Health Reform Can’t Copy Auto Insurance

Republicans and Democrats have looked to auto insurance as a model for reforming an expensive health care system that leaves millions without coverage and forces most Americans to accept either a government plan or whatever coverage their employer offers. That’s because the auto insurance market provides many choices, lots of competition and, at least outside of Detroit, affordable rates.

If a major health care reform becomes a reality, it will probably add a car-insurance-like individual coverage mandate — something that 49 states, including Michigan, require. But at best, auto insurance provides only a partial model for health care reform.

Borrowing the most talked about feature of auto insurance — an individual mandate — won’t provide coverage to all of Americans who lack it. About 6 percent of drivers go uninsured now. And Massachusetts, which has had a mandatory health insurance law for almost three years, has reached 97.5 percent coverage. Countries like Switzerland, the Netherlands, Israel and Germany that require individuals to buy private health insurance, likewise, find that not everyone complies even when fines and penalties come into play. In addition, health insurance will always remain much more expensive than auto insurance.

About 4 percent of drivers will get into a crash that results in serious injury. By contrast, everybody who has health insurance will eventually die and likely incur large medical bills. While subsidies and taxes can hide the cost, there’s no way to make any decent health insurance plan as affordable as the typical auto policy.

As a political matter, it’s difficult to see how the health insurance market could ever give consumers as much choice as the auto market. Michigan has some of the most comprehensive auto coverage mandates in the country, and that’s a major reason why the base auto insurance premium in Detroit is the highest in the nation by far at $5,072 a year.

But not even Michigan requires "extras" to cover things like towing, temporary rentals and damage to one’s own car. The great bulk of states don’t require much more than a few hundred thousand dollars in coverage for damage that drivers cause to others’ bodies and cars. In the health insurance arena, however, nearly 2,000 state-level mandates force residents to buy health coverage that includes everything from hairpieces to podiatry.

In fact, making insurance affordable will require stiff limits on these mandates. In Switzerland and France, where most people buy health insurance themselves, private insurers face fewer mandates on what they must cover and (in some cases) who they must cover. American states will have to pare back their mandates, allow their citizens to buy health insurance across state lines or participate in some sort of federal system if they hope to achieve anything like universal coverage at an affordable price.

The auto insurance market does let individuals make many more choices than the health care market. It’s worth studying for lessons as Congress formulates health care reform plans. But whatever happens, the health insurance market will never work just like the one for auto insurance.