On Obamacare

There is one looming policy issue that I have yet to address on this blog. As the title suggests, that would be healthcare. The reason I haven’t addressed healthcare thus far is because the issue is incredibly complicated. Even though I haven’t written anything about it I have continually had conversations about it with my friends at home and my colleagues at work. I have continually stated to my friends that of all the domestic policy issues that confront America, I believe this one is the most complicated. In fact I believe it is so complicated that if I were president I would not even have tackled it. I would have concentrated on trying to do anything I could to reduce unemployment, but I would not have tried to reform healthcare. President Obama has my admiration for even attempting it.

One of the hardest things to understand about healthcare is that it is unlike a lot of commodities which are bought and sold.  When you’re healthy, healthcare and health insurance mean nothing to you. A healthy person doesn’t care whether or not they have health insurance or whether any medicine is available because they don’t need it. However, once a person gets sick healthcare becomes their number one priority and a person will pay almost anything for the cure to an ailment that causes them great discomfort or would otherwise be terminal.

This gives healthcare providers and by extension healthcare insurers a tremendous advantage when providing healthcare. If you’re healthy you don’t care what kind of health insurance you have and if you buy health insurance at all you are generally going to look for the cheapest healthcare you can get. Historically health insurers have used this fact to tremendous benefit. They enroll people in “affordable” insurance and take their monthly payments and then when they actually have a serious sickness or ailment, they find out that their “affordable” insurance is so inexpensive because it doesn’t cover anything serious. As a result, people are left having to foot the bill for most of the health services which ends up costing in the thousands for anything serious. Other than that, the health insurance company will raise the premiums for their service anytime the group of people they have enrolled is more prone to sickness. That’s actually the best case scenario, the worst case is the health insurance company labels you high risk and drops you from the plan altogether. On top of this, most health insurance companies deem it too expensive to cover someone who had any serious condition before they applied for insurance.

Therefore, there were approximately 47 million Americans uninsured and several many more millions who carried only the most minimum insurance which is pretty much just giving the health insurance company money for nothing. Due to rising premiums, the cost of healthcare was rising uncontrolled and threatening to bankrupt not only individual Americans, but the country as a whole.

Obamacare is basically an attempt to remedy these issues. In the simplest way I can explain it Obamacare contains:

  • A mandate that says everyone must enroll in healthcare or pay a fine.
  • A rule that no insurance company can turn anyone away or engage in price discrimination against anyone with a pre-existing condition.
  • Guarantees that every health insurance company will provide a certain level of health insurance and provide for preventive care.
  • Caps on the amount of profit a healthcare insurer can seek to attain.

In my opinion, Obamacare is really just a regulation of the previous free market system of healthcare as opposed to the government takeover it has been made out to be.

In order to make these rules possible, Obamacare has to establish a minimum level of insurance that all healthcare companies must adhere to. Under our free market system, the health insurance companies had to calculate a cost for service under these new rules.

As I said before, there are some people who have cheap healthcare plans that don’t really cover anything. These are basically the people who started receiving cancellations to their plans when Obamacare went into effect on October 1. That’s about 7-12 million people and some percentage of those people will actually end up paying less for their healthcare because they will be eligible for government subsidies.

So yes President Obama was wrong when he stated “if you like your health insurance plan you can keep it.” Because some people liked their health insurance plan because it was cheap and they didn’t have to use it anyway. They would like it a lot less if they actually had to use it. This would all have been much easier to work out if healthcare.gov was working like it was supposed to, but it isn’t. This means that the people who got cancellation notices are having a hard time getting healtchcare.

This brings us to the latest development in this saga. This past Friday the House of Representatives passed a bill to let the people who got cancellations keep their healthcare plans. It sounds like a good idea, except for the fact that if people are allowed to keep the healthcare plans that were canceled because they didn’t comply with basic coverage regulations it actually goes against the whole point of the law in the first place. If that bill is allowed to become law it would mean that cheap, ineffective plans remain in place and healthy people would remain on those plans. This leaves less for the government marketplaces which would basically drive up costs for Obamacare, while leaving the people who kept their plans exposed to danger in the future.

One final point, you might notice that I said between 7-12 million people will receive cancellations, but judge that against the 47 million people who never had health insurance and would be able to get it under Obamacare. Should we trade the interest of let’s say 10 million people who would benefit in the long run anyway, against 47 million or so who are going to see an immediate improvement?