Point 5: A Double Mandate For Health Works For Europe

How do countries who use private health plans achieve universal coverage? They use a "double mandate: Everyone must buy. Everyone must sell.
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How do most European countries achieve universal coverage?

Most people believe that European countries use the Canadian single payer model to achieve universal coverage.

Most people are wrong.

Only Canada uses that model. Canada actually makes private insurance illegal. Most countries in Europe successfully achieve universal insurance coverage using a mixed model based on a combination of private insurance companies and government programs. Some European countries, in fact, use only private insurance companies, and a couple of European countries who have achieved full universal coverage don't have any government-run insurance program at all.

There are actually hundreds of private health plans of one kind or another in various European countries. Each of those countries has both competing health plans and universal coverage.

So how do all of those countries who use private health plans actually achieve universal coverage?

They basically use a "double mandate." Most European countries mandate that every citizen must buy insurance coverage. They also mandate that every local insurance company who wants to do business in the country must sell coverage to any citizen who applies for that coverage. Health screens are not allowed.

It's a very clear double mandate. Everyone must buy. Everyone must sell.

Each of those countries with a double mandate -- Switzerland, the Netherlands, Austria, Germany, etc. -- collects a portion of each worker's paycheck to pay for the coverage. Payroll deductions are the most common method of funding health coverage in Europe, and employers are definitely part of the health care financing picture in almost all countries.

Most European countries continue to maintain a relationship between jobs and people's health coverage for two main reasons: The number one reason is that jobs are where the money is. Jobs create paychecks, and paychecks are the most common source of revenue used by other countries to pay for people's health coverage.

The second reason countries link jobs and health coverage is that employers often function as "wise" or skilled volume purchasers, and employers in some countries make various decisions and negotiate deals with insurers to help workers get either better coverage or better services from the private insurance plans.

Premium Costs Are Shared With Employers
In most countries, premium cost is shared between employers and employees -- a portion of each worker's paycheck is dedicated to pay for health coverage, and then the employer usually matches some or all of the worker contribution.

As one example, Germany has an 8 percent payroll deduction from each worker. That deduction from each worker's paycheck is matched by an 8 percent contribution from each employer. So, in essence, 16 percent of every German paycheck is spent to buy universal health care coverage.

Germany doesn't have a Canadian-like single payer system. German health insurance is provided by a fairly large number of private health funds. So each German picks a health plan -- or "sickness fund" -- to actually be their personal insurer. Many of the sickness funds are co-op-like entities. Some are for-profit insurers. All are privately run and operated. The whole approach does not look anything like the Canadian single payer system.

Germany has used that model for over 100 years. Bismarck invented it.

Low-income Germans without jobs, of course, have their premiums subsidized by the government.

Because everyone is in the insurance "risk pool" all of the time, Germany doesn't have the problem of people waiting until they are sick and then joining a sickness fund to "use other people's money" to pay for their care.

How well would that model work in the U.S.?

An interesting economic fact is that all "group" insurance in the U.S. already basically uses an approach that operates very much like that European double mandate model. Employers in America buy coverage for an entire group of employees. Every eligible employee in each group is automatically covered as a member of the group. The result is a lot like Europe, one group at a time. There are some exceptions, but everyone employed full time in each employer group is usually in the insurance group, and every group member must be covered by the insurer. Health screens and medical underwriting do not happen within employer groups in America now. More than 90 percent of the people in the United States with health insurance receive their coverage through "groups."

We would be very well advised to take the double mandate risk-sharing business model that works well for Switzerland and the Netherlands, and works equally well today for our group purchasers in the U.S., and use it for all of our people.

Covering everyone is important in both Europe and America because we need to have a broad cross section of people enrolled in order to keep the average cost of care at a level that makes the average premium affordable.

The underlying concept of getting everyone in the risk pool is pretty simple. Automobile insurance would fail as an economic system if car insurers were required to sell instantly to every applicant but people could wait until after their car had crashed before actually buying insurance coverage. People would not pay premiums for car insurance every month if they could simply wait to pay one month's car insurance premium when the accident actually happened and then have the insurance company buy them a new car. Fire insurance would also obviously fail as a business model if the insurance companies only insured burning homes. Everyone who understands fire insurance understands that there needs to be premium paid from quite a few houses that are not burning to put enough money into a pool to pay the expenses of repairing or rebuilding the houses that do burn.

We need to use a European-like double mandate for health insurance in America to get everyone insured and to get everyone in the risk pool.

The double mandate already works fairly well in America for the 90 plus percent of insured people who get coverage through employers.

Let's just finish the job. Let's use a double mandate to enroll everyone in America. No one should ever lose their home in America or be financially ruined because of health care expenses. We need to cover everyone. A double mandate can help make that happen.

Health insurance reform bills from the House of Representatives and the U.S. Senate will soon be going to a conference committee process. That process should create a blended final bill that will focus some key energy on keeping the average costs of care down by getting as many people in the American risk pool as possible.

If we can't do a pure European style double mandate in America, we should get as close to it as we can.

We should not be too arrogant or too insulated to learn from what works well in other settings and other countries. The double mandate can work well here.

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