An editorial in today's Wall Street Journal accuses President Obama of engaging in a "distortion" when he claims that "buying insurance on your own costs you three times as much as the coverage you get from your employer." The Journal calls this "simply false," citing a Congressional Budget Office study that asserts, "Premiums for employment-based plans are expected to average about $5,000 per year for single coverage and about $13,000 per year for family coverage in 2009. Premiums for policies purchased in the individual insurance market are, on average, much lower—about one-third lower for single coverage and one-half lower for family policies."
What the Journal totally ignores are the next sentences in the Congressional Budget Office study: "Those differences largely reflect the fact that policies purchased in the individual market generally cover a smaller share of enrollees' health care costs, which also encourages enrollees to use fewer services. An offsetting factor is that average administrative costs are much higher for individually purchased policies. The remainder of the difference in premiums probably arises because people who purchase individual coverage have lower expected costs for health care to begin with."
If anyone's distorting things here, it isn't Mr. Obama, it's the Wall Street Journal. As someone who recently lost his employer-provided health care and then went and tried to buy the exact same coverage in the individual market, I can testify from firsthand experience, it isn't half as cheap -- it is a lot more expensive. That is the point Mr. Obama is trying to make, and it's neither false nor a distortion, it's the truth. It's one thing to argue that the tax rules for employer-provided health insurance encourage people to over-consume health care and over-consume health insurance by buying more expensive plans than they would if they were spending their own money as individuals, and that as a result individuals spend less on insurance premiums than do employers. That's a reasonable argument. But it is not true that the exact same policies are cheaper on the individual market than on the group market, which is what the Journal editorial can be read to suggest. What the CBO report that the Wall Street Journal cites actually says is that individual plan premiums cost less because they cover less and because the people who buy them are healthier. And anyway, what matters to a consumer in the end when assessing total health care costs is not only the premium costs, but the deductibles and coverage limits.
