Wednesday, January 15, 2014

Poor quality regulation

Lyn Stout says in his book: Good laws makes good people. Today I would like to confirm again that bad regulation distorts markets. In 1999 it was decided that only group contracting for private health insurance would have some tax rebates, individual insurance lost such consideration. Fifteen years after, the government has decided that such rebates will be subject to social security contributions, this exactly means an increase in buyer's cost by 36%, 30% for the employer and 6% for the employee. In 2012 the average premium in the individual market was 731 €, while the group premium 562€. Such difference is huge since the product is nearly the same, and differential cost can't justify a discount of 23%. Former regulation may explain such distorsion, and precisely this was my argument in an article 3 years ago.
Nowadays group health insurance is not included under income tax, although it may be in the next step. Any government should assess how regulation distorts markets, and fit decisions to strictly improve markets functioning. I think that right now they are strictly thinking on more income and don't care about the impact that may be relevant next year.

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