Attention Deficit Health Insurance Disorder

Random thoughts are the rule today, as the RM returns from nearly six months of hiatus. I will try to keep the random on topic though, so here we go. Currently, all political junkies (and everyone else unable to get away from the tyranny of 24 hour news) are consumed by ObamaCare. Strangely though, very few Americans have sought to become informed on the Affordable Care Act. This particular reality hasn’t changed much in the 54 months since the first versions of health care reform began to filter into Congressional sub-committee rooms. It is one thing for an issue to be sidelined in favor of a straw man in opinion columns, but whole committee meetings have been devoted to talking about elements of the law that don’t exist. As a consequence, this entire process has been dominated by mythology and the unwillingness of regular folks to read a few lines past the sensational headline to get to the facts.

So by way of reminder, here is a set of facts (with a couple of challenges) for your review. Please, don’t hesitate to use the comments here or on Facebook to respond:

  1. For the past 20 years, premiums in the individual and employer-based health insurance market have been increasing at four to five times the rate of inflation. Take the RM challenge, and get your employer-based health insurance information out for the past seven years. Now take a look at how much your premiums have increased over the six years prior to now. Those same cost pressures acting pre-ObamaCare will not go away by themselves. Take ObamaCare away and, at some point in the future, your employer won’t be able to pay for your health insurance.
  2. Premium increases, deductible increases, and the resulting deficits in coverage have resulted in ever increasing write downs and write offs for doctors, clinics, hospitals, device makers, and drug companies. Some of these write offs come from lazy and irresponsible folks defaulting on their bills. But most don’t; most come from hard-working responsible folks defaulting on their payments (because who has $50,000 for back surgery that, if you don’t get, makes you a “lazy irresponsible person on disability”)?
  3. Write downs and write offs have to be covered by those firms, individuals, and shareholders. Business managers like me cover them by adding them into the other costs reflected in our break even analysis for the next year. This increases the basic costs of all procedures, drugs, and devices. This cost increase is then passed on to those folks who still can buy insurance and still do pay their bills (which explains point number one above.)
  4. The simplest way to fix the system would be to adopt what all but two of the other industrialized nations in the world have done; single payer or socialized medicine. Nations that follow this system include our “bestest pal in the world”, Israel, and all of the nations currently beating our brains out industrially. This includes Germany, the richest, most prolific exporter in the world and home to massively profitable and innovative privately owned firms.
  5. Of course, we the people don’t like “socialism” (unless it involves Saturday postal service, public schools, roads, intercontinental rail access, bans against price fixing, bans against profiteering in the utility markets, air travel, Social Security, Medicare, veteran’s benefits, border control, brown water infrastructure, police, fire, and the military.) So single payer was a non-starter in our political system (HR 676 had fewer than 180 sponsors and less than 4 dozen senators willing to back a Senate version.) One alternative proposed by conservatives in the mid-90’s was a system designed to create a functioning marketplace for health insurance. Their idea was to use the two things functioning markets do well; markets with plenty of buyers and sellers in communication put downward pressure on price and upward pressure on service level. A sufficiently balanced market would make good health insurance a highly price-elastic product, which is very good indeed for consumers. So Republican politicians, armed with a position paper from the Heritage Foundation, proposed the market-based alternative to the Clinton Plan.
  6. Fifteen years of premium and deductible increases later, and with pension plans for major corporations and state governments lying in the ruins of health care inflation, the House and Senate passed bills (twice folks…they were passed twice) that were built on the conservative, market-based solution. Republican politicians, armed with talking points from the Heritage Foundation, promptly labeled the law ObamaCare, screamed Socialism!, and offered their own brand new solution to the problem (which not coincidentally has become their own brand new solution to most problems:) prayer and a demand for tax credits for business owners.
  7. The law that passed (twice folks, it was passed twice), the law that was found constitutional by the most conservative Supreme Court of the last century, the law the repeal of which was the centerpiece of the last Republican  presidential candidate’s campaign (he lost)…yes, that law, only really does three things. Yes, I know it is long (no, it isn’t 2,000 pages, it is 900 pages of 18 point font with 1.5 inch margins…so the old men in Congress can read it)…and I know it is boring (I read it…quite the life I lead)…but it does only do three things. First, ObamaCare forces insurers to carry everybody, which means they have to underwrite risk they have been avoiding…which means that for them to achieve the same profit levels to which they are accustomed, they must have many more customers. Second, ObamaCare sets a minimum value for the percentage of customer premiums returned to customers in the form of coverage and service. Third, ObamaCare provides for a marketplace to buy insurance plans (which implies a marketplace where those insurers can go find those customers they now need), and it mandates that all the plans available meet a collection of clear guidelines on the services covered and out of pocket expenses uncovered.
  8. So why all the fuss? Why are these three things worth fighting over? Because when sellers need more customers, and the customers can easily find products they need and understand, then everyone wins. And since these products are, in many facets, the same in terms of design and access, the sellers in this equation must compete using the only two weapons they have left; price and service. They don’t want to miss the market this year, so they compete on price (in the individual market). They don’t want to lose those new customers next year, so they will make sure their service level steps up.
  9. So what the heck is going on right now? The private contractors that the feds hired to build the marketplace sucked, and the feds didn’t test the system until it was too late. (The contractors can claim all day that their hands were tied by bureaucrats, but it’s a silly argument. Coders around the world have been laughing at every facet of the website construction since its launch, which means the contractors were incompetent from day one.) Despite the screw-ups (and, if the reporting is accurate, a conservative cyber attack on the site), over 100,000 managed to buy private insurance through the portals in the first month, and over 400,000 signed up for the expanded Medicaid.
  10. No, really, what the heck is going on with my insurance!? Employer-based insurance goes up every year (generally), but it is going up at higher rates this year and…Liberals cover your ears…it is going up as a direct consequence of ObamaCare. Insurance companies are underwriting, in part, the new individual marketplace by raising the price floor in the group marketplace. This is a temporary problem however (and by temporary, I mean one year), because the same market pressures that will act to push prices down in the individual market will take effect in the group market (this isn’t political wishing or fantasy, it is simply how markets work.) Also, and even more importantly, the consequence of expanded coverage will be dramatically lower write downs…you remember those pesky demons from the first couple of points. Our prices will go down as we stop having to pay the tab for those who weren’t previously covered.
  11. And what of those “masses” who used to pay $50 a month for health insurance before the evil ObamaCare cancelled their plan? If anyone can show me a cancelled policy that costs within 25% of what they can buy on the exchange, and comes close to the free preventative care, $2,500 deductible, and $6,000 out of pocket maximum that are the standards for a plan to be on the exchange, then I will eat my hat.

The Rational Middle is listening…

One thought on “Attention Deficit Health Insurance Disorder

  1. Okay out there…reading this article will help you understand what's happening with the Affordable Care Act. Just a few things to note: 100,000 people HAVE selected new plans, 400,000 more qualified for the expanded Medicare portion and that equals 500.000 people NOW with insurance that's affordable and reasonable. Many out there are like me and are still reviewing the options but WILL select a plan before the end of the year. And don't forget, depending on your income level, there are tax breaks to be had!! Welcome back Michael Chase, we've missed your incite and understandable explanations!!!

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