By Carson Beadle
The flub of the day under the Affordable Care Act (ACA) or Obamacare, as reported in the Wall Street Journal, is that the federal government may not be able to subsidize premiums for lower-income buyers from exchanges run by the federal government. Huh?
The law clearly directs state-run exchanges to provide subsidies but is silent regarding the 36 federally run exchanges. Now a federal judge will decide if the act provides the IRS the legal right to provide the subsidies which are at the heart of the program.
But, the real elephant has not yet entered the room. By the time he does, two to three years from now, his presence will be disastrous.
Here is the story.
Group health insurance is based on distribution of risk among those currently healthy and unhealthy. Individuals deciding whether or not to buy health coverage are heavily influenced by their health condition at the moment they make their decision.
Unhealthy people would be foolish not to rush to the ACA exchanges and get the best coverage they can afford. Their health conditions will produce costs way beyond what their subsidized premiums can support. The ACA, therefore, wants huge numbers of younger, healthier persons to join at premiums higher than needed for their claims so there will be surpluses to cover the claims of the unhealthy.
But the premiums the healthy pay are more onerous than the penalties imposed for not buying coverage especially in this economic slowdown when they need every dollar to pay their rent; i.e., if they don’t feel the need for coverage why buy it?
What is so different from the existing system that has worked for years is that employers were the great levelers. They knew their unhealthy employees would cost more than the healthy ones but for a variety of reasons paid some if not all of their health insurance costs. Individuals did not have to make a cost decision. The employers’ reasons included attracting good employees; being a good corporate citizen; having a healthier, more productive workforce; collective bargaining agreements, etc.
It worked for seventy years. None of these drivers are present in a government -imposed and -administered program for the uninsured.
Further, the conditions of the ACA have now made a growing number of employers reconsider their role with some already dropping health coverage and giving employees money to buy their own coverage through the ACA exchanges (Walgreen’s); dropping dependents’ coverage, leaving employees to find benefits on their own (UPS); to cutting employees working hours to less than 30 per week so they no longer get full-time employee benefits (fast-food industry).
So now we have a government-imposed program that is eroding a historically successful contract among employers, employees and the healthcare delivery system and replacing it with a system that is fundamentally unsound; i.e., if you only insure the poorer risks without the healthier risks your plan will go broke.
Going broke means the government will have to go to the taxation cookie jar and take more, potentially much more, from you and me or reduce benefits affecting the newly insured, low-income folks even more than the rich.
The sums involved will be staggering. They bankrupted General Motors. These circumstances are not dissimilar, i.e., promising more than your budget can cover. What I have just described will happen. You can take it to the bank.
I distrust any system that does not have an alternative to which one can turn if they fear the one they are in. If your employer or union had an insurance company or Blue Cross plan they did not like, they could find another; when government is the only choice there is no ‘‘other.’’
The ACA debacle did not need to happen. Done in a pragmatic sequence, the first order of business would have been to introduce best practices, transparencies and efficiencies into the healthcare delivery system so it could handle the flood of newly insured, unhealthy people. Second would be to require the existing system of health coverage providers to make coverage available to every American or they would not be allowed to stay in the business. Third, the government’s role would be limited to ensuring that providers do their job and to subsidize those who could not afford coverage using the current tax system to qualify entitlements much as the ACA intended.
The sad part for those of us who believe in the least government intrusion into our lives is that the ACA program is so faulted yet defended that hands will soon be thrown into the air in frustration and demands will be made that government take over the whole mess under a single, government-run plan. How brilliant is that?