Obamacare is Where Pragmatism and Cynicism Meet

My opposition to Obamacare is where pragmatism and cynicism meet. My health insurance premiums are going up faster than my wages and I cannot do anything about it. This is pretty galling for a healthy person who has not made an insurance claim in this century. If Obamacare cannot fix the largest part of the health insurance market, Obamacare as a health care reform is a failure. It is not even a good first step! So I hope for the best and plan for the worst. For the next two to three years I think that the individual health insurance market will be a better deal than the group health insurance market as I wrote in What if Individual Health Insurance Premiums do not go up as fast as expected? According to this Milliman report on health insurance in Ohio, the two biggest cost drivers in the individual health insurance market is pre-existing conditions and community rating. If we can fix these two problems then the individual health insurance market segment will continue to be more attractive than the group health insurance market. Community rating is just another arbitrary cost shifting scheme that disguises cost pressures. If you want market pressures to help reduce health care cost increases, you do not hide the costs. Since I would prefer that we have slower health care cost increases, community rating needs to be dramatically reduced or eliminated. The individual mandate is a really dumb solution for the pre-existing condition problem. It just needs to go away. Here is a more elegant solution to the pre-existing condition from the Heritage Foundation, The Right Way to Limit Pre-Existing Condition Exclusions. Yes, this solution on one page. Work smarter not harder!

Over 90 percent of Americans with private health insurance are covered by employer group plans where existing rules governing the application of pre-existing condition exclusions are not an issue.  Before passage of Obamacare, the law specified that individuals with employer-sponsored insurance cannot not be denied new coverage, be subjected to pre-existing-condition exclusions, or be charged higher premiums because of their health status, when switching to different coverage. Thus, group market, pre-existing-condition exclusions only apply to those without prior coverage, or to those who wait until they need medical care to enroll in their employer’s plan.

These existing rules represent a fair approach: Individuals who do the right thing (getting and keeping coverage) are rewarded; individuals who do the wrong thing (waiting until they are sick to buy coverage) are penalized.

The problem is that the same kind of rules did not apply to the “individual” (non-group) market””about 9.4 percent of the total market for private health insurance. Thus, an individual can have purchased non-group health insurance for many years, and still be denied coverage or face pre-existing condition exclusions when he or she needs or wants to pick a different plan.

The obvious, modest and sensible reform is to simply apply to the individual health insurance market a set of rules similar to the ones that already govern the employer group market.

Instead, Obamacare prohibits the application of pre-existing condition exclusions under any circumstances, thus encouraging everyone to wait until they are sick before buying health insurance. These perverse incentives are a recipe for disaster. To limit the effects of that disaster (of their own making), lawmakers included an unpopular individual mandate to buy health insurance in the health care legislation.