by Robert Maynard
While the current mess made by the roll out of the ObamaCare exchanges is getting more and more attention, it is just the tip of the iceberg. As this Independent Institute article points out, the real problems with ObamaCare are yet to come. Here is an excerpt:
Even if the glitches get fixed and the exchanges operate as smoothly as originally envisioned (buying insurance was supposed to be as easy as buying an airline ticket at Travelocity), Obamacare faces a triple whammy that almost no one is paying attention to.
Here are the problems:
- State risk pools and the Obamacare risk pools are about to officially close and dump their high-cost enrollees on the health insurance exchanges.
- Both public and private employers are about to dump their retirees on the exchanges.
- Employees who are trapped by job lock will leave their employer plans and head toward the exchanges as well.
In all three cases, people with above-average health care costs will be attracted to the plans in the exchanges, and odds are they will go for the gold and platinum plans while they’re at it—because this insurance will look cheap, compared to their expected health care costs.
Before going on, let’s stop to reflect on how monumentally stupid the designers of Obamacare were in even allowing the possibility of what is about to happen. More on that below.
On January 1, 2014, the state of Texas will formally end its risk pool and the 23,000 people who are enrolled there are expected to seek insurance in the Texas (Obamacare) exchange instead. It will be a good deal for the state, which has been spending more than $12,000 per enrollee operating the pool. Other states will follow suit. So will the Obamacare risk pools—some run by state governments and some run by the federal government—which currently insure about 107,000 people.
Then there are city governments throughout the land that have promised post-retirement health care benefits to retirees who are not yet eligible for Medicare. This is the age group that is the most expensive to cover. Under health reform, not only are there federal subsidies in the exchanges, the law limits the premiums charged to no more than three times the premium charged to enrollees in their twenties (although the actual cost of coverage is more on the order of six to one). Detroit, for example, is trying to send 8,000 city retirees to the Michigan exchange.
Similar efforts are expected in the private sector. According to a Towers Watson survey, more than half of employers that offer health care benefits to pre-65-year-old and post-65-year-old retirees plan to discontinue them.
Then there are those currently trapped in jobs they would like to leave but don’t because their health condition would cause them to pay very high premiums or perhaps be denied insurance altogether. Here is liberal columnist Wendell Potter:
An untold number of Americans for all practical purposes are indentured servants in large corporations, locked into jobs they don’t like but won’t dare quit because of their employer-subsidized health coverage.
By making the discriminatory practices of insurance firms unlawful, which will bring to an end their ability to cherry pick only the policyholders they want—the young and healthy—the Affordable Care Act will give American workers the key to that lock.
I’m confident that this newfound freedom—taken for granted in every other developed country—will usher in an era of entrepreneurship and new business development, the likes of which we’ve never seen before. Our best and brightest will be able walk away from the jobs they’ve been shackled to and go into business for themselves or go to work for a smaller company—even one that doesn’t offer health care benefits—without fear of being uninsured.