The Pre-Existing Condition Exaggeration


by David Henderson

Source: EconLog

One of the claims that many supporters of ObamaCare made during the debate in 2009 and early 2010 is that many people could not get insurance because of pre-existing conditions. I was always skeptical of this claim for a simple reason: pre-existing conditions could easily cause you to pay more because, after all, you're higher risk. So, for example, someone who lives far from a fire hydrant has a "pre-existing condition." But that generally doesn't stop him from getting insurance on his home.

So why would a health insurance company turn you down flat rather than just price higher?

I can think of one main reason: your pre-existing condition is so extreme that the premium would have to be so high that the insurance company would not offer it. Why bother offering something that is so expensive that almost no one would want it?

So then the question becomes: how many people would be turned down because of pre-existing conditions?

Health economist John C. Goodman writes:

Then, on the eve of the passage of the ACA [the Affordable Care Act], virtually every Democrat who appeared on TV to defend it had one and only one message to offer: people were being discriminated because of pre-existing conditions. And how many of those people are there? Well for the first three years under the law, anyone denied insurance because of a pre-existing condition was able to enter the new (ObamaCare) risk pools and pay the same premium a healthy person would pay. How many did that? About 107,000. That's out of a U.S. population of approximately 314 million!

That gives a sense of the size of the problem. Let's say that there's a lot of inertia and that only one third of the people turned down for pre-existing conditions decided to enter the ObamaCare risk pools. Then that's one in one thousand people. And for this we got ObamaCare with the huge disruption it's causing in millions, and possibly tens of millions, of people's lives?






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