Health Insurance — New York Times ‘Junk Plans’ Story Misses Point

The debate over health care is characteristically — I almost wrote “uncharacteristically,” but then I gave it a few seconds of thought — dumb. A representative case: This New York Times article speculating that Ted Cruz’s proposal to allow insurers to sell cheaper plans with less coverage will mean a return to the days of “junk insurance.”

The article is not in its entirety unreasonable: There are sensible concerns, for instance, as to whether Cruz’s plan, which would allow insurers to sell plans that don’t meet current regulations if they also sell compliant plans, would essentially turn the Obamacare exchanges into an underfunded and unstable high-risk pool. But the bulk of the article consists of accounts from the pre-Obamacare days of customers who bought cheap plans and then ended up being on the hook for tens of thousands of dollars when they fell ill. The New York Times presents this as something of a human-rights violation.

What the Times fails to even cursorily mention: Apart from a case of genuine fraud — which was later litigated — the individuals concerned voluntarily bought these plans. And they worked exactly as advertised! The idea behind “junk plans” is far from insane: You don’t pay very much in premiums, but if you get sick, you end up paying a lot because deductibles are high and the insurance may not cover very much. A few of these plans probably aren’t worth buying for anyone, since they offer little more than the promise of insurance. And an upper-middle-class family of four, for instance, would be poorly advised indeed to buy a very cheap plan. But for a young and healthy customer, paying a relatively small amount to obtain pared-down catastrophic insurance might well be preferable both to paying thousands of dollars a year in premiums for a comprehensive plan and to going without coverage altogether.

Consider the stories in the Times piece. Off the bat, we have a middle-aged, self-employed horseback-riding teacher who bought a skimpy plan that ended up costing her $20,000 on medical care over a seven-year period. This is a terrible argument against junk insurance: $20,000 over seven years is not an enormous amount for medical care — in fact, it is almost exactly as much as the average American pays in premiums on the Obamacare exchanges. The other cases the Times cites are harder, however: a man in his late 20s who incurred $40,000 to $50,000 in unpaid medical bills after developing testicular cancer because his plan limited outpatient care to $2,000 a year; most tragic of all, a man with bone cancer who was misled into buying a policy that limited chemotherapy payments to $1,000 a day and was left with $500,000 he had to pay.

The last case was actually litigated and settled for $1,071,000, so it’s really more of an argument against fraud and misrepresentation than it is against cheap policies. Of the three examples the Times gives, the young man with testicular cancer is the only compelling one, although even here, it would be important to know the time period of the illness: If he incurred $40,000 in a year, then his situation was tragic indeed, but if the sum covered a decade of treatment, then he probably paid an extra $2,000 to $3,000 per year over an Obamacare-complaint plan, when factoring in his lower premiums. The whole point of cheap plans, of course, is that they cost more if you get sick, and the possibility of an extra few thousand dollars a year for cancer treatment would be a very rational risk for many young Americans to take.

Moreover, it’s easy to attack cheap insurance by presenting the very worst cases — although, apparently, not easy enough for the New York Times to avoid bungling it — while the beneficiaries of cheap insurance are much less visible. What of everyone for whom the risk pays off — saving an extra $1,000 a year while still remaining far better off in the case of injury or illness than if they had no insurance whatsoever? After all, the alternative for many of the buyers of these plans probably would not be high-premium, Obamacare-compliant plans — it would be no insurance at all.

But suppose you disagree with me on all this — as some readers probably do. Suppose it strikes you as fundamentally irrational that a 25-year-old should take the risk of paying several thousand dollars or more (or, in the highly unlikely but possible worst case, maybe tens of thousands more) should he get sick. Suppose this strikes you in fact as the height of youthful irresponsibility. Well then, so what? Is it our job to prevent him from making this bad decision?

The question of how much choice we’re willing to allow customers to make will dictate to an enormous degree the system of health care we end up adopting.

That isn’t a rhetorical question: Many people believe that, yes, in fact, it is our job. I take the conservative side that it is not our job; that liberty is a great thing, that liberty entails choice, and that choice entails foolishness and bad decisions. I’m not a maximalist on this: I’m okay, for instance, with mandatory savings accounts and government nudges and other things that encroach on totally free choice. But I do believe that choice is enough of a virtue, and irresponsibility on the scale here not such a vice, that we should let people in cases like this choose which health plans to buy. Now, you may agree with me or disagree with me, but either way, that’s the debate. The question of how much choice we’re willing to allow customers to make — can they buy skimpy plans? can they decline to buy plans altogether? — will dictate to an enormous degree the system of health care we end up adopting.

Yet it is a debate that no one seems interested in grappling with anymore. Consider the way that the New York Times phrases the central issue: “Plans with much lower premiums are certain to be attractive to many people. But Elizabeth Imholz, a health policy expert for Consumers Union, warned, ‘The reality for consumers is that they can be stuck with huge, unexpected out-of-pocket costs.’” This is the closest the Times comes to admitting that these plans existed because there was a demand for them. But nowhere does the article impute any rational decision-making to those actually buying the plans; it seems to insist instead that they were all either duped by unscrupulous insurers or had no idea how thin the plans they bought actually were.

This is terribly disingenuous. There are occasional, sad instances where people are deceived about the quality of coverage they are being sold — but that has little to do with the underlying question of whether customers should be allowed to buy the plans of their own accord. As for the remaining customers, who were not tricked into the policies, formulations like the following abound: “Once he needed it, he learned the plan limited what it paid for outpatient care to $2000 a year.” What nonsense — health-care policies are not written in Aramaic up to the moment you get sick. It’s hardly a mystery anyway: If you buy a very cheap plan, you are buying very cheap insurance, and no one has ever associated cheap insurance with wonderful insurance. The fact of the matter is that many people knew they were buying less-than-comprehensive insurance and chose to buy it anyway. The New York Times believes that they should have been prevented from doing so; no doubt much of its readership agrees. Yet it is incapable of admitting that this is really the debate to be waged.

Republican politicians, for their part, are scarcely doing better. In the aftermath of Obamacare, it was commonplace for conservatives to point out that one of the central tenets of the project was to deny people the option of not buying health insurance. Conservatives intuited — correctly, I believe — that Americans care a great deal about individual choice, and would naturally gravitate toward health-care systems that emphasized choice, and away from regimes that restricted it. But this sort of argumentation has been sadly lacking from the political debate now that the actual reform effort is underway. There is a great deal of discussion about the best way to manage subsidies, lower premiums, stabilize the exchanges, maintain coverage, and lower spending, but precious little discussion about how to maximize choice and foster liberty.

Don’t get me wrong: premiums, subsidies, the stability of the exchanges — these are all critically important. But these empirical questions are just half of the debate; in all truth, they are the less important half. More important than these is the question of what sort of a society we want to be: What are the values we wish to emphasize and what are the values we’re more willing to sacrifice? Perhaps there are some things that are so important to us that no outcome would be worth losing them; perhaps there are not. Until we can settle on answers to these problems, all the empirical debates in the world won’t fix our health-care system.  

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— Max Bloom is a student of mathematics and English literature at the University of Chicago and an editorial intern at National Review.