The problem with Potter

The New York Times, in an op-ed column, describes how former insurance executive Wendell Potter is now championing universal health care, a "reform" he worked hard to oppose while he was employed by the industry. Potter feels remorse for some of the practices his former industry uses to cut costs, and he wants universal health care to solve these problems.

Potter notes the following unsavory, though legal, tactics used by insurance companies:

• Denying expensive procedures
• Raising the premiums for small businesses if an employee needs expensive treatment, thus forcing the business to drop coverage for all of its employees or to seek coverage elsewhere (but now with one employee who has a preexisting condition)
• Perhaps the most inflammatory practice, rescission: When a covered individual develops an expensive-to-treat illness, the company goes back through its records to see if it can find a form that wasn't filled out correctly or other reason to declare that person's coverage invalid retroactively

Universal health care, he thinks, would solve these problems -- and he believes a public option is a necessity to combat rapacious insurance executives.

The problem is that it's government intervention that has bought us these objectionable tactics in the first place. Were it not for the massive tax incentive for employers to buy insurance coverage that encompasses routine expenses -- expenses that, as I've argued in the past, it doesn't make sense to insure against -- individuals, and not their insurers, would be deciding whether an expensive procedure or drug is worth the cost. Expenses high enough to cause a catastrophic policy to kick in would be rare -- rare enough that the premiums paid in by most people over their lifetimes would be able to cover those few people who experience an unforeseen and truly catastrophic health issue. Employers wouldn't be the ones who decide what kind of insurance gets purchased, so small businesses wouldn't be forced to choose between a sick employee and the rest of its staff.

And rescission? Let's face it: Some businessmen do look to make profits not just by trading value for value, but also by screwing over their customers in a technically legal way. But liberals act like all businessmen do this -- and not only is that not true, but a free market provides a strong disincentive to do it. In our current far-from-free market, there is little individual choice between insurance plans -- so consumers can't vote with their feet. But in a free market, a company that practiced rescission on a regular basis would not last long: People would hear about it, just as they're hearing about it now. And in a free market, when they hear about it, they can decide they don't want the same thing to happen to them -- and take their money to an insurance company that has a better reputation for treating its customers well.

Potter is certainly right that our current system has serious problems. But he's dead wrong about how to fix them. Further government intervention in health care will only create higher costs, which will lead to rationing -- hardly, I think, what he means when he says that health care should be universal. It was government intervention that caused these problems in the first place -- and only the free market can solve them.