February 26 2010

IWF in the News: Health Insurance for Domestic Violence Victims Doesn't Require Reordering the Entire Health-Care System

Carrie L. Lukas

The most memorable moment of Congresswoman Louise Slaughter's (D-NY) fairly incoherent remarks at the White House health-care summit was surely her description of a constituent who used her dead sister's dentures because she couldn't afford to buy her own. It's a perfect example of an anecdote entirely useless to the current debate about health care: Yes, Congresswoman, we know there are some poor people who don't get all the care they need in the current system. The question is, what are we going to do about it?

While the denture drama can be brushed off, Slaughter brought up another issue that deserves serious attention:

[P]re-existing conditions have to go. It is cruel and capricious and done only to help the bottom line. This was not even anything we talked about 10 or 15 years ago, but I mentioned that all Americans should be treated the same. Let me give you a history.

Eight states have declared that domestic violence is a pre-existing condition on the grounds, I assume, that if you have been unlucky enough to get yourself beaten up once, you might do it again. Forty-eight percent is the higher cost for women to buy their own insurance. Believe you me that is really discrimination.

Is it really discrimination - and I'll take that term to mean bias against women in this context - to consider domestic violence a pre-existing condition? Actuarially speaking, it seems very likely insurance companies are making a rational link that those who have been victims of domestic violence consume more health care than the average person.

People naturally recoil from this. It seems unfair that women who are victims of such violence are penalized again with higher insurance premiums for something that is no fault of their own. Yet this is a common practice in insurance.

If your car gets vandalized, it's not your fault, but your insurance company may suspect you're parking in a neighborhood prone to crime. You thus might see your premium rise upon renewal. The same logic applies to home insurance. Undoubtedly, this can mean that people in lower-income neighborhoods face relatively higher risk premiums than those in posh suburbs. Life insurance applications ask dozens of questions designed to assess how great a risk you pose. This means a missionary who travels to poor countries to help the destitute is likely to be identified as a risk taker and pay a penalty for living a life of good works. It's not existentially fair, perhaps, but it's not discrimination based on malice either.

Let's say, though, that as a polity we decide we're just not comfortable with the idea some might find it more difficult to obtain insurance through no fault of their own.  What's the best way then to help them?

The Democrats claim the answer is to create a highly regulated insurance industry and ban the consideration of factors like pre-existing conditions. This means insurance premiums will become more expensive for the average person, which is why policymakers also must create an individual mandate to force everyone to buy the more expensive insurance and to institute price controls over premiums.

Yet we could help those with pre-existing conditions without completely reordering the health care system. As the Galen Institute's Grace-Marie Turner explains: "Access to health insurance could be guaranteed, including for those with pre-existing conditions or high health risks, through a network of programs that engage states, private-public sector partnerships, safety-net programs, and new subsidies and incentives to encourage continuity of coverage."

Remember, our current system heavily favors employer-purchased health insurance over the individual market and therefore creates a lack of portability and discourages continuity of insurance. Reforming this would be an important first step toward reducing the number of uninsured with pre-existing conditions.

As the Cato Institute's John H. Cochrane wrote:

A truly effective insurance policy would combine coverage for this year's expenses with the right to buy insurance in the future at a set price. Today, employer-based group coverage provides the former but, crucially, not the latter. A "guaranteed renewable" individual insurance contract is the simplest way to deliver both. Once you sign up, you can keep insurance for life, and your premiums do not rise if you get sicker. Term life insurance, for example, is fully guaranteed renewable. Individual health insurance is mostly so. And insurers are getting more creative. UnitedHealth now lets you buy the right to future insurance - insurance against developing a pre-existing condition.

For skeptics who believe a more free-market approach would leave too many without coverage, the government could even provide targeted assistance to those with pre-existing conditions to help them purchase insurance in a competitive marketplace. The point is, the government doesn't have to supress the extremely useful tools of health insurance markets and pricing differentials to address the problem of providing coverage to those with pre-existing conditions. 

Rep. Slaughter's anecdotes may evoke sympathies for those failed by the current system, but they say absolutely nothing about the merits of proposed reforms.

- Carrie Lukas is vice president for policy and economics at the Independent Women's Forum.

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