Why Obamacare doesn't Work from an Insurance Perspective
What can honestly be said about Obamacare at this point? It's one of the most controversial bills to be passed in the modern era and certainly a topic of discussion during this Presidential election season. Much to the satisfaction of many struggling working Americans (Democrats & Republicans alike), President-elect Donald Trump ran on the promise to repeal and replace the Affordable Care Act, as it is now less commonly called (and for good reason), upon assuming office.
"Americans are too stupid to understand..."
The infamous healthcare bill was passed on December 24, 2009, without a single Republican vote, and subsequently signed into law by President Obama on March 23, 2010. Delivering a litany of since broken promises and purposely misrepresenting how the law was supposed to work, a bill that was deemed affordable at its conception has proven to be anything but, with skyrocketing premiums (often doubling or tripling from year to year) and preposterous deductibles.
Once considered to be the hallmark of his legacy, Obama's countless untrue assurances on his signature healthcare law have since proven to be an inescapable blow to confidence in the President's Administration. Declarations of unanimous yearly savings by the majority of American households and the ability to keep your current doctor slowly unraveled with the horrific realities of the federal government uprooting and disrupting the entire health insurance marketplace. Even Hillary Clinton could not escape the negative repercussions felt by struggling consumers currently coping with an expensive exchange, disconnectedly promising only more the same.
But let's not beat the metaphorical dead horse to death here, as we all know it's a failure (well those of us living in reality), so I'm not going to rant about a bill that will likely not be here in its current form at this time next year. Instead, let's take a quick look at why Obamacare does not work and is completely incompatible with the insurance industry. After all, although most have a negative perception of insurance companies, I think we can all acknowledge they are in business to make money just as any other major service provider.
First off, let me lay to rest a popular and highly inaccurate talking point now being circulated by the left, in hopes of drumming up fear over repealing Obamacare. This refers to a couple aspects of the law that are typically found to be agreeable, and perhaps all that Obama will be able to some day clasp onto for legacy preservation. These are the inability for insurance companies to exclude individuals based on pre-existing conditions and young adults having the option to remain on their parents' plans until the age of 26. While we could debate the merits of these two conditions, neither looks to be going away in any of the proposed replacement models that Republicans and Trump have teased. Let's glance over the most fundamental principles of insurance that Obamacare usurps and therefore shocks the entire system.
Basic insurance concepts that all consumers should understand, especially for those still riding the sinking ship with the liberal media and attempting to defend the President's signature law:
- Insurance in essence is the insured (consumer) paying a premium for the insurer (service provider) to assume a risk and therefore provide reimbursement for a covered loss should an unintended consequence occur (sickness, treatment, etc) or preventative measures (checkups).
- Ideally insurance carriers want a large pool of paying participants that they can proportionately distribute risk among. A grouping of lower risks and higher volume of consumers in a particular pool, should then translate to a cheaper premium for the insureds involved.
- The degree of risk that is assumed also plays a role in this process, as high risk (i.e. those with chronic diseases or major health problems) often results in greater expenses being passed onto the consumers from companies looking to manage payouts and still profit.
Another approach is to think of sustainable insurance like a pyramid. Most customers will pay their premiums and unlikely or irregularly submit a claim, which comprises the base of the pyramid. The smaller third of the middle is made up of those that have been loyal paying customers and maybe have an annual checkup, taken some medication, or use the occasional other service. This leaves the top, which is reserved for individuals that have not been in the pool long and are receiving a payout for a covered risk or frequently drawing funds to cover health issues.
For the company to make a profit or even remain solvent (an industry term for being able to meet all long-term financial responsibilities), the risks they are assuming must be evaluated and accepted accordingly. Obamacare tends to invert the pyramid, leaving companies disproportionately approving too many high risk individuals and grouping them with the general population. Frankly, this means that number of high risks or chronically ill tend to outweigh those contributing healthy individuals. The higher rates are simply reflecting this (not a justification, as the insurance companies are also being bailed out at our expense...). Couple this with subsidizing both those low earners that cannot afford insurance (like any of us can anymore), along with the deteriorating providers desperately trying to make money, and a complete breakdown ensues.
You are probably thinking, gee thanks for the micro insurance lesson... But I wouldn't have wasted my keystrokes, if I didn't think it vital to understanding the core reasons why the law has been so disastrous for the health industry and most importantly, us, the American consumer.
Obamacare has failed because:
- Health insurance companies can no longer deny coverage for preexisting conditions (great in theory), which means that they are adding a large number of high risk consumers into their pools that were previously not there, thus spreading the financial load for insuring them out and passing off increasing costs onto the consumer. We might soon be seeing a greater emphasis on high risk plans to alleviate healthy people sharing the entire fiscal weight.
- The coverage that is provided is essentially rendered inapt, as customers are not only faced with paying higher premiums (counter to the President's continued assertions), but also outrageously high deductibles ($3000-$4000 for an individual has been reported in some extreme cases!). Nearly defeats the purpose of having insurance, especially for those on high risk plans.
- Companies are having a difficult time meeting new standards imposed on them by the government, while still offering previous costs. The multitude of government intervention and regulation that has been injected into the system has made it impossible for some insurance companies to deliver corresponding coverage at an affordable rate, patients to keep their doctors, and a plethora of other problems. For the millions they claimed to have added to the exchanges, millions more lost coverage or saw mass increases due to Obamacare's regulation.
- Health insurance companies are pulling out of the exchanges at alarming rates, mostly for financial reasons, leaving fewer options. This often results in only one or two carriers in a given location, with little competition for consumers to shop. There has even been instances of zero available health providers for certain regions, leaving residents in a dire situation.
- Insurance providers are being discouraged to compete, as under-performing companies are often eligible for government subsidies (yep another expense passed onto the tax payer, who are already shelling out the cash for ungodly insurance premiums). As we all know, less competition translates to higher prices. In fact, the Fiscal Times and Forbes estimated 2015 to have cost taxpayers $15 billion to prop up struggling insurers alone.
- All Americans are forced to have health insurance under the "individual mandate," or face a fine (penalty, tax, whatever...) for not carrying coverage over the course of a year. This has left the unintended consequence of those who can't afford health insurance weighing their options of either paying the fine or investing in expensively unusable coverage (because that's fair... probably why the elitist excluded themselves from it, right?).
There are certainly more (like the heavily scrutinized poor website design), but these are the biggest culprits for why such federal intervention is completely incompatible with the foundation that was already in place, in addition to the financial fallout many have been forced to suffer. With less competition, mandatory inclusion of high risk individuals, stricter standards, unsustainable models for insurance companies, consumers willing to pay the fine instead, and a lack of faith in the law itself, Obamacare has been the failed experiment that we all bear the burden of...