Apples and Oranges

The Commonwealth Fund once again is making headlines with a new study that says people with individual health insurance policies pay more, get less, have higher deductibles, and are less happy with their coverage than those with job-based plans. This certainly would seem to undermine confidence in private health insurance.

But America’s Health Insurance Plans immediately countered that the Commonwealth study – which was based upon telephone interviews with only 137 people with individual policies (of 1,878 total in the survey) – doesn’t jibe with AHIP’s own survey of 1.9 million individual policies covering 3.2 million people.

AHIP found that individual insurance policies were more affordable than Commonwealth reported and had richer benefits. Further, AHIP’s data shows that 9 in 10 people who completed the application process were offered coverage. Commonwealth said that 9 in 10 people who “explored” buying coverage in the individual market didn’t succeed.

Certainly the market for individual health insurance has problems, many of which are due to heavy-handed regulation and mandates by the states. But the Commonwealth study is most off the mark with its basic concept of comparing what those with individual policies say they pay in health costs vs. those with job-based coverage.

It is an apples and oranges comparison, made even fuzzier since the Commonwealth data comes from telephone interviews (while AHIP’s is from actual policies purchased).

When people buy individual policies, they must pay the full cost. But workers with job-based policies see only a fraction of the cost and are under the illusion that their employers pay the rest.

Once again, it gets down to tax policy. Health insurance is part of the total compensation package for workers, but tax policy shields them from seeing its full price.

So it’s no wonder that people with individual policies say they pay more. Their full costs are visible, but not for workers with job-based policies.

There is a brief aside by Commonwealth in footnote #14 about “economic theory” suggesting that “the differences in premium costs between those with individual coverage and those with employer coverage might be less than these data suggest.”

Well, yes! Economic theory is right.

Heads nodded throughout a room of women business owners this week when I talked about health insurance costs. In a speech to the annual conference of Women Impacting Public Policy in Washington, these women acknowledged how difficult it is to boost the wage package for each of their workers by thousands of dollars to buy them health insurance. These business owners know that health insurance is part of a worker’s pay. If they offer the insurance, salaries will be lower.

So looking just at what people SAY are their out-of-pocket costs is hardly a legitimate study. Workers and individuals pay the full price. It’s just that individuals know it.

Commonwealth should go back to the drawing board on this one. And maybe they could also join us in calling for deregulation of the health insurance market that makes individual coverage unnecessarily expensive and for changes in tax policy that would give people who buy individual coverage an even break.


And there is yet another study out that is upsetting our friends in the policy community, this one from GAO on “Early enrollee experiences with health savings accounts and eligible health plans.”

GAO’s main conclusion is that 51% of the people enrolling in HSA-eligible insurance plans had incomes of $75,000 or more, appearing to buttress the argument that HSAs are only for the wealthy.

But that also means that 49% of the purchasers had incomes of less than $75,000. We know from an Assurant study, from eHealthInsurance, and from AHIP data, covering millions of lives, that there is a virtual bell curve in income for those buying HSA insurance.

Further, we know from Assurant and Blue Cross/Blue Shield data that people age 45-54 are the most likely to purchase HSAs: They are old enough to know they need health care, are wiser about wanting control over their choices, and have enough time before retirement to accrue some real savings in their accounts. And because they are older and likely have been in the workforce longer, they are more likely to have higher incomes.


The constant hammering at the individual market for health insurance and HSAs must encourage those calling for more centralized, government control. But where would that take us, exactly?

To find out, please join us on Tuesday for a great conference in Washington featuring colleagues from European think tanks to give us their first-hand accounts of what life is like under socialized systems. Don’t miss it! And if you can’t join us, you can also listen in on the webcast at

Grace-Marie Turner


  • Massachusetts: More mirage than miracle
  • An information prescription for health care’s cognitive-disorder problems
  • Going public on what is private
  • Stethoscope socialism
  • Beneficiary choices in Medicare Part D and plan features in 2006
  • Access to cancer drugs in Medicare Part D: Formulary placement and beneficiary cost sharing in 2006

Author: Tom Miller
Source: Health Affairs Web Exclusive, 09/14/06

Massachusetts’ health reform initiative “has generated more favorable press plaudits and political projections than its shaky foundations merit,” writes Tom Miller of the American Enterprise Institute in one of a package of Health Affairs papers analyzing the Bay State’s plan. Miller is the most critical, challenging, among other things, a key argument that costs would come down if hospitals didn’t have to treat so many uninsured people. “Much of this argument is vastly overstated, if not illusory,” Miller says. He concludes that policy should shift from pouring “more money into the same leaky insurance coverage vessels and toward insisting that those who control most health care spending – primarily physicians – begin to deliver better outcomes that consume relatively fewer resources.”

