When they buy automobile insurance, Americans enjoy a market that provides many choices, lots of competition, and, in most places, reasonable rates. Residents of 47 states face a mandate to purchase car insurance and every driver pays something for it. To a growing bipartisan group of presidential candidates, this looks like a model for reforming an expensive health care system that leaves millions without coverage and forces most Americans accept whatever plan their employer offers.
Already, nearly all major candidates for president have said come out in support of measures to make health insurance work more like automobile insurance. As governor of Massachusetts, Republican Mitt Romney signed a first-in-the-nation law requiring state residents to buy health coverage. Republican Rudolph Giuliani, likewise, referred to the automobile insurance industry in his first major speech on health care. The three Democrats with a reasonable shot at the nomination –Hillary Clinton, John Edwards, and Barack Obama—all support systems that would ultimately require all Americans to buy insurance on the private market. But this near-consensus masks several deep flaws in the analogy between the two types of insurance: at best, auto insurance provides only a half-way model for health care reform.
To begin with, borrowing the most talked about feature of auto insurance—mandatory purchase—won’t actually provide coverage to all of the 47 million Americans who lack it. While over 95 percent of American motorists live in states that mandate auto insurance purchase, about 13 percent of accidents involve drivers without coverage. Countries like Switzerland, Israel, and Germany that require individuals to buy private health insurance, likewise, find that not everyone complies. Mandatory purchase would decrease the number of uninsured, but, alone, nobody can seriously contend that it would actually result in universal coverage.
No matter what steps the government takes to contain costs, control premiums, and subsidize needy groups, furthermore, health insurance will remain much more expensive than auto insurance. On one hand, only a small percentage of drivers—about 4 percent—will ever get into a crash that results in serious injury. On the other, everybody who has health insurance will eventually die and likely incur large medical bills in the process. While subsidies and taxes can hide the cost, there’s simply no way to make any decent health insurance plan as affordable as the typical auto policy. While a person of very modest means can often afford to pay for a bare-bones auto insurance policy, health insurance will very likely much harder to afford.
As a political matter, finally, it’s very difficult to see how the health insurance market could ever give consumers as much choice the auto market. Right now no state requires that auto insurance include “extras” like damage to ones’ own car, towing, or temporary rental. On the other hand, nearly 2,000 state-level mandates force residents to buy health coverage that includes everything from mammograms to podiatry.
In the long term, it’s conceivable that legal changes could let consumers purchase health insurance from companies subject to other state’s regulations and thus avoid these burdensome mandates. Here, however, the auto insurance market does not provide a useful model: like health insurers, auto insurance companies must deal with inconsistent and seemingly arbitrary regulations from all fifty states and the District of Columbia.
The auto insurance market, it’s true, does let individuals make many more choices than the health care market. It’s worth studying as candidates formulate health care reform plans. But, whatever happens, health insurance will never work just like automobile insurance.