A Health Care Epiphany

I discuss in my post about a Picture of Free Market Healthcare that the government is distorting the price of healthcare through various laws. Mainly, health insurance really isn’t insurance.

What I missed is a small, but extremely important point that Tom Woods and Bob Murphy bring up in their Contra Krugman podcast, “Why It’s Impossible to Keep Only the “Good Parts” of Obamacare”. Due to the 1939 Revenue Act, section 104, which establishes employee tax exclusions for compensation for injuries, sickness, or both received under workers’ compensation, accident, or health insurance, the pre-existing conditions issue is a government created perverse and unseen distortion.

For all other insurance products, the employee is tied to the company that writes the policy. However, due to the 1939 Revenue Act, the employee’s healthcare is tied to the employer.

Your auto insurance isn’t tied to your employer. Your life insurance isn’t tied to your employer. Your homeowner’s insurance isn’t tied to your employer.

This seemingly innocuous tax credit completely blows out of proportion the issue of pre-existing conditions because you have to get re-screened every time you change employment, instead of when you wish to change insurance providers or policy coverage.

When I get a 30 year life insurance policy, it is for a set premium amount for those 30 years. I don’t get re-evaluated during the life of that policy.

Granted, as I’ve discussed previously in my post, we’re not talking about “real” insurance when we talk about healthcare, but this is a huge distortion that wouldn’t otherwise happen if it weren’t for employer subsidized health care.

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