I had recently, tongue in cheek, asked readers if they had heard about America's Life Insurance Crisis. Of course, there isn't one. The reason is that, unlike health insurance, there is a real market for that product. How can we create a real market for health care and insurance? It will require 4 steps. Let's discuss the first one today.

The decision to buy health insurance and care must be with the ultimate consumer. The days of your boss selecting your health care must end. If employers in the large group market do not allow for real choices in plans for employees then the reason for them having that power to begin with must be removed. That means that the exclusion of employer-provided health insurance from taxable income must be ended. Anything the boss spends on health premiums should be on your W2.

This will free me and tens of millions of other employees to select the health plan we want. I suspect HR bureaucrats will recognize that many employees will walk from employer coverage and start offering us a large amount of choicesin health care. Presumably large firms will start banding together to create "exchanges" where employees select thecoverage they want from numerous competing plans. This would put the rest of us in the same position as Federal employees who have access to many plans through the FEHBP.

Of course, this represents a large tax increase on employees. Politically, that is a nonstarter. To make the reform reality will require the maintenance of the current tax subsidy to purchase health care. President Bush's proposal for a tax deduction is a good start but needs to be altered and expanded. Everyone should receive a refundable tax credit for the purchase of health care in exchange for the taxation of employer paid premiums. This does two things, First, it puts the purchase of individual plans on the same basis as employer plans. Second, it allocates more of the subsidy to low income groups by reducing the benefit to the wealthy. Warren Buffet should not get a bigger tax break for buying health insurance than you and I do.

(See parts one, , four, and five)