In another paper, Lynn Etheredge, consultant for the Health Insurance Reform Project, writes that the Massachusetts initiative “offers an important opportunity for a new federal-state strategy to cover the uninsured.” He suggests a demonstration plan to combine the health insurance tax credits proposed by President Bush with the Massachusetts initiative to help lower-income workers afford coverage offered through the new Connector. All six papers can be viewed online at the link below.
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Author: Tom Miller
Source: Health Affairs, September/October 2006

Health Affairs has published Tom Miller’s assessment of Michael Porter and Elizabeth Teisberg’s groundbreaking book, Redefining Health Care: Creating Value-based Competition on Results. “Perhaps not surprisingly, the two business school professors find that the structure and strategy for health care competition need to be fixed, and the primary problems involve management and organization, not technology or regulation,” writes Miller. “The core strength of this book is that it provides an overarching guidepost and vision to direct the otherwise fragmented players and components of the overall health care system,” concludes Miller.
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The New England Journal of Medicine has published Dr. Arnold Relman’s review of Arnold Kling’s book, Crisis of Abundance: Rethinking How We Pay For Health Care, published by the Cato Institute. Dr. Relman disagrees with many of Kling’s observations such as “that we cannot have health care that is both accessible and affordable while still insulating consumers from its costs.” Nonetheless, Relman finds himself attracted to “a certain freshness and directness in much of Kling’s argument,” and “warmly” recommends this book to “general readers who want to understand what economics has to say about health care.”
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Source: Canadian Health Care Consensus Group, August 2006

The Canadian Consensus Group has published the first in a series of discussion papers aimed at helping our northern neighbors better understand the health system they have. The paper observes that the vast majority of physicians and other health care providers are actually small businesspeople, albeit ones who get most of their revenues from government. And there are some practitioners who operate much more freely and receive more private payments, such as dentists and optometrists. But hospitals, which are classified as non-profit institutions, really are under almost complete control of the government. “One thing that we hope to make clear is that setting doctors free to make the decision to turn their practices into clinics [so procedures can be performed in less expensive settings outside of hospitals]?will not mean the end of civilization as we know it,” conclude the authors.
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Author: Deroy Murdock
Source: National Review Online, 09/13/06

Columnist Deroy Murdock examines the pitfalls of socialized medicine, focusing on a new study from the National Center for Public Policy Research that recounts the abysmal survival rates of people who actually get sick and need care under government-run systems. Breast cancer, for example, is fatal to 25% of Americans but to 46% of women in Great Britain and New Zealand. Prostate cancer is fatal to 19% of American men but to 57% of men in Britain. The reason: Limited budgets and rationing. “For all its problems, America’s more market-friendly health system offers patients better care,” he concludes. “As for importing universal care, author P.J. O’Rourke said it best: ‘If you think health care is expensive now, just wait until it’s free.'”
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Authors: Jennifer Bowman, Amy Rousseau, David Silk, and Catherine Harrison
Source: Health Affairs, September/October 2006

The Medicare Part D drug benefit “could greatly expand beneficiaries’ access to cancer treatments,” according to research from Avalere Health, a healthcare strategic advisory firm. The authors analyzed differences in cost sharing and coverage for cancer drugs among Part D plans. “Twenty of the cancer drugs we analyzed, including several newly approved drugs, are covered by virtually all Part D plans,” write the authors. “Among the ten drugs least often covered by Part D plans, many are brand-name versions of generic ingredients that plans cover nearly universally.” Further, “many plans charge a relatively low copayment for most cancer drugs.”
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Managed Care Risk Association Conference
September 18 – 20, 2006
Colorado Springs, CO

Grace-Marie Turner will speak about Medicare managed care on Tuesday, September 19. For additional details and registration information, go to:

The Dangers of Undermining Patient Choice: Lessons from Europe and Canada
Galen Institute and Institute for Policy Innovation Briefing
Tuesday, September 19, 2006, 10:00 a.m. – Noon
Washington, DC

For additional details and registration information, go to:

The Secrets of Debit Card Integration in Consumer Driven Healthcare
Lighthouse1 Webcast
Wednesday, September 20, 2006, 2:00 p.m. – 3:30 p.m.

For additional details and registration information, go to:

Medicare Meets Mephistopheles
Cato Institute Book Forum
Thursday, September 21, 2006, 12:00 p.m. (Luncheon to Follow)
Washington, DC

For additional details and registration information, go to:

Balancing the Promise and Cost of Biotechnology
Alliance for Health Reform Briefing
Friday, September 22, 2006, 12:15 p.m. – 2:00 p.m. (Lunch available at noon)
Washington, DC

For additional details and registration information, go to:

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at

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