New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences.
[…]The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market. In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.
New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.
Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.”
Obama plans to get around the problem of healthy young people opting out of paying for other people’s health care by fining them.
The new federal health care law tries to avoid the death spiral by requiring everyone to have insurance and penalizing those who do not, as well as offering subsidies to low-income customers.
[…]Under the federal law, those who refuse coverage will have to pay an annual penalty of $695 per person, up to $2,085 per family, or 2.5 percent of their household income, whichever is greater. The penalty will be phased in from 2014 to 2016.
How does this reduce health care costs? It doesn’t. But it does explain why we have so many uninsured in this country – they don’t buy insurance because government regulations requiring mandatory coverages have made it a bad deal for them. Young men don’t need to pay for in vitro fertilization and sex changes. They don’t use it, so why should they agree to pay for other people’s problems? They have their own lives to live.
Ed Morrissey explains:
If nothing else, this proves a couple of points that critics have made all along. The mandates are nothing more than a way to get the young to create a proxy welfare state by forcing them into a usurious insurance model. It does nothing to reduce actual costs, and in fact makes cost increases both more likely and more amplified.
Now you understand socialized medicine. The left plays on people’s fears and insecurities in order to gain control of the economy. They promise to take care of people, so that people can stop worrying about taking responsibility for their own choices. Once the leftists are elected, they take money from the young people who don’t understand what is happening to them, and they give it away to special interests in order to buy votes.
The single most popular health care idea emanating from the right is to allow Americans to purchase health insurance across state lines. What a stupid idea, making people buy insurance only within their own state!
[…]Now, think about this for a minute. I doubt her precise figure, but let’s grant the premise that young healthy people could save a lot of money from such an arrangement. Why is that? Is it that out-of-state insurance companies are that much more efficient? No, of course not — profit and overhead don’t account for anywhere close to two-thirds of insurance premiums.
The young and healthy would save money because they’d find an insurance plan from a state with very limited regulation. Say, those plans would operate in a state that doesn’t require insurance to cover any medical conditions that are unlikely to afflict a young, healthy 25-year-old. What happens is that the health care industry becomes like the credit card industry. Some small state realizes it can attract a lot of business its way by winning the race to the regulatory bottom.
So then, effectively, we’ve almost completely eliminated all regulations on health insurance. Conservatives will say that’s great. And certainly the healthy 25-year-old would be better off. But, of course, the effect of those regulations was to force insurers to cover medical conditions that older or less healthy people have. As a result, all the young healthy people have split, and costs on everybody else go up. The young and healthy are paying higher rates because of these regulations. But the same regulations let the old and sick pay lower rates — and they’re the people who have the biggest trouble buying insurance as it is. Allowing interstate sale of insurance isn’t just a non-solution, it’s a massive anti-solution, worsening all the problems of the status quo.
Got that? The whole point of socialized medicine is to force people to limit their choice of coverage to only in-state plans so that young people just starting their careers have to pay more for coverages that they don’t need. And retired people who have had all their lives to make money and save for their own health care get health care for less. The health care of the elderly needs to be subsidized via government-controlled wealth redistribution. Isn’t it amazing that young people vote so overwhelmingly for Obama?
What would happen if Obama succeeds in passing a law to force insurance companies to accept customers with pre-existing conditions at the same price as everyone else who doesn’t have pre-existing conditions?
Read this IBD editorial by George Mason University economist Walter Williams. (my second favorite economist)
Excerpt:
Sen. John Rockefeller, D-W.Va., chairman of the Senate Finance Subcommittee on Health Care, and Rep. Joe Courtney, D-Conn., a member of the House Education and Labor Committee, have introduced the Pre-existing Condition Patient Protection Act, which would eliminate pre-existing condition exclusions in all insurance markets. That’s an Obama administration priority.
I wonder whether President Obama and his congressional supporters would go a step further and protect not just patients, but everyone against pre-existing condition exclusions by insurance companies. Let’s look at the benefits of such a law.
A person might save quite a bit of money on fire insurance. He could wait until his home is ablaze and then walk into Nationwide and say, “Sell me a fire insurance policy so I can have my house repaired.” The Nationwide salesman says, “That’s lunacy!” But the person replies, “Congress says you cannot deny me insurance because of a pre-existing condition.”
