TCS Daily

Trimming Waistlines by Trimming Government

By Michael Cannon - December 8, 2004 12:00 AM

The Journal of the American Medical Association recently published a study purporting to link increased soda consumption with weight gain. This comes on the heels of studies linking obesity to urban sprawl, longer commutes to work, time in front of the television, time on the Internet, not enough physical education in schools, vending machines in schools, marketing and advertising of junk food to children, and countless other trends, foods, habits, and (in)activities.

Unfortunately, a slew of nutrition activists and nanny-statists want to use the fact that some Americans are getting bigger to limit what the rest of us can choose to eat. And so we're seeing lawsuits waged against food companies, calls for "fat taxes" on calorie-dense eatables, and moves for restrictions on the advertising and marketing of junk food.

We oppose these measures, and prefer a system where people are free to make their own decisions about diet and lifestyle, but are also required to bear the consequences of those decisions.

But there are a number of things we can do with respect to health insurance that could both facilitate an increased sense of personal responsibility and harness the power of free markets to encourage good decisions about diet and activity.

Standing in the way are legal barriers to allowing health insurers to assign risk in health insurance premiums the same way they do with auto and life insurance premiums. Currently, many states require health insurers to charge the same premiums for any member of a group health plan, regardless of risk. This means that the costs of the donuts-and-pizza couch potato's unhealthy decisions are imposed on the gym rat who keeps a careful diet and watches his cholesterol.

Removing these barriers would encourage health insurance companies to begin experimenting with carrot and stick approaches to healthy lifestyles. One company might give premium discounts for gym memberships, for example. Another might foot the bill for nutritional counseling. In short, we'd get a system where health insurers compete amongst themselves to contrive a system that best balances the health and self-interest of consumers.

Health and Human Service Secretary Tommy Thompson said at an obesity summit last June that there are no federal restrictions on so-called "medical underwriting." His counsel's office has confirmed that not only are there no federal laws against it, there are no binding court decisions or federal regulations, either.

Congress can help eliminate these state laws that encourage unhealthy lifestyles by enacting legislation similar to the Health Care Choice Act, sponsored by Rep. John Shadegg. That bill would enable the residents of any state to purchase health insurance in any other state, under the laws and regulations of the state where the insurer is incorporated. This would create a nationwide market for health insurance, as President Bush has suggested. Making the U.S. a "health insurance free trade zone" would allow consumers to avoid unhealthy regulation and encourage states with anachronistic health insurance regulations to deregulate, or face the risk of health insurers reincorporating elsewhere.

A nationwide market for health insurance would spur competition among health insurers to attract customers, and would spur competition among the states to attract health insurers. The resulting effect on health care would be to create 51 "laboratories of democracy," to borrow a phrase from former Supreme Court Justice Louis Brandeis, where consumers would benefit from two tiers of competition.

Of course, Congress has already taken a step toward encouraging healthier lifestyles by increasing access to health savings accounts. Health savings accounts give consumers the money that their insurance companies would otherwise control; whatever the insured doesn't spend stays in his account and grows tax-free. Bringing the costs of unhealthy lifestyles closer to consumers encourages more careful attention to lifestyle choices. If a consumer knows that any money not spent on health care can be rolled over into a retirement account, he's more likely to make the kinds of lifestyle decisions that keep him in better health.

A nationwide market for health insurance would go a long way toward restricting the obesity problem to the obese, instead of subsidizing it by spreading the costs of weight gain over the entire population. Most importantly, it would harness the power of markets and competition to uncover the most effective way to encourage healthy lifestyles, and free health insurance and health care providers to provide incentives to choose those lifestyles.

It certainly won't guarantee an end to the obesity problem, but it certainly would be preferable to policies that encourage irresponsibility and restrict choice for everyone.

Michael Cannon is Director of Health Policy studies and Radley Balko is a policy analyst with the Cato Institute.


TCS Daily Archives