafted to play into the Left’s feel-good narrative that this is all about a “right” to see a doctor.  But that’s not what we’re really talking about.  What we’re talking about is medical expense insurance—that is, policy coverage to offset certain costs associated with medical services.  But let’s back up.

Insurance in our modern sense originated in the form of marine insurance—policies providing some measure of compensation for the value of an oceangoing vessel and its cargo in the event they were lost at sea.  We can think of it as a kind of wager: the vessel owner bets $10 that the ship and its cargo will go down, and the insurer bets $10,000 that it won’t.  We would never say that the vessel owner has a “right” to the vessel going down, or, for that matter, that he has a “right” to make the insurance company prevent that from happening.  He doesn’t even have a right to have the government force the insurer to write the coverage.  What we have is a private contract; an agreement whereby one party pays a fee in order to receive a financial guarantee from another against the happening of a specified risk.

Typically the amount the policy holder pays is very small relative to the magnitude of the risk being covered—otherwise it would make more sense to just bear the risk ourselves.  The insurance provider can make this work because, just like diversifying your investment portfolio, they spread their risk across a large number of policies.  In my marine example above, wagering $10,000 against a $10 premium seems like a bad bet, until we consider that the odds of that particular ship sinking are very low.  Let’s say 1 in 2,000 ships actually sink.  If the insurance company writes policies covering 10,000 of them, it collects $100,000 in premiums.  Statistically, they can expect five of their covered vessels to sink, and thus they will have to pay out $50,000 in benefits.  The remaining $50,000 goes to pay their overhead and costs of business, and anything left over is profit.  That is how the insurance business works.

Of course, if we force the parties to change the coverage terms, we change the mathematics.  For example, if we compel the insurer to pay $50,000 in benefits instead of $10,000, we see very quickly that the statistical risk calculation doesn’t work for him; the same five vessels will sink, costing the insurer $250,000 versus only $100,000 in premiums.  The insurer must either raise the premium, or go out of business.  Neither result is good long term for either the insurer or the insured.

Fundamental to the insurance proposition is that it’s a private agreement.  We can write insurance to cover just about anything as long as we can reach an agreement with the insurance provider as to how much the premium is, what the insurance is to cover, what the monetary limits of that coverage are, and any time limitations that may be applicable.  With medical expense insurance, the concept is NOT that you have the right to see any doctor, anywhere, anytime, for anything.  These same principles of agreement apply, and you must reach an agreement with the provider as to how much your premium (co-pay is a form of per-event premium) is, what illnesses or procedures are covered, what the limits are on how much the provider will pay, and over what period of time the provider will cover you.  Each of those items is almost infinitely variable, but you and the insurance provider must reach an agreement on them.  Once you do, you have a private contract that defines exactly to what you are entitled. 

But somewhere along the way, this idea of insurance as an agreement seems to have been lost.

The Left regards employer-provided medical coverage as some form of fundamental right—but when did this “right” come into being?  Prior to the late 19th Century, medical expense insurance as we know it did not exist.  None of the Founders had it.  Abraham Lincoln didn’t have it.  It’s unlikely that Progressives like Woodrow Wilson or FDR had it.  And before the 1960s, those who had medical expense insurance almost invariably had it through private policies that they bought themselves.  The practice of employer-provided medical expense insurance only became widespread after the creation of tax rules that made it more advantageous for employers to include that coverage as a benefit in their compensation package than simply to offer their employees higher wages that they could use to buy their own medical expense coverage or otherwise spend as they saw fit. 

As these employer-provided policies have become ubiquitous, however, they have come to be viewed incorrectly as some kind of entitlement, rather than as a compensation benefit provided by virtue of this three-way agreement between the carrier, employer, and the employee.  You do not have a “right” to “health care” at someone else’s (the insurance company’s) expense; what you have is a right to reimbursement for whatever medical expenses are specified in your insurance agreement.  And this is where the contraception mandate in particular, and the individual mandate in Obamacare more generally, have their problem. 

Let’s say, for example, that the local Catholic diocese operates Holy Cross Hospital, and offers its employees medical expense coverage through Aetna.  Let’s say further that every one of the Holy Cross employees is a practicing Catholic.  The diocese doesn’t want to provide, and the employees don’t want to receive, a policy that covers The Pill.  Aetna is perfectly happy to write a policy that doesn’t cover it.  All three parties to this private agreement are happy to agree voluntarily to this arrangement—it’s exactly the way they want it.  Under Obamacare and the contraception mandate announced by HHS, they don’t have any choice.  They’re going to have to change their agreement whether they like it or not. 

Let’s take another example.  Let’s say OB1Solar is a green energy startup, and offers its employees a choice between a medical insurance plan or an extra $30,000 in base salary.  Many of these employees are young, healthy, and single; they view their risk of needing medical care as slim, and thus see a greater benefit in taking the extra cash rather than the policy.  They voluntarily agree to take a job without employer-provided insurance, and OB1 voluntarily hires them on that basis.  Again, all the parties to this private arrangement agree it’s exactly the way they want it.  Under Obamacare’s individual mandate, they don’t have any choice.  They’re going to have to provide/accept medical coverage whether they like it or not.

Both mandates are an affront to the notion of private contracts, which is a fundamental aspect of private property.  When and from where did the federal government—and the Chief Executive in particular—get the power not only to order you to enter into a private contract, but also to order what the terms of that contract must be?  And if that power exists, where does it end?  This is not just a Freedom of Religion issue reserved to Catholics.  It’s an Article II issue (as I explained yesterday), and a freedom of contract/private property issue.  

And that affects everybody.

No comments:

Post a Comment