Playing the (Bad) Hand You're Dealt: Prop Up Obamacare or Kill It?
April 7, 2017
NCPA Senior Fellow Devon Herrick writes at Townhall:
The Affordable Care Act (ACA) was predicated on what is sometimes referred to as a three-legged stool. If any one of the legs breaks or is removed, the stool topples along with anyone using it. The first leg is insurance regulations that guarantee everyone access to coverage regardless of pre-existing conditions. In addition, premiums cannot vary by health risk.
The regulations (that is, guaranteed issue/community rating in industry parlance), are an attempt to increase cross-subsidies in health insurance. The idea is to force the young to subsidize the old and the healthy to subsidize the less healthy. Of course, these conditions are never stable; they require coercion to maintain. Thus, the second leg is an individual mandate requiring everyone to have health coverage -- even if the coverage is a poor value. Finally, the third leg is subsidies to help those who cannot afford coverage on their own.
Without a mandate, healthy people have an incentive to remain uninsured until they become sick or need a medical procedure. Say, a young woman who is perfectly healthy and then becomes pregnant. She signs up and gets $30,000 worth of care for the price of a few months in premiums before dropping coverage once her baby is born.
There are numerous perverse incentives built-into Obamacare. It is common sense that the people who would most want to enroll in Obamacare are those whose health status is such they can anticipate to receive coverage far cheaper that their expected costs. These individuals will consume medical care far more than their premiums cover. By contrast, the least likely to enroll are those young, healthy people. Lacking health concerns, they were always the least likely to think they needed health coverage.
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