There are so many dimensions of possible problems with Obamacare; the technical problems with the website are masking other much more problematic concerns. Higher costs, fewer choices, and coercive mandates are only now being considered by consumers as the actual implementation of the law is upon us. As I listen to the debates of the Obamacare implementation, conservatives against the bill are pointing to the lack of enrollment and choices in many areas. Liberal supporters blame Republican lack of support–and point to California, where the state embraced Obamacare and set up its own exchange as a model for what could be. So what is happening in California? This story in the LA Times is very informative.
Pam Kehaly, president of Anthem Blue Cross in California, said she received a recent letter from a young woman complaining about a 50% rate hike related to the healthcare law. “She said, ‘I was all for Obamacare until I found out I was paying for it,'” Kehaly said.
One of the common assertions of modern liberalism is “we’re all in this together,” suggesting we need collective action to mutually support each other in many dimensions of life. Ostensibly, Americans who do not share this vision (or at least its coercive application) are selfish. Yet the practical implementation is that they’re all for mutual support, as long as it’s the rich who are supporting the poor. They’re shocked to find out that “we’re all in this together” might mean we’re all in this together. The manifestation of this is now coming due, revealing the central problem of Obamacare: how do we get younger, healthier people to enroll and pay more? Or to pay much more?
Fullerton resident Jennifer Harris thought she had a great deal, paying $98 a month for an individual plan through Health Net Inc. She got a rude surprise this month when the company said it would cancel her policy at the end of this year. Her current plan does not conform with the new federal rules, which require more generous levels of coverage. Now Harris, a self-employed lawyer, must shop for replacement insurance. The cheapest plan she has found will cost her $238 a month. She and her husband don’t qualify for federal premium subsidies because they earn too much money, about $80,000 a year combined. “It doesn’t seem right to make the middle class pay so much more in order to give health insurance to everybody else,” said Harris, who is three months pregnant. “This increase is simply not affordable.”
Part of the problem is the lack of choice; Obamacare supporters note that where it has been embraced, such as in California, there are many competitors to give consumers choice. While this may be true in some cities it doesn’t seem to be true across large parts of the country, but more importantly, it misses the point. We get less choice with Obamacare because we are mandated to purchase insurance for issues we don’t need or want. For just one example, many 50+ year old women are being forced to buy health insurance which requires pregnancy care. We can’t choose any level of coverage–we must choose the minimum coverage Mr. Obama has mandated. And if we choose too many coverage options, we can pay a “cadillac” tax. What about lower priced plans that meet consumer needs and price points?
Blue Shield of California sent termination letters to 119,000 customers last month whose plans don’t meet the new federal requirements. About two-thirds of those people will experience a rate increase from switching to a new health plan, according to the company……All these cancellations were prompted by a requirement from Covered California, the state’s new insurance exchange. The state didn’t want to give insurance companies the opportunity to hold on to the healthiest patients for up to a year, keeping them out of the larger risk pool that will influence future rates. Peter Lee, executive director of Covered California, said the state and insurers agreed that clearing the decks by Jan. 1 was best for consumers in the long run despite the initial disruption. Lee has heard the complaints — even from his sister-in-law, who recently groused about her 50% rate increase. “People could have kept their cheaper, bad coverage, and those people wouldn’t have been part of the common risk pool,” Lee said. “We are better off all being in this together. We are transforming the individual market and making it better.”
The “state and the insurers” agreed what was best! Crony capitalism at its finest–the marriage of government and business and the consumer gets told what to do. Don’t worry, “we are transforming the individual market and making it better.” Better for whom?
So what does this mean economically? We often assert that voters are rationally ignorant, in that they don’t pay attention to political issues because the costs exceed the benefits. So when voters are told by Mr. Obama, “if you like your health care plan you can keep it,” many tune out. Now that this is demonstrably false, the cost/benefit calculation is beginning to change. Economic theory suggests that more and more voters will become informed. Will they like what they see? If not, what will they do? I think there is a reason some at-risk Democrats in the Senate are heading for the tall grass…..
Anonymous
October 28, 2013
You said that we must cost the minimum coverage Obama mandated. You meant the minimum coverage Sebelius mandated. She’s the one that set these stupid requirements.
Jeff Haymond
October 28, 2013
I might agree on the specifics, i.e., Mr. Obama didn’t get into the weeds as to the specific coverage required (and likely Mrs. Sebelius either), but the concept of minimum coverage mandates was certainly something Mr. Obama wanted.
Rachel Palmer
October 28, 2013
I agree that as more and more Americans are having to pay the price for our “affordable” new health care, Americans will begin to become informed. They will not stand for something that ends up costing them. If the majority of Americans takes a stand against this issue, then the program will have to be reformed or done away with.
Aaron Free
October 28, 2013
My family has had to switch from a $250/person deductible to a $5000 deductible/a person because the premiums for the $250 plan were around $1500 a month because of the new law. In a sense, however, this is the truest kind of insurance, because the only way to reach that is having a major problem that has a low chance of happening, which is exactly what insurance is designed for.
