Employer-based health insurance plans no longer work

An industry trade group recently unveiled a plan for universal coverage that includes requiring all uninsured Americans to buy policies from private insurers. For their part, the insurers would agree to stop rejecting people with preexisting conditions.

But anyone who's ever shopped for coverage in the individual insurance market knows that such policies don't come cheap, and the only way to keep costs down is to take on sky-high deductibles.

Pauline Rosenau, a health professor at the University of Texas, says the U.S. should be looking to the Netherlands for guidance -- about what to do and what not to do.

Until 2006, the Dutch combined employer-based coverage with individual policies as well as a government-administered insurance program. This became unwieldy and inefficient.

The Dutch introduced a system two years ago that did away with employer-based plans and government insurance, replacing them with a mandate that everyone buy individual policies.

At the same time, the government said it would play a more active role in keeping prices competitive and thus prevent individual policies from soaring in cost.

"They have a very, very highly regulated system," Rosenau said. "Private insurers have to sell to anyone who wants it, and they have to sell at the same price that they sell to everyone else in a certain geographic area."

She said Dutch insurers supported the change, liking the idea of mandates and no longer having to compete with a government insurance program. Since the new system was adopted, insurance firms have vigorously competed for market share by keeping prices low -- just as the government intended.

What wasn't intended was that most insurers would consistently lose money on basic policies, although some have managed to recoup cash by offering supplemental insurance to those who desire it.

"We can avoid their mistakes," Rosenau said. "We need to create a system that allows insurers enough freedom to operate, but at the same time regulates them so they compete on price, not on being able to avoid the very sick."

What's clear is that our own reform efforts should begin without preconditions. The employer-based system isn't our only choice, and we should be open to alternatives (while ensuring that whatever's taken away from workers in terms of an insurance benefit is returned in the form of extra pay or tax credits to cover new expenses).

Ours isn't the only country to face the challenge of offering universal coverage while also reining in healthcare costs. The conversation needs to begin with what's in the best interests of the American people and the best interests of U.S. businesses.

If we're honest with ourselves, I think we'll see that reform can mean healthy change, not just more of the same.

David Lazarus' column runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.

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