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Thursday, August 27, 2009

No Insurance Club Vs. President Obama

Chad Harris is an entrepeneur. As such, health insurance was always expensive for him because he never had group insurance through an employer. (after all he's his own employer) It could cost well over a $1000 monthly for his family. One day he was on a business trip when his wife was discussing the difficulties of getting health insurance with her doctor Dr. Sam Sannoufi, MD. Her doctor came up with an idea. The doctor would provide a menu of basic medical care for her and her family for $599 for the whole year and the whole family. It would allow for up to 12 hospital visits and several basic tests and procedures. She was stunned and so she wrote out a check before even speaking with Chad.

Once Chad heard about the arrangement, his entrepeneurial instincts took hold. He immediately arranged a meeting with the doctor. He found out that the doctor arranged about 500 such arrangements. By doing so, patients received most basic health services cheaply. They could still get catastrophic health care coverage and that would be at a reasonable rate. Meanwhile, the doctor had unshackled himself from the bureaucracy of the insurance companies, at least with these 500 patients. He no longer needed to have basic procedures approved by an insurance bureaucrat. He no longer had to send in mountains of bills to insurance companies and carry a collections department to make sure the bills were paid.

What eventually was born was No Insurance Club. It creates an internet market place where patients and doctors come together and prices for basic medical care is transparent. Harris saw an inefficiency in the market. He said that three people could be in the same doctor's office at the same time for the same procedure and each be charged a different price. That's because each insurance company negotiates prices with the doctors separately. So, a routine check up might cost $100 with one company and $200 with another.

With No Insurance Club, doctors' services would be transparent and available for all consumers to see. Harris exploited another inefficiency in the market. There is no car insurance policy in which your oil change, tire reallignment, and tune up is covered. Instead, what is covered is damage you can't afford on your own. Yet, with health insurance, we have plans that cover every sngle medical procedure. This creates out of control medical costs. That's because it creates waste, excess administration, and it forces doctors to go to insurance company for permission to run nearly every single medical procedure.

So, if you could set up a system where most basic medical procedures can be provided outside the insurance system, you could contain costs. That's what No Insurance Club does. Doctors provide basic sets of services. Patients pay No Insurance Club and they receive most basic services. The payments, ranging from $499-$899 yearly, are much cheaper than most insurance. There's no more dealing with insurance bureaucracy, billing codes, and administrators. This puts the patients and the doctors right in front of each other.

Finally because No Insurance Club is NOT insurance, they can sell their services in multiple states. (they're currently in ten states) So, effectively, No Insurance Company, on its own, accomplishes everything that President Obama claims to want to accomplish and NO tax payer money is used. Costs are lowered. Costs are affordable. Insurance bureaucrats are no longer in charge.

Now, I don't want anyone to think that I am simply promoting No Insurance Club, and I get nothing for this story. The reason that I set all this up is that ironically enough, if HR 3200 passes No Insurance Club goes away. That's because HR 3200 would force everyone to get all the services that No Insurance Club provides to be mandated under some sort of a health insurance plan.

In fact, No Insurance Club and President Obama see the same problem and come up with two different solutions. Harris is an entrepeneur. He believes health care costs are out of control, health insurance is structured all wrong, and as such, costs are not transparent. As such, he has created a company that will exploit all those inefficiencies. That's what entrepeneurs do. That's what the free market provides. President Obama is a politician and he sees the exact same problem. He believes that government regulation and control will solve it.

Isn't it ironic though that a bill that supposedly expands choice would immediately take away this particular choice. I don't know if No Insurance Club will blow up and become a major player in health care. As I told Harris, it sounds like a good idea but the market place is full of good ideas. It's all about execution. I do know that No Insurance Club is an example of the free market allowing for opportunities to exploit inefficiencies to benefit both the entrepeneur and the consumer.

I think there's a certain irony here. President Obama wants the government to regulate and control because he thinks that leaving the free market to its own devices wouldn't produce the necessary reforms to bring down costs. Yet, No Insurance Club is proof that he's wrong. No Insurance Club is a consummate free market idea. Yet, this free market idea would be eliminated by a government hell bent on trying to solve the exact same problem that No Insurance Club. By imposing HR 3200, No Insurance Club would not survive. All its services would be mandated under a gold plated health insurance plan. That's because President Obama believes that preventative medicine is far too important and so everyone must have preventative medicine covered under insurance. He can't imagine that the free market could possibly create an alternative that would accomplish the same thing. So, unbeknownst to him, his plan would eliminate No Insurance Club which attempts to do the same basic thing as he is. One uses the free market. One tries to impose it by government decree. Which do you believe in?

4 comments:

offgrid said...

"I think there's a certain irony here. President Obama wants the government to regulate and control because he thinks that leaving the free market to its own devices wouldn't produce the necessary reforms to bring down costs."

Actually the market has proven to not be able to produce reform, only higher premiums. I like the no-insurance idea, and it would be cool to see it as one in a palette of options available.

Tim

mike volpe said...

Interestingly enough, there is a contradiction in your own words. The free market created No Insurance Club. You like that but the free market didn't create reform.

In fact, it was the lack of a free market that created higher premiums. There are regional monopolies all over health insurance. That's no free market, but a monopoly.

Furthermore, with Obama's plan, there is no No Insurance Club because it becomes obselete.

Anonymous said...

It's a decent enough idea. I'm a progressive for the most part, but I also disagree with idea that the solution to this problem is to have the government mandate what private actors -- individuals, businesses, and insurance companies -- have to do vis-a-vis health insurance. But I do agree that the government should provide its own alternative for those who want/need it, but then leave the private market to its own devices for those who would prefer that. This would still leave open the possibility of something like No Insurance, but at least there would also be a basic level government program for anyone who wants it.

Chad Harris said...

That's a great article. Very even handed. Tim's comments are typical because the concept of procedure costs and insurance costs being separate is a new way of looking at the old problem.

Price competition has never existed on procedures, only on premiums and deductibles and those are two completely different animals.

The "Free market" has never been free in healthcare. Regional insurance monopolies controlled the patients to the providers. Having a fully mandated option would just replace regional monopolies with a national one.

Any group that promotes a true market based solution, based on total price competition will see that Lasik went from $3,000 to $500 and improved every year because of the price competition. You never see insurance companies advertising "$50 mammograms with no co-pays this weekend" I am assuming you would not have that luxury if we had a government option either. Thanks guys, Chad