Imagine my surprise when I read, in the North Jersey Record's and Daily News's website that a 6'2," 190 lb man in good health had trouble finding affordable individual health insurance.  Apparently, this is because health insurers can "cherry-pick" (the media's term for underwriting, which they use to give negative spin to this fundamental insurance principle).

North Jersey is in New Jersey, so the newspaper obviously has it wrong.  NJ is one of the few states that outlaws underwriting, which results in outrageously expensive health insurance for everyone in the Garden State (as described in Conrad Meier's Destroying Insurance Markets: How Guaranteed Issue and Community Rating Destroyed the Individual Health Insurance Market in Eight States, published by The Heartland Institute in 2005).

How did the papers get it wrong?  Well, the story actually comes from the San Francisco Chronicle's Victoria Colliver.  It's a California story; and California does allow underwriting in the individual market.

Lesson learned: reporters and editors are generally hopelessly uninformed about state regulation of health insurance, but will not fact-check when they run an article about such regulation from another state.  In this case, the North Jersey Media Group has done a disservice to its readers, who will make important voting decisions based on a misunderstanding.  One of the main reasons New Jersey does so poorly in the U.S. Index of Health Ownership is its over-regulation of private health insurance.

OK, but what about this man in California?  6'2" and 190 lbs describes my girlish figure, and I figure I'd be insurable in my home-state's individual health insurance market.  What is the difference between me and Mr. Odell, the subject of the San Francisco story? Age: Mr. Odell is 56, and he suspects (undoubtedly correctly) that the first underwriting "cut" is age.

The problem is that he is no longer employed, but too young for Medicare, so he has fallen through a gap, a foot wide and a mile deep, that many baby-boomers are stepping into.  When employed, they were paying premiums for group health insurance that were too expensive, because when they were young they subsidised the premiums of older workers.  (Of course, most of them did not realize this, they thought their employers were paying the premiums, out of some treasure chest in the basement.)

In the 1990s, politicians tried to get in front of this issue with tweaks named COBRA, HIPAA, and similar state reforms that were supposed to allow people to move between insurance markets without this friction.

To put it mildly, these laws & regulations did not work.  Is there another way? Yes, in papers published by Health Affairs and the National Bureau of Economic Research, Professor Mark Pauly and colleagues describe a market for individual health insurance that is guaranteed renewable annually at an average rate (for the "block" in insurance lingo.)  We cannnot insure against aging, but we can insure against the variance of incidence of disease within any group at a given age.

What has to happen to make this a reality? First, tax reform that frees Americans' from our workplaces and encourages us to buy our own, individual, health insurance when we are young and healthy, which we keep for our whole lives.  (Internet search: "Giuliani health proposal".) This should not be difficult to understand: it's how we insure every other risk in our lives.