December 11 2012

ObamaCare's Latest: $63-Per-Head Fee

Hadley Heath

Before ObamaCare, everyone was very frustrated by insurance companies.  Remember that?  Those evil, profit-seeking companies... 

Because most people pay for health insurance - and then the health insurer pays for our health care - we say we have a "third-party payer" system in the U.S.  So, a lot of people wanted to change that to a "single payer" system, where, basically by using tax money the government would pay for everyone's health care.  Neither of these systems is perfect.  In fact, both of them have some serious flaws, and can turn out horribly, depending on execution.

What we ended up with instead - ObamaCare - also has serious flaws.  Instead of pleasing progressives and wiping out the insurance industry entirely, ObamaCare simply forms an unholy alliance between the government and insurance companies.  Insurers, in short, sold their soul (or, whatever little control they had over their business) to the government in exchange for the individual mandate that would force everyone to become customers.  It's very important that people understand... this is more like cronyism than socialism (so far), and will result in serious politicking on the back end.  Waivers for some people, huge costs for others, etc.  Some health providers will have their services/products mandated for insurance coverage, some will not.  The questions we ask ourselves before scheduling an appointment ("Wonder how much this will cost me?  Does my insurance cover that?" etc.) will only become more complex.  And heaven forbid we move from one state to another... we'll need to take a class or something to become acquainted with all the differences among the states, because people can't be trusted to carry their insurance policy across state lines!

The latest news from this scheme is that the government is imposing a $63-per-person fee on medical plans for 3 years.  It starts at $63 the first year and will decline after that, with the goal of raising $25 billion in new revenues for a fund to "help" insurers afford the newly insured people with pre-existing conditions (usually more expensive to insure than healthier people).

Now, for anyone who has taken economics... this is downright silly.  Of course the idea behind ObamaCare's "guaranteed issue" requirement that insurers take all customers is to give unhealthy people the chance to re-enter the ranks of the insured, and avoid going without insurance (and potentially visiting hospitals and not paying).  This is called "cost-shifting" because then hospitals have to charge more money elsewhere to cover their losses.  BUT ObamaCare's plan to reduce cost-shifting is not going to work.  In fact, I've said many times that ObamaCare attempts to solve the cost-shifting problem with more cost-shifting.

With the new $63-per-person pre-ex fee, the many people who have employer-sponsored insurance will either have to pay the fee or their company will (meaning, fewer resources available for wages, hiring, or investment in the company).  Employers or insurers will pay the fees to the government, who will collect the money into a new fund.  (Let's not forget that government has a horrible track record managing certain other "trust funds" that are intended to be "totally separate" from other government money) Then the government will dole out the money from this fund to insurance companies - I suppose as needed - to help cover the costs of insuring the difficult-to-insure people with pre-existing conditions.  

That's a lot of hands on your money before it gets - ultimately we hope - to your doctor.  Imagine how much money we might save simply by cutting these many middle men out, and paying our doctors directly for the visit or the test.  Now, naturally we can't just pay out of pocket for a complex brain surgery, etc., and those catastrophic events are a good reason to have insurance policies.  But the fact that we pay for everything - even check-ups - through insurance means there's a lot of money changing hands that aren't ours.

I have an idea... Why don't we allow (force) insurance companies to compete with each other to find the best ways to insure the most people?  The company with the innovative new plan to cover more people - even sicker people - would be rewarded with more business.  We don't need a government fund to "redistribute" resources among insurers.  We just need a marketplace.  

With ObamaCare as the law of the land, free-market health care is truly a daydream in the United States.  Insurance companies weren't and aren't the enemy; they simply aren't insurance companies anymore.  "Insurance" is no longer something we use in case of unexpected expense.  And "company" implies private management.  Insurance companies under ObamaCare will be mirco-managed by the government.  We were far enough away from a marketplace before ObamaCare, because our third-party payer system was heavily regulated by the government (and state governments).  But now we will have a fourth-party payer in the government, or perhaps they are the fifth party, after employers, who are also now handcuffed into the regulatory scheme they once participated in voluntarily.  These many parties are so busy exchanging money... where was the health care reform exactly?

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