Sunday, October 13, 2013

Unicorns, Rainbows, and the ACA

People, the rubber biscuits are out on the table. The Chicago Tribune is incensed that ACA plans with the lowest monthly premiums have the highest deductibles.

Really, they seem amazed that the world isn't made out of unicorns and rainbows, and they go looking for a scalp to put on the wall,

Plans with the least expensive monthly premiums — highlighted by state and federal officials as proof the new law will keep costs low for consumers — have deductibles as high as $6,350 for individuals and $12,700 for families, the highest levels allowed under the law. 

 Insurers say the price and cost hikes result from new benefit mandates, additional taxes levied as part of the law and a requirement that they can no longer deny coverage to people with pre-existing medical conditions. 

 The vast majority of insurance plans for 2014 must include a list of 10 essential health benefits, some of which, like maternity care, weren't necessarily included in all health plans a year ago. The law also includes mandatory coverage of mental health and substance-abuse treatment, prescription drugs and rehabilitative care. All preventive care, including annual physicals and routine immunizations like flu shots, must be covered at no cost. 

 Further, insurers are required to take all applicants, regardless of whether they have pre-existing medical issues that may have locked them out of coverage in the past. And they're prohibited from charging their oldest, sickest members any more than three times as much as their youngest, healthiest members, causing premium prices to rise for many younger people. Costs associated with those mandates are passed along to all members of a health plan. 

Considering those factors, "the rates are actually quite reasonable," said Kelly Sullivan, a spokeswoman for the Illinois health insurance marketplace.

People, not even President Obama can defeat common sense and basic economics. If you increase demand (the mandate and subsidies) and expand the scope of the product (more required benefits), and disallow discrimination, then prices will rise. And if you squeeze the monthly payment down to make it look good, the deductible must rise.

I'm not saying any of the above actions are bad, I'm just saying it's nuts to think they'd be accompanied by lower prices.

I favor mandatory, high-deductible, insurance for everyone. Say a $10,000 deductible plan that covers major injury, illness, etc., just like we have for car insurance. I am less sure, but I think I'd even favor letting each state set the standard of what this bare bones coverage looks like inside its borders, just like we do for car insurance. You'd have to show proof of insurance to get a license, receive benefits, etc.

But instead of subsidizing the policies, I'd prefer to use the EITC or a basic income grant to deal with affordability issues.


John Thacker said...

The only problem is that President Obama claimed that he could defeat common sense and economics, so people who believed him are surprised now.

In 2008, McCain and his advisors offered a plan that was honest. It was easily defeated by Obama's ads that attacked its honesty, and promised unicorns and rainbows instead.

I agree with your recommendation. I'd prefer a mandatory HSA with a basic grant as part of it, but it could be part of the EITC.

Yancey Ward said...

I have it on good authority that President Obama can indeed defeat common sense. Little Ezra Klein told me so.

Anonymous said...

And I think all Americans over eighteen should be required to have a hand gun for the general good, and to insure their health and welfare, or pay an IRS penalty for their failure to purchase one: like an automobile or health insurance, someday they may have to use a gun.