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A subjective 'substandard' insurance judgment


Published:   |   Updated: December 11, 2013 at 09:20 AM

As the White House struggles to rouse itself from its self-induced “Obamacare” public relations nightmare, the primary excuse — at least regarding the canceled health insurance portion of the fiasco — has been to claim that the relevant policies were “substandard” and, therefore, harmful to individual consumers. Ergo, the “substandard” plans needed to be abolished from the market so citizens would be liberated from the possibility of purchasing a “substandard” plan, leaving the procurement of a “quality, affordable” health insurance plan as the sole option. There are two major problems with this statist argument.

The first problem is that it is logically impossible for a third party (the American state in this scenario) to objectively declare a scarce resource (the health insurance policy in this scenario), transferred from a seller to a buyer via a legal contract, “substandard.” As libertarian economists like Carl Menger, Ludwig von Mises and Robert Higgs have shown, value is subjective. The buyer of a “substandard” health insurance plan demonstrates, by the very act of purchasing the product, that the plan meets or exceeds her subjective quality standard.

In contrast, when the American state decrees that a particular plan is “substandard,” the state is evaluating the plan based on its own subjective quality standard rather than the consumer's. All subjective standards are different. Aesop's fable, “The Town Mouse and the Country Mouse,” illustrates this human truth.

The second problem with the White House's argument is that it does not specify who deems the canceled health insurance policies “substandard.” A fundamental mistake of the typical nonlibertarian consumer, based on the comments from President Barack Obama himself or his surrogates, is to assume that the American state is the only organization that appraises the canceled insurance polices as “substandard.” The truth is that the insurance companies also perceive the relevant policies as “substandard.”

The reasons the American state and the insurance companies divine the policies to be substandard are different, however. The state judges the plans to be “substandard” because the state wields less health care power than it otherwise would when it has not yet micromanaged the health insurance market. The insurance companies judge the plans to be “substandard” because they earn less profit than they otherwise would when market competition necessitates that they offer inexpensive plans that have not been banned from the market. To solve this manufactured “crisis,” the insurance companies and the American state colluded — evidenced, among many things, by a December 2008 “reform” proposal by America's Health Insurance Plans, the national trade organization for insurance companies, which is nearly identical to “Obamacare” — to create a system from which the state gains increased power by micromanaging the health insurance market and insurance companies gain greater profits.

In summary, White House protestations that the recently canceled health care insurance policies were “substandard” and, therefore, should have been abolished are unintelligible. The assertions are unintelligible not only because it is not logically possible for the American state to objectively declare that a product is “substandard,” but also because the state has conspired with insurance companies to increase state and corporate power. The just solution to these genuine problems is abolition of the state, not “Obamacare.”

Don Stacy is a libertarian writer and physician.

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