John on November 8, 2009 at 12:06 am
It passed the House tonight. Still lots of hurdles ahead. Anyway, this Martin Feldstein piece from the Washington Post is a couple days old but still timely:
Obamacare could have the unintended consequence of raising health insurance premiums and causing a decline in the number of people with insurance.
Here’s why: A key feature of the House and Senate health bills would prevent insurance companies from denying coverage to anyone with preexisting conditions. The new coverage would start immediately, and the premium could not reflect the individual’s health condition.
This well-intentioned feature would provide a strong incentive for someone who is healthy to drop his or her health insurance, saving the substantial premium costs. After all, if serious illness hit this person or a family member, he could immediately obtain coverage. As healthy individuals decline coverage in this way, insurance companies would come to have a sicker population. The higher cost of insuring that group would force insurers to raise their premiums. (Separate accident policies might develop to deal with the risk of high-cost care after accidents when there is insufficient time to buy insurance.)
The higher premium level would cause others who are currently insured to drop coverage, pushing premiums even higher. The result would be a spiral of rising premiums and shrinking numbers of insured.
In an attempt to prevent this, the draft legislation provides penalties for individuals who choose not to buy insurance and for employers that do not offer health insurance. But the levels of these fines are generally too low to cause a rational individual to insure.
Generally speaking, it’s the same problem we were discussing here a few days ago.
I realize the pre-existing conditions part of this reform is relatively popular. I just don’t think many people have thought carefully about what it actually means. In essence it means we’re not offering insurance at all anymore, not really. We’re offering to pay the bills with or without insurance.
I suspect a lot of people are going to be surprised by the number and expense of the unintended consequences this bill creates should it become law. Good thing we’re flush with cash.
Category: Health & Education |