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Health Insurance ... or Else

Health insurance can protect you from huge medical bills. Yet for a variety of reasons, many people go without health insurance. Now, government leaders are taking a new approach toward making sure everyone gets the medical care they need.

Moving away from the idea of direct universal health care, many politicians at both the federal and state levels have looked to health insurance as a way to solve problems with the health-care system. Rather than creating a one-payer system that keeps patients from having to consider medical costs at all, the idea is to make sure everyone has health insurance coverage. Sen. Hillary Clinton (D-N.Y.) included such a provision in her health-care reform proposal earlier this week. A similar plan using private insurance companies is already in effect in Massachusetts, signed into law by former Gov. Mitt Romney.

What it means
In order to understand the effects of making health insurance mandatory, you need to look at why people don't have insurance coverage. Although health insurance is perhaps the most sought-after employee benefit, many employers have cut back or eliminated their health coverage in response to rising costs. Even if you have coverage through work, changing jobs can require you to make insurance payments under COBRA -- costly payments that are often beyond the reach of someone who is newly unemployed. Individual policies outside an employer's plan can be very difficult to find at any price.

Even large employers aren't immune from the costs of providing health insurance benefits. Earlier this year, executives from Wal-Mart (NYSE: WMT  ) , Intel (Nasdaq: INTC  ) , AT&T (NYSE: T  ) , and Kelly Services (Nasdaq: KELYA  ) (Nasdaq: KELYB  )  joined union representatives in calling for universal coverage.

Mandatory insurance proposals seek to eliminate the problems of employer-based health insurance by imposing reciprocal duties on health insurance companies and the general public. Under these proposals, insurance companies generally can't deny coverage, regardless of an individual's medical history. On the other hand, the proposals force individuals to buy specified coverage -- whether or not they want it.

First-hand experience
As a Massachusetts resident, I've seen the state's new mandatory insurance program up close. At first, I was appalled at the cost of an insurance policy that would comply with the state's requirements. As a self-employed person, I don't have an employer to offer me insurance. And even though the state provides scaled subsidies for some families, they only apply to those below certain income levels.

As the program evolved, however, the government did a reasonable job of identifying and addressing problems like these. The state's negotiations with the major health insurance carriers in the state led to reductions in premiums, to levels far less than what I would have had to pay for similar coverage without the program. For me and others in similar situations, therefore, mandatory insurance will save money.

Not the perfect solution
Yet many aren't in the same situation. Part of what makes the plan affordable is my willingness to get high-deductible coverage and to set up an emergency fund to cover a substantial part of my medical bills if something major happens to a member of my family. For those who need more comprehensive coverage, policies can get extremely expensive. Consider: A family of three making $52,000, with both parents in their 50s, might need to pay upwards of $2,000 per month -- almost half their gross income -- for health-care coverage alone.

Those who can't afford the coverage they need face not only the uncertainties of having no protection but also penalties for violating the mandatory insurance laws. While the penalties that currently apply in Massachusetts are small, harsher provisions are likely to apply in the future.

If nothing else, considering different ideas to give people affordable health care at least brings the issue to the forefront. The programs currently available in some localities will act as experiments for the federal government to consider before doing something on a national level.

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