Maybe encouraging people to switch from private to government-provided insurance wasn't the intention of Hawaii's universal children's health insurance initiative, but that result certainly shouldn't have come as a surprise. When a free alternative becomes available, it's sensible for families to reevaluate if they should continue paying for a service on their own. This dynamic will hold true whether the federal government starts offering preschool through the government-run public school system (another Democratic priority) or if they expand eligibility for government-subsidized healthcare.
The Heritage Foundation estimated that about half of children who would obtain health insurance through SCHIP if eligibility is raised above 200 percent of the poverty line would have previously had private insurance. Other economists have placed the estimate even higher. As more families decide to stop paying for private insurance and switch to the government system, some children may actually end up having worse healthcare coverage than they did before the government generously offered taxpayer-funded support.
The migration from the private insurance marketplace to government programs will have consequences beyond the effects on individual families and even beyond the price tag that will have to be borne by taxpayers. Private insurers will be losing business to the public system and will have increased difficulty offering their services at the same prices. They may have to find ways to cut costs or reduce expenses. As their services become comparatively less attractive, more people will make the switch. Employers who today help pay for employees' health insurance may begin to decide it isn't worth the investment and that employees would rather have money in their pockets and make the leap into the government program.
President Obama may sincerely not want Americans currently happy with their health insurance to be affected by new government policies. But such policies have consequences beyond their most visible beneficiaries. Americans would be wise to understand that whether they like it or not change may be coming their way.