Ignore the Newspeak: ‘Obamacare’ is pushing us in the wrong direction
To politicians fluent in Orwellian “Newspeak,” it’s known as the “ Patient Protection and Affordable Care Act” (PPACA). But you and I know it more accurately as “Obamacare,” the controversial piece of federal legislation that forces everyone to purchase health insurance – whether they want it or not – and mandates that each state have a health exchange.
Kentucky has obtained nearly $67 million from taxpayers in the form of a federal grant – more than any other state except New York – to establish such an exchange.
University of Kentucky economist John Garen, Ph.D., describes these exchanges as “essentially a website where consumers can find individual health insurance plans and prices that are available to them.”
But Garen points out in a new Bluegrass Institute policy brief that it only takes a quick Google search to find private sector websites providing the same service already exist.
And while big-government apologists often portray such exchanges as a market-friendly alternative, “this is very misleading as the PPACA overlays the exchange with a whole new set of rules that plans and consumers must comply with,” Garen writes.
Such overreach actually discourages health plans proven to reduce costs while providing adequate coverage.
Known as “consumer-directed” policies, these market health plans include full coverage for catastrophic care and allow for high deductibles and heath savings accounts for smaller medical expenses.
A new study by the RAND Corporation shows that such plans could reduce America’s health costs by $57 billion annually if allowed to grow unimpeded. Currently such plans comprise only 13 percent of all coverage.
Rather than spurring the growth of consumer-directed plans, Obamacare moves us in the wrong direction. It discourages such plans by forcing insurers to pay out a certain percentage of the premiums they collect in the form of claims.
As Garen points out, insurers are unlikely to offer consumer-directed plans if the PPACA is fully implemented because these higher-deductible options “have lower premiums but not proportionately lower administrative costs.”
Uniform-pricing demands are another particularly potent ingredient in Obamacare’s harmful prescription. Instead of insurers being allowed to set their premiums based on the risk of the individual or group – the way it has, and should, be done – the federal mandate forces nearly everyone to pay the same premiums while guaranteeing coverage for all individuals, regardless of pre-existing health conditions.
Only shallow thinkers would board this boat to economic ruin.
On the surface, it might sound good to mandate the same price for all, regardless of their level of health or lifestyle choices. But who will pay for this policy?
Garen says those in good health “will overpay for their insurance” and will not, as a group, benefit from the new law. This puts insurance companies at odds with their healthy customers – the kind of clients companies prefer to have more of yet who will inevitably seek less insurance.
Meanwhile, insurers will be forced to provide the same type of coverage for unhealthy customers even though doing so will lead the company to the wrong side of the accounting ledger. Why would any rational company choose to offer health insurance at all under such a regime?
The PPACA also discourages incentives for adopting healthy behaviors, which most certainly would reduce health-care costs – precisely what “affordable care” acts are supposed to do.
“Disallowing individual rating of health insurance premiums leaves no scope for lower premiums as an incentive for healthy behavior,” Garen writes. “Bad health habits are, in effect, rewarded.”
While we may still be waiting on the Supreme Court’s ruling concerning the constitutionality of Obamacare, the verdict is already in about whether it will fix our nation’s health-care challenges.