This is part 3 of an ongoing series. You may want to refer to part 1 and part 2.

According to some, Health Insurance exchanges will be the solution to all of our health care problems. These agencies will function like the market for health insurance but, because insurers will be watched by the government, supporters assure us that the outcomes will be much better than in the present system.

Specifically insurers will not be able to turn anyone away and will be required to charge the same premiums to all for the same policy. In order to make sure that everyone is paying into the insurance pool all people, young or old, will be required to get health insurance. Proponents tell us that universal coverage will pool risk and bring down costs. Furthermore insurance companies will compete to lower costs and provide valuable case management and wellness services.

Now Wonks Anonymous believes that health insurers will compete to provide lower cost plans. He works in medical administration and see some health insurance innovation or other almost weekly. All the new plans that Wonks Anonymous has seen in the past 5 years share a simple,basic cost cutting strategy: The less medical care the insurer pays for, the lower the cost of the plan.

The new plans, which are growing in popularity among insurers and employers, require the insured to pay a high deductible - up to $5,000 for an individual and $10,000 for a family - before health insurance pays for any care. After the deductible is met the plans will require cost shares and copayments to be made until the maximum out of pocket payments - add another $5,000 to $10,000 here - are met.

The 2006 the top 15% of the population - the health care big spenders - managed to average something like $5,500 per person in health care spending. See here for details.

These new insurance policies work for health insurers because they seldom require companies to pay the insured. Even when a consumer meets the deductible, most of the payments for health care will be made by the consumer. No one is talking about writing regulations to ban or limit these policies.

Things get worse because the high out of pocket policies appeal to young people who have lower average health care costs. Older people and people who have the misfortune to have chronic health problems would rather have comprehensive policies. Consumers who are cheap to insure are drawn to the low cost plans  which lowers the cost of these plans further. Others are left with steadily increasing premiums in the comprehensive plans. Under these conditions the health insurance market divides into two segments: the land of the golden youth, where premiums are always low, and the geezer ghetto.

But this is not enough for bold reformers like Alain Enthoven:

Tax employer-paid health benefits: But only the excess over the low-price plan, the one offering the standard benefitsfor the fewest bucks. The fact that employees today can take advantage of unlimited tax benefits on health plans costs the federal governmentmore than $260 billion per year.

This tax benefit is a powerful incentive for people to choose more-costly plans, and most of the money goes to upper-income people.Why should taxpayers have to subsidize your choice of a more expensiveplan?

The cap would save billions of dollars that could be used to subsidize health insurance for low-income people. The subsidies could be used only to buy health insurance through the exchange (See A).

In case you were in doubt about what sort of policies these folks are worried about you can see it explicitly stated by Joe Nation in today's SF Comical:

An excessive plan is one with few or no co-payments, few or no deductibles and little or no consumer responsibility to keep health care costs contained.

Because for Professor Enthoven and others the insurance exchanges represent an ideal marketplace and this market place has rendered a judgment about the most desirable, least expensive health insurance policy. That would be a policy that relieves beautiful young people from paying high rates and forces unattractive older people to pay most of their medical expenses out of pocket.

Never mind that the beautiful youth of today will regret this when they fall from their never land into the geezer ghetto. Never mind that the geezers paid into comprehensive policies that they made little use of in their youth. The market has spoken and it wants us to take responsibility for our own health care spending, after we have made sufficient payments to insure the well being of health insurers.

Now they just want to government to lean on us a little bit more so that we get the message. Because we may think that we want health insurance to relive us of most of the financial risk of illness but that is not really what is good for us. We need to pay for catastrophic unsurance so that we will not become a burden on the state and so that health insurers have a steady flow of income, but we really need to buck up and take care of ourselves.

Capitalism is not about happiness, it is about character.