Zach Santmier
October 28, 2013
My father-n-law and I were recently discussing this and he informed me that his health insurance costs over doubled and yet his new deductible was going to be higher then before. He decided to do a bit of research and decided to join a Christian group that pooled their money together for health care. He said that after doing some research, people who had been in the system for 10 years plus were very satisfied with their coverage and had always been able to get their medical bills paid. Religious groups don’t have to adhere to the governmental regulations, so if you’re not satisfied with the government’s new regulations, it may be time to consider a religious organization for your health care needs.
Christy
October 29, 2013
It’s interesting how that works. So many people think the government just has money to spend aside from taxes and loans. They don’t make the connection until it hurts them. Then and only then do they have a problem with social programs.
Carrie
November 11, 2013
Good points all around. Truly apactripeed.
Steve Adams
October 29, 2013
As long as 50% or more of the voting public see Washington elected officials as the candy man (our candy by the way) then we will continue down the wrong path. Candy goes to rich corporations, including the biggest banks, as well as the poor both working and non working. Washington is broken in so many ways. We need politicians brave enough to say no to the banks, the unions, big business and the masses uneducated in what makes an economy strong. Then we may have a chance at a new economy. Until then we remain on the path that took down other great nations in history.
Anonymous
October 29, 2013
All I know is I have sticker shock. I have insurance through anthem. I recently received my premium notice which told me because of recent legislation they had to increase the monthly premium by a little over $21. Thanks a lot president Obama
Mitchell Adams
October 29, 2013
that was my post about anthem. I’ve been having trouble posting and it’s been coming up anonymous. Sorry for the confusion.
Lani
October 30, 2013
Individuals are not the only ones who will directly face the negative aspects of Obamacare. Small start-up companies that offer benefits to their employees will have a difficult time affording the rise in cost. I was recently speaking with one small business owner whose company faces a dramatic increase in cost due to Obamacare. This increase in costs provides an incentive for his company and similar companies to refrain from offering healthcare, as healthcare provision is not mandated for companies with fewer than fifty full-time employees. In addition, companies will likely limit the hours employees can work to avoid falling under Obamacare requirements.
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March 10, 2014
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Ben Saxe
October 30, 2013
Here is a quick look into the future. I wonder how long it will take for enough to realize who actually is paying for all this that there will be enough provoke new policy.
bluntj
October 31, 2013
Dr. Hammond,
There are many problems with the new Obamacare system. You quote people whose insurance rates have gone up. However, shouldn’t young people be paying more? Heck, shouldn’t everyone?
Under the old system, government encouraged corporations to give health plans to their employees. This caused people to way over-consume healthcare since the consumers did not directly pay for their costs. If people did not have health-insurance, the state picked up the tab when these people went to the ER and defaulted on those bills.
It makes sense to me that people should start paying more.
Jeff Haymond
October 31, 2013
bluntj; you seem to be mixing two different issues. If you are asking, shouldn’t the young pay for their care when they go into the system, the answer is yes, and currently they do–if they are not destitute. While hospitals are forced to take anyone in the ER (insurance or not), that does not eliminate the bill. The central question I’m asking is should the government force the young to pay, as a made up example, $3k/yr for health insurance when their risk characteristics are only $1.5k/yr, in order to transfer the $1.5k delta to older consumers? You can turn the question around–why shouldn’t older/sicker people pay for the care they are consuming?
You say “it makes sense to me that people should start paying more.” That is NOT the point of Obamacare. The point of Obamacare is for some members of the population to pay more in order that others pay less than their costs. As in any government program, there are winners and losers. My question regards the ethics of forcing one group to pay for another group.
bluntj
October 31, 2013
That’s fair. I’m more clear on what your article is addressing. I thought at first that your main complaint was the fact that under the new exchanges, some individuals, as opposed to their employers, are now bearing more of societies health costs. My mistake.
Personally, I think the employer mandate, and all other incentives for employer-provided healthcare, needs to be dropped. Healthcare costs have been holding back productivity for years. Additionally, employer-provided insurance plans are inefficient. Consumers will over-consume healthcare on plans that they do not pay for. This is not sustainable. The U.S currently consumes around 17% of GDP on healthcare and this will only get worse. My main complaint with the ACA is that it does not address the healthcare sectors unsustainability adequately.
In the future, (assuming you have not already done so) I would love to see a blog post on an alternative to the ACA that somehow reduces cost inflation (get healthcare spending to stabilize at its current % of GDP or even shrink) while also somehow getting out of the old system of employer-provided healthcare
Jeff Haymond
October 31, 2013
I think you are on track. While not a health care economist, I do understand the 2nd Law of Economics–incentives matter! We have all sort of perverse incentives for the over consumption of health care, as well as no incentive for recipients to demand value in the consumption they do make. The biggest problem is 3rd party payment; businesses should be out of the business of providing health care.
David Hartung
November 2, 2013
In a twisted way, it is almost nice to finally see what conservatives have always said will happen, happen. Sure enough, people are losing coverage and companies are ending coverage left and right. It sounds like the Affordable Care Act will in fact pull through and we will pay for it. Wahoo!