You Want Choice? Talk To Ron Wyden.

Health care reform ought to make life better for everybody, even people who have health insurance. It will make their coverage more secure, more reliable, and (over the long run) more affordable.

But many people who get health insurance from their jobs probably don’t think that way. They have benefits, so they assume they’ll get to keep them. In at least some cases, they’re used to taking whatever coverage their employers give them, so they're relatively satisfied with what they have.

This complicates the politics of reform. President Obama and his allies in Congress have worked hard to make sure that people who have insurance won’t have to change it, so that reform itself seems less threatening. But a plan that doesn’t make things worse can also be one that doesn’t make things better--or, at least, better in ways that are immediately perceptible to the voters.

Senator Ron Wyden of Oregon wants to change that. 

Wyden has been a controversial figure in the push to reform American health care. But he's been a favorite of the policy wonks, this writer included.

Back in 2006, just weeks after the Democrats took over Congress, Wyden unveiled a plan called the "Healthy Americans Act" that would guarantee health insurance to every American, while reorganizing the health insurance system in ways that would make medical care less wasteful. It's a serious, thoughtful proposal--one that helped build political support for reform, in part by attracting nominal support from Republicans. But it's unlikely to be the basis for congressional action, in no small part because it's got critics on both the left and the right.

Wyden, though, hasn’t given up on trying to influence legislation. The Healthy Americans Act would give everybody, not just a select few, the chance to choose from among a set of insurance plans. Now he's trying to save that feature, among others, by grafting it onto to legislation moving through Congress already.

Obama and his allies would be wise to consider the idea.

The reform scheme likely to emerge from both the Senate and House would set up insurance “exchanges.” These exchanges would be government-run marketplaces through which individuals and businesses could purchase regulated insurance: Coverage would have to meet minimum benefit standards, and be available to all people at the same price regardless of medical condition. (The offerings could include a public insurance option--that is, an insurance plan, like Medicare, run directly by the government--although that part remains very controversial.)

If Wyden has his way, there’d be one more wrinkle. Most of the proposals would open the exchange only to individuals buying coverage on their own--that is, people who don’t have access to affordable coverage through their employers--and to some small businesses. In other words, if you work for a larger company that offers insurance, you wouldn’t be able to buy insurance through the exchange, even if you thought it offered better options than your employer did. (The exception would be if you could demonstrate that paying for your employer plan would cause you financial hardship.)

Under Wyden’s new initiative, which he’s calling the “Free Choice Proposal,” even individuals who can get insurance through their employers could buy coverage through the exchanges. And not only would they be able to use the exchanges; they’d be able to carry over the money their employer might otherwise have spent on their insurance directly.

In other words, if you worked for a large company that offered coverage, you’d have two options: Take your employers’ insurance, or take a voucher equal to what your employer would have paid for coverage and use it to buy the policy of your choice through the exchange.

You may be wondering, gee, isn’t this a no-brainer? The answer is “no.” 

As Mary Agnes Carey and Julie Appleby explain in a new article for Kaiser Health News, there’s a reason the House and Senate bills don’t let everybody enroll in exchanges. Two reasons, actually.

The first is that it presents policy challenges: If people can choose between coverage offered by their employers and coverage offered by the exchanges, it’s possible that they might separate by their relative risk. Healthy people might end up aggregating in one place, leaving all the unhealthy people in the other; the resulting imbalance would mean really cheap coverage for the healthy but really expensive coverage for the unhealthy. And this is precisely the type of situation reform is designed to avoid. (TNR's print edition has more about this.)

There are ways to avoid this problem and Wyden has been working on that part. Wyden provided me with a preliminary version of the proposal; to be perfectly honest, I'm not sure whether he's got it down yet or not. (Experts I consulted had mixed opinions.) Then again, Wyden is as wonky as they get in the U.S. Senate. If he hasn't figured it out yet, he'll probably have some answers soon.

That brings us to the other obstacle to his idea: the political one. Many employers are reluctant to cede control over the kind of coverage their employees receive. They are among the groups who have pushed to limit access to the exchanges; and, it’s safe to assume, they would not be happy about this latest Wyden proposal. At a time when Obama and his allies are (understandably) focused on getting whatever they can through Congress, this is no small thing.

Still, there’s a compelling argument that--in the long run--employers and would be better off under this system. The more people shop around for coverage, the more they will seek out better bargains, assuming the market is well-regulated. That will reduce employer costs. Besides, under Wyden's scheme, employers themselves would eventually get the right to buy coverage through the exchanges. (The whole thing would phase in over a couple of years.) That, too, could reduce the burdens on their bottom line.

For any of this to happen, of course, a lot of people would end up moving out of employer-sponsored coverage and into the exchanges. That's the sort of change many people fear--and that opponents of reform are sure to exploit. Again, this is not a minor thing--although Wyden's counter-argument here is also pretty good. If he gets his way, everybody, even people with insurance, would suddenly have new alternatives. And they'd be better alternatives.

It’s worth remembering that Obama, along with other reformers, have frequently suggested reform will offer more choices. If Wyden can perfect his proposal--and, no less important, if he can get his fellow reformers to embrace it, in some shape or form--that promise can be fully realized.

Update: Ezra Klein has more smart thoughts on the underlying problem here:

A policy that preserves the current system is necessarily timid with ideas that could harm the current system. And that's what we're seeing. From a political perspective, that concession was probably an important, and maybe even an essential, one. But from a policy standpoint, it was a huge concession nevertheless.

--Jonathan Cohn