This mandate against insurance company discrimination would not only apply to home insurance, but auto insurance and life insurance as well. Instead of a wife wasting money on costly life insurance premiums, she could spend that money on jewelry, cosmetics and massages and then wait until her husband kicked the bucket to buy life insurance on him.
Insurance companies don’t stay in business and prosper by being stupid. If Congress were to enact a law eliminating pre-existing condition exclusions, what might be expected?
Yeah, that’s why Walter Williams is awesome. And you must read the rest to see how it would apply to medical insurance. Everything sounds good to those who do not ask the most important question in economics: “and then what happens?” And that question cannot be answered with “then I feel good about myself and people like me because I care about the poor”. That question needs to be asked for the forgotten man. The nameless man who is hog-tied into supplying the wealth that gets redistributed by demagogues desperately seeking adulation from the covetous masses.
The problem is that people don’t understand how insurance works. If you have to pay guaranteed claims from people with pre-existing conditions, then the premiums of all those people who don’t have pre-existing conditions will be increased to pay for those claims. Think. Beyond. Stage. One.
The Cato Institute
Consider this podcast from the libertarian Cato Institute, which explains a little more from the point of view of the medical insurance company.
Here a summary of what happens after stage one, to the forgotten man. Medical care costs money to produce. Forcing medical insurance companies to sell care for a pre-existing condition far below the actual cost of providing it will force insurers to drop coverage for those pre-existing conditions. (Or they may drop the doctors who treat those conditions from their network). That is worse for the people with pre-existing conditions. And this is how economic ignorance hurts the very people that the secular leftist do-gooders are trying to help.
Believe me when I tell you that this happens all the time with leftist economic policies. It’s the law of unintended consequences. They think they are helping their preferred victims, they feel better about themselves, but they actually hurt the very people they are trying to help. And by “help” I mean they steal someone else’s money/product/liberty and transfer it to their preferred victims in order to buy votes.
National Review
Now, take a look at this article that ECM sent me from National Review, which talks about Obama’s promise that you will be able to keep the medical coverage you have. Is Obama telling the truth? Can pigs really fly just by sheer belief and pixie dust?
Excerpt:
Obamacare would forbid insurers from basing rates on the individual health of their customers in any community. It also would force issuers to cover people who refuse to buy insurance until they get sick. These and Obamacare’s other complexities and contradictions would make insurance pricier, as would a $149.1 billion, 40 percent excise tax on high-value “Cadillac plans.” Thus, some employers would save money by paying fines after de-insuring employees. Workers who cherish their health plans then would find themselves dumped into the government-run Health Insurance Exchange.
“Some smaller employers would be inclined to terminate their existing coverage,” explained a December 10 memorandum by Medicare’s chief actuary, Richard S. Foster. He added: “The per-worker penalties assessed on non-participating employers are very low compared to prevailing health insurance costs. As a result, the penalties would not be a significant deterrent to dropping or foregoing coverage. We estimate such actions would collectively reduce the number of people with employer-sponsored health coverage by about 17 million.”
Even more ominously, Obamacare would require employers to provide federally approved coverage. Obama considers “meaningful” plans those at least as generous as the Federal Employees Health Benefits Program.
“Obama’s definition of ‘meaningful’ coverage could eliminate the health plans that now cover as many as half of the 159 million Americans with employer-sponsored insurance, plus more than half of the roughly 18 million Americans in the individual market,” says Cato Institute policy analyst Michael Cannon. “This could compel close to 90 million Americans to switch to more comprehensive health plans with higher premiums, whether they value the added coverage or not.”
It’s not just elective abortions that we’re going to be paying for whether we want them or not. In some countries with socialized health care you can pay for breast enlargements (UK), sex changes (Canada), in vitro fertilization (Canada), etc. And these elective surgeries take up money from the other vital services. Obama can make it such that every plan has to offer those coverages.
So, those who don’t use such elective services end up encouraging them, even if they have moral objections to those services. When the government subsidizes something, more people choose it. Won’t Planned Parenthood be pleased with all that new revenue? I’m sure they’ll think of something to do with all that money. Maybe a nice political donation?
WINTERY KNIGHT 