NCPA - National Center for Policy Analysis


March 6, 2009

President Obama's plan for health care reform will lead to the deterioration of the private health insurance market, with the federal government -- read: taxpayers -- financing health care for a growing share of the U.S. population, says Grace-Marie Turner, President of the Galen Institute.

ObamaCare would create a new National Health Insurance Exchange (NHIE) that would function as a clearinghouse for people buying insurance:

  • Through the NHIE, participants would be able to purchase private coverage or buy into a new federal insurance plan.
  • This supposedly offers consumers choice, but Obama's plan would also stipulate what type of coverage the private plans must offer.
  • It would be a generous plan that today costs federal workers $14,000 a year for family coverage.

The new government health insurance plan poses the biggest danger to private insurance, says Turner:

  • The government would offer its own plan through the Exchange, and there would not be a level playing field. 
  • The government would be the referee as well as a player, able to change the rules to stay ahead.
  • This federal plan would have the benefit of government price-control and policing authority, as well as taxpayer-subsidized administrative overhead. 

The government plan would surely under-price private plans, putting them at a disadvantage, says Turner.

In addition:

  • Obama would issue rules that would further destabilize private insurance: He would require insurers to accept all applicants regardless of their health status and require insurers to charge higher premiums to younger people so older people would not have to pay so much for their coverage -- called "community rating."
  • The six states that have "guaranteed issue" laws have the six highest average premium prices.
  • Of those, the three that also have community-rating laws -- Massachusetts, New York and New Jersey -- have average annual family premiums roughly double the national average.

If the Obama plan were implemented, Americans would naturally flock to the new public insurance program, which at least initially would have a lower premium.  Slowly but surely, private insurers would be supplanted by the public program.  And the private coverage that Obama promises we can keep would vanish, leaving the American people with few options besides government-run health insurance, says Turner.

Source: Grace-Marie Turner, "13 Questions That Advocates of Free Markets and Limited Government Should Be Asking: Will Consumers Be Allowed to Choose Their Own Health Care?" The Insider, February 18, 2009.

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