If It’s Voluntary, It’s Not Reform : Health insurance: Any scheme without mandates will encourage the healthiest people to go without, as they do now.

Republican lawmakers and some conservative Democrats may see the death of universal, comprehensive national health-care reform as a great political victory, but it’s bad economics. Thanks to Proposition 186 on the Nov. 8 ballot, however, Californians still have a chance to do something before an insidious process known as “adverse selection” trashes what’s left of our health-care “system.”

Adverse selection is the tendency of people with poorer than average health expectations to sign up for insurance more than healthier people. If you have a health problem, you know how important coverage is and you’ll probably put insurance high on your spending priority list.

But given the choice, a significant number of people won’t get insurance unless an employer pays for most or all of it. For people with very low incomes, it may come down to a contest between food and health coverage. Without significant subsidies, insurance will be at the top of the list only for those with the worst health problems. Meanwhile, many young, healthy individuals will see no reason to spend their own cash on health policies. After all, they may think, “I’m strong as a horse, and there are plenty of other ways I’d rather spend my money. Although purchasing pools may help small employers get a better deal in the insurance market, some employers (large or small) will rate health coverage for their workers lower than other business spending options.

The truth is that without a mechanism to cover everyone, many healthy individuals simply won’t be part of the insurance pool. That means people with health problems will make up an ever-larger percentage of the pool, thereby pushing up premiums. Unfortunately, as premiums continue to climb, price will drive more and more employers and low-risk individuals out of the market. This is the destructive cycle that will ruin any system that depends on purely voluntary, private decisions about health coverage.

The uninsured who become sick will, after spending their private resources, fall back on public, poverty-based programs at taxpayer expense. The tinkering advocated lately by some in Washington would simply hide the fact that more people are being dumped on those already overloaded programs. Result? The worst possible kind of “single-payer” system--an underfunded, stigmatized, poverty-based one.

Major victims of adverse selection will include:

* The poor. Without significant subsidies to help them pay for private coverage, even more people will find themselves relying on government health programs of last resort, often at a much higher cost to the public than a comprehensive system of universal coverage.

* Middle-class Americans and the working poor. This group is among the hardest-hit now. According to a report in the April issue of the California Journal, the fastest-growing portion of the Medi-Cal caseload consists of households with incomes between $16,000 and $24,000 for a family of three. Without the kind of universal coverage that now appears available only through enactment of Proposition 186, the combination of higher insurance premiums and higher taxes to support an increasingly overburdened safety net for the poor is likely to make things worse.

* People with disabilities and serious pre-existing conditions. This is the same group that insurers routinely reject for coverage now. Even if Congress ultimately requires insurers to take everyone, regardless of health status, escalating premiums will effectively price this group out of the market for any health plan that could possibly meet their needs.

*Employers. Cost-shifting to pay for treating the uninsured, along with an increasingly high-risk insurance pool, means that many employers who want to cover workers will either find themselves at a competitive disadvantage with companies that don’t offer health benefits or else be priced out of the market altogether.

Contrary to the misleading rhetoric that often masquerades as analysis of health-care reform these days, the best protection for all of us is universal coverage for a basic benefits package that is comprehensive enough and flexible enough to meet individual needs in a cost-effective way. Thanks in large measure to the very forces that oppose it, Proposition 186 is now the only viable way to achieve that goal.