The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
Do you trust your doctor? Most patients assume their doctor is working in their best medical interests whenever he or she orders a diagnostic test or recommends a particular treatment. Customers might wonder whether an unscrupulous auto mechanic is being truthful when he recommends a brake job or a new transmission. But most patients trust […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
Dr. William C. Padgett is a retired optometrist who has been trying to bring an elderly care facility to Beaufort County, North Carolina, for over a decade.“Our senior citizens,” he laments, “are finding that it is difficult and in many cases impossible to find an appropriate long-term care facility locally.” Though he has received several […]
Professor John H. Cochrane of the University of Chicago had an op-ed in the Wall Street Journal on Dec. 25, in which he gave a brief description of (among other things) a market in which individuals buy our own health insurance — and not from an Obamacare exchange.According to Professor Cochrane: “…we should transition to […]
A new survey from Harvard University found a large majority of young Americans do not believe the law will save them money, do not believe it will improve their health, and do not intend to sign up for insurance through the new exchanges.
Liberal supporters of the Affordable Care Act specifically, and big government in general, are quick with excuses for all the problems that Obamacare has been experiencing in these early days. We have heard: they did not have enough time, it’s complicated, it’s the insurance companies’ fault, we just need to make a few adjustments, and […]
I opened a new bottle of probiotics this morning, and it had one of those circular seals on the top. You know, the one that reads, “Sealed for your protection.”And that seal got me thinking… how much protection do we need? How much security is enough?How much homogenization, pasteurization, disinfection, national security, etc…. do we […]
As the fallout continues over the cancellation notices sent to millions of people covered by health plans in the individual insurance market, it is becoming clear that millions more workers and their families are expected to lose their employer-based coverage as the Affordable Care Act (ACA) is implemented.According to the Congressional Budget Office (CBO), 156 […]
A president stands disgraced. Congress is scattering. Bureaucrats are baffled. Pundits are reaching. Industry is scared. Politicians are scrambling to do something, anything, to make it better. One political party is in meltdown and the other loving every minute of it, hoping to ride the calamity to electoral gains.The so-called Patient Protection and Affordable Care […]
Any married couple that earns more than 400% of the federal poverty level -- that is $62,040 -- or a family of two earns too much for subsidies under Obamacare. But if that same couple lived together unmarried, they could earn up to $45,960 each -- $91,920 total -- and still be eligible for subsidies through the exchanges in New York state.
The president assures us he is not responsible for the wave of health insurance policy cancellations. The insurance companies are. OK, so where is the other side?
The saying goes that things have to get worse before they get better. But with Obamacare, things just keep getting worse — and then they get worse still. In private, even many critics of the law are at least a bit surprised by how poorly the rollout has gone. The question that many are asking […]
Though the rollout of the Affordable Care Act (ACA) exchanges has dismayed even the law’s supporters, the problem the ACA is designed to address is real enough: Millions of Americans, even those with insurance, lack access to adequate health care. In a voluntary society, civil-sector groups would step up to provide social services, like health […]
It is such a kick to read the transcripts from the White House’s health care “war room” in the first days of release. What a meltdown, and you get to watch it all in real-time.I’m not trying to be cruel to the kindly despots who have wrecked so much of what worked in the existing […]
Obamacare certainly has made history. It has set the record for the fastest-failing Big Government program in world history. This isn’t only about a website flop; it is about the failure of government to accomplish the aims of Obamacare in general, and in a way that has profoundly touched millions of individual lives.“Train wreck” is […]
A handful of reports last week suggested that the Obama administration had moved to delay the health law’s individual mandate — the penalty the law imposes on those who are uninsured. That’s not quite right: Instead, the administration will align the 2014 penalty date, which had been February 15, with the end of Obamacare’s open […]
A common argument made in favor of government-financed health care is that it is inherently cheaper than a private system. Strangely, however, the people who celebrate the government’s ability to hold down health care spending would be horrified at the same argument applied to other public-sector functions. It’s a seriously inconsistent position held by advocates […]
You didn’t want to be the guy chosen to tell Stalin that the wheat crop failed or the production quotas on trucks and cars were not met. Why?Because despots always blame people, not systems.In the same way, you don’t want to be the guy chosen to tell Obama that his health care websites are a […]
Lately, many have characterized this administration as socialist, or having strong socialist leanings. I differ with this characterization. This is not to say Mr. Obama believes in free markets, by any means. On the contrary, he has done and said much that demonstrates his fundamental misunderstanding of and hostility toward the truly free market. But […]
As the health care debate rages on, there is one reality that even the proponents of this hostile takeover of health care by government cannot ignore — and that is money. The government simply does not have the money for a new, expansive, public health care plan.The country is in a deep recession. The last […]
The online Internet exchanges created by the Affordable Care Act are up and running.OK, they’re up. Uhh, OK, some of them are sort of up.It has been almost a week since last Tuesday’s initial launch, and there have been more than a few problems.Website crashes, excessive response times and other problems have plagued the exchanges. […]
Professor John H. Cochrane of the University of Chicago had an op-ed in the Wall Street Journal on Dec. 25, in which he gave a brief description of (among other things) a market in which individuals buy our own health insurance — and not from an Obamacare exchange.
According to Professor Cochrane: “…we should transition to fully individual-based health insurance”. This is the Holy Grail of free-market reformers, and likely unattainable as long as Obamacare’s political opponents are unwilling to take the risk of a reform that can be twisted as “taking away” employer-based benefits. (Although, as I have described in a previous article, the task would not be impossible if free-market reformers improved our communications skills.)
In Professor Cochrane’s approach, each individual would buy health insurance that actually combines two policies. The first would cover the beneficiary for catastrophic illness and accidents this year. The second, called health-status insurance, is insurance against being underwritten again in future years.
Traditional employer-based coverage is re-underwritten every year (sometimes within limits prescribed by state laws). Before Obamacare, individual insurance was never re-underwritten, but that fell apart if the beneficiary switched insurers. Healthy beneficiaries found it easy to switch insurers, but people who became sick were forced to stay with their plans, even if they preferred to switch.
Obamacare addresses this problem by forcing health insurers to accept everyone, without regard to health status, at the same premium (with some variation for age). With Professor Cochrane’s health-status insurance, a patient who is diagnosed with an expensive condition, who wants to move from one insurer to another, takes with him a sum of money (from the previous insurer) that will cover the higher premiums. The whole model is best explained by Professor Cochrane in a paper he wrote in 2009.
How can we get there, in a world where everyone who promotes the idea will be accused of “taking away” citizens’ employer-based benefits? The