November 17, 2013

The Promise Redux: You Can Keep It After All. Sort of.

by Hal Gershowitz

Comments Below

 

After being woodshedded by the widely presumed future First Husband of the land, President Obama relented last Thursday and announced that he would keep his promise to millions of individually insured Americans, and allow them to keep (sort of) the insurance they had previously purchased.

The problem is, it is no longer President Obama’s promise to keep.  Insurers have canceled millions of healthcare policies because those policies did not comply with the coverage requirements his Administration crafted. They were quick, of course, to offer coverage that did comply with the higher ObamaCare minimums, generally at higher ObamaCare premiums. Those insurers may or may not reinstate those now cancelled policies.  Some, perhaps most of these insurance companies, will want to understand precisely what happens a year from now when the same problems will, no doubt, re-emerge. Are they then expected to re-cancel these policies?

Remember, Obama hasn’t grandfathered these policies (as the original legislation disingenuously implied). He has only granted a reprieve because of the grief the cancelations have caused and the extraordinary adverse publicity that has accompanied the ObamaCare roll out.   The President apparently is counting on being relieved of his newest promise when individual policyholders learn more about the options they have available to them, and then, presumably, select an ObamaCare approved option.  We wouldn’t count on it.

No matter how much the Administration and its acolytes in the media assume that individual policyholders will accept the ObamaCare-approved policies once they learn what is in them, many individuals will feel perfectly capable of selecting the coverage they like and the coverage they feel they can afford.

Many individuals and families will also continue to object to being forced to buy coverage they know they will never need.  We understand that defraying all costs for all services over the entire population theoretically lowers per capita costs for that service, but if it is a service many people will never need, it represents an added cost to those individuals who will never require that service. That kind of coverage is not medical insurance.  That’s simply socialized medicine masquerading as medical insurance.

For example men generally do not give birth to babies, but under ObamaCare they will be required to buy maternity and new-born care coverage.  Some married men with spouses of childbearing age will feel that this makes sense.  Few single men are apt to feel that way, and many men and women who are too old to be producing children may feel they have entered an age where they should be spared the cost of such coverage.

Some provisions of ObamaCare, such as Section 2706, are so ambiguous that anyone licensed by state law to provide what can be rationalized as health-care service can be considered to be providing an insurable service.  For example, massage service certainly can be conducive to good health.  It can also simply be a pleasurable form of relaxation for those who can afford it.  Associations of licensed massage therapists will lobby in their respective states to assure that the cost their members charge for service will be covered by insurance and, no doubt, some physicians will prescribe such service when their patients request it. Indeed, the Associated Body and Massage Professionals, an industry group, takes the position that “evidence shows that massage therapy, especially when performed by a massage therapist, is a cost-effective delivery method of health care.”  No argument from us, but we expect there will be many who will question just where the lines defining insurable health care should be drawn.

It also seems logical that people who are required to buy service they have never used or considered using, such as, say, massage therapy, would certainly begin using that service if their insurance paid for it.  That might be both beneficial and enjoyable, but it would most certainly also add to the cost of medical care in the United States, and, by extension, the cost of premiums.

All policies must also cover pediatric services, including oral and vision care, but many individuals and couples without children and who have no plans to have children can also be expected to object to paying for such coverage.  These mandates are expensive and we are just beginning to understand just how expensive they will prove to be. According to the Council on Affordable Health Insurance, mandates that have already become active at the state level have resulted in a 10 percent to 50 percent rise in premiums.

The problems the country has experienced, and will continue to experience, with ObamaCare have been largely predictable, as anyone knows who has been reading our essays during the last four years.  It is, for example, easy to sit in Washington, wave a wand and proclaim that care for the elderly will not exceed three times the cost of healthcare for the young and healthy. But that bit of wizardry bears no relationship to what the real cost will be.  For example, the Administration when enacting rules for ObamaCare decided that insurance companies would not be allowed to charge older policyholders more than three times what they would charge for younger patients.  That’s nice, but actual medical costs for older people are five times those of younger individuals. Mandating a spending ratio of three to one simply pushes yet more healthcare costs onto the young and healthy.  Actuarial underwriting is thus obliterated at great cost to the young in deference to the old.

According to a study by the well-known health insurance consultancy Oliver Wyman, patients between ages 18 and 24 can expect their premiums to increase by roughly 45 percent and those aged 25 to 29 will see a 35 percent jump. 
Of even greater concern, the same study found that a three-to-one limitation on age cost ratio would drive half a million young Americans out of the insurance market.

The problems with ObamaCare we are all witnessing today will, we believe, prove to be the tip of the iceberg.  We’re really not being naysayers. We’re just trying to apply common sense. Even the exceedingly cautious Congressional Budget Office (CBO), predicts that half of the roughly 11 million to 12 million young uninsured Americans who are expected to be subject to the individual mandate’s tax penalty will pay the fine and walk away from ObamaCare.

CBO also anticipates that approximately 30 million people will still be uninsured by 2016.  That’s nearly two-thirds of all the people who were uninsured when this march to ObamaCare began.  And, make no mistake about it; if healthy young people flee the insurance market, and sick patients disproportionately flock to the ObamaCare insurance exchanges insurance premiums will go through the roof.  That, as every medical actuary understands, is known as a premium death spiral.  But who is listening to medical actuaries these days?

All comments regarding these essays, whether they express agreement, disagreement, or an alternate view, are appreciated and welcome. Comments that do not pertain to the subject of the essay or which are ad hominem references to other commenters are not acceptable and will be deleted.

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6 responses to “The Promise Redux: You Can Keep It After All. Sort of.”

  1. Paul Lubar says:

    Since pre existing conditions do not preclude the purchase of an insurance policy why would any one purchase a policy before he or she became ill? I wish I could wait until I got into an automobile accident before I bought auto insurance. The penalties being imposed for not buying health insurance before the fact are minuscule compared to the premiums and may not even be collectible.

  2. Mark J Levick says:

    When elected representatives voted for legislation they have not read and do not understand and are relieved to subsequently learn that the legislation will not involve them and will be crafted on the fly by the Federal bureaucracy the concept of three equal branches of Government with checks and balances no longer exists. Thus we have enabled the President to impose his will on America at a cost which is likely to destroy the US economy by redistributing income from wage earners to bureaucracts who will pass it on to those who require subsidies to achieve insurance equality. Equality also means rationing of medical services based on age and cost standards not on patient needs. We’re we not living in Wonderland it would be obvious that while the concept of affordable health care is laudable the ACA is not affordable, cannot provide quality healt care and can result only in the destruction of health care system we have known and enjoyed. Our President knew we could not handle the truth whis quite simply that the young and healthy will either be paying the cost of insurance for the poor and those with pre existing conditions or we will be taxed to oblivion to pay for Government regulated affordable health. The Pied Piper has had his way with us and we are headed to both an economic and quality of care sewer.

  3. Janice Marcus says:

    Lets get rid of the insurance company’s , and then one by one we can eliminate any other businesses that do not want to be part of the salution! Americans deserves to have health care. I don’t care how we get there. We need to catch up with the rest of the world,and make sure that we can provide health care to all our citizens . “Period.” All your comments only convince me that this problem won’t be solved till we socialize medicine. Greed doesn’t belong in the Medical field.

  4. Rosemary Lenners says:

    Any sort of common sense is absent within the “Beltway” and more so in the White House. What if, in a truly bipartisan manner, the President and Congress had worked on coming up with a plan to help the truly needy? Instead our economy is facing collapse. What if a law had been passed to allow portability across state lines? But, no, Obama threw out the baby with the bath water.
    If Obama’s lips are moving he’s lying and the same holds true for Pelosi and Reid. When they are caught in their lies, they try to pretend they didn’t really mean what they said. They think the American people are stupid and that they know what’s best for all of us. Unfortunately, the people who voted for them are either stupid or want more “free stuff” than they already get, i.e., Welfare, Food Stamps, Section 8 Housing, Free Phones, ad nauseam. As for the rest of the Dems, they follow those three like sheep.
    Socialized medicine hasn’t worked in England nor in Canada and it will not work here.
    I am very afraid for this country and the futures of my adult children, grandchildren and great grandbabies.

  5. Jerry Kaufman says:

    Congress and our president are attempting to repeal the laws of economics. They might as well try repealing the laws of physics. I am reminded of a line from a play where god says (approximately): Every time I do a miracle, I have to do ten more to undo the damage I’ve done.

  6. Dan Newell says:

    You might find this interesting – a way that CA has fixed runaway car insurance premiums in the past. Looks like we will try it this time with health care in 2014. Check it out at

    http://www.latimes.com/opinion/commentary/la-oe-rosenfield-obamacare-prop-103-20131119,0,2059028.story#axzz2lAKf2AAZ

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