Reconciling insurance laws with the free market

August 17, 2009 · 0 comments

This editorial at the WSJ talks about some commonly advanced alternatives to  current health-care/health-insurance reform legislation.

As a law student, I took a whole class on insurance law; I practiced insurance defense law (in mass torts, not individual personal injury cases); and I’ve studied the economic principles relating to insurance law (in fact, I keep an economist around for quick answers — it helps that he’s my best friend). I’m a believer in Schumpeterian competition. I’ve see it live in watching my father grow his small business over decades, seen mistakes and successes in my own career and business.

So when I read an article like this, it’s not hard for me to deconstruct the arguments and understand the rationales behind them. Indeed, most of them resonate with me and, I think, philosophically sound. Thursday, I attended the signing of NJ’s autism insurance legislation, which provided a minimum of $36,000 annual coverage for behavioral therapy for children with autism (about 2 hours a day, for those who are counting, assuming no price inflation) and speech/physical therapy/occupational therapy as required for all covered persons with autism.

Of course, this bill, like other state bills, does not reach those insurers that are subject to ERISA, which fully preempts state regulation for compliant plans. This statutory backdrop is the reason that as much as Autism Votes and state groups are working on state statutes, they are also all focused on federal legislation. (The possibility also exists, although I haven’t read the federal bills to see exactly how they’re approaching the issue, to extend insurance coverage for behavioral therapy to all insurance plans by expanding the statutory language to express Congress’ clear intent to preempt the entire field of autism insurance coverage and supersede state schemes (or lack thereof) with a single federal scheme.)

So those statutes are good for people like me: a parent with an autistic child who benefits from ABA therapy. But I probably should consider that government intervention will skew efficiency. I believe that’s true with protectionist trade tariffs, agricultural subsidies, and byzantine tax code provisions that hide the politicized allocation of costs and benefits from taxpayers. I’ve never really been in a situation where something particular to my situation was at real issue: what am I supposed to do? How am I supposed to reconcile these two ideas: adherence to a set of theoretical beliefs about how markets function, economic principles of incentives, and federalism with the very clear imperative to help my son and protect my family?

In some countries, and for some people in the US, the answer is simple: take whatever you can and steal the rest. We expect democracy, not kleptocracy, and I still believe that unjust means do not justify the ends; we can turn our country into a mess by expanding government power in the name of security from terrorists just as easily as we can do it in the name of protecting the people from “greedy” corporations.

But how much does it matter to my ASD son what sort of political climate we live in if he can’t fully participate in society, if he’s unable to vote, or advocate for himself? Does it matter as much to my other son what the world is like if his brother is at risk? I think that these questions are easier to answer in a hypothetical than in real life, when faced with a specific child and real choices.

Part of my response right now is to suppor the things that are clearly good ofr my son while helping to build the detailed evidence that they are good for society as a whole rather than a “mere” transfer of wealth. This approach is as much self-interest as it is self-satisfying; if there is societal benefit to spending funds on ABA for people with autism, then it’s far less likely to be removed, whittled away, or excised from future budgets through even more political wrangling.

How have you reconciled your general political or economic philosophy with the “slings and arrows” of real life? Where have you drawn lines?

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