The U.S. auto care crisis of 2095 started innocently enough. In 2050, the government decided that employers could add automobile insurance as a tax-free fringe benefit for their employees. Thus, a worker who needed $1,000 in pre-tax salary to buy his own $600 insurance policy could, in effect, get the same policy by agreeing to forego $600 in salary.

This tax advantage rapidly altered the auto care business. The market for individual insurance and direct payment withered. Most of the population soon got -- and, when they became unemployed, lost -- insurance as part of their job. Because the benefit was tax-free, insurance coverage became broader and broader. Initially designed to protect motorists against high-cost catastrophes, coverage began to pay for routine items like gasoline, oil changes and tires. Because insurance was paying for it, drivers no longer cared about costs. They demanded the best grade of gasoline, most expensive tires, etc. Since all the bills went to insurance companies, gas stations and mechanics no longer posted prices. The few drivers who did care about cost had no way to make price comparisons.

The second big change was the decision to offer government-paid auto insurance to everyone over the age of 65. Seniors, who were more accident-prone than rest of the population, would no longer have to worry about being bankrupted in their golden years.

SeniorCar was wildly popular in spite of -- or, more likely, because of -- the fact

that it promised trillions more in benefits than it collected in taxes.

SeniorCar had other side effects. To hold down costs to the government, oil companies, mechanics and parts suppliers were forced to provide services to seniors at prices near or below cost. In order to maintain their profitability, the companies charged everybody else extra. These extra costs led some companies to abandon or cut back on car insurance benefits. Out-of-pocket insurance and/or direct payment became unaffordable for many individuals.

The situation was not improved by lawsuits launched against mechanics and parts makers whenever a repair went awry. This led to "defensive" repairs where extra tests were performed to provide legal cover.

The government also restricted competition among insurers. Companies were not allowed to sell policies across state lines. Government mandates forced insurers to cover problems with items as such as in-car DVD players, navigation devices, moonroofs and seat warmers whether customers wanted such coverage or not.

As a result of all the above, more and more Americans found themselves without insurance. The problem was particularly acute for those who lost a job or had a pre-existing history of mishaps due to no fault of their own.

Amazingly, the reforms proposed to deal with the crisis had almost nothing to do with the underlying problem. Instead of reforming the tax code to break the connection between employment and insurance, an employer mandate making the connection tighter was proposed. Instead of raising payments to stop the cost-shifting distortions of SeniorCar, billions of dollars of reimbursement cuts were recommended. Nothing was done to limit lawsuits. Discussion of additional competition in the insurance business devolved into a largely symbolic debate over the merits of a "public option" versus co-ops.

The failure to face the underlying issues led to the auto care insurance crisis of 2096, 2097, 2098.

Jeffrey R. Scharf is president of Scharf Investments. Contact him at jeffrey@scharfinvestments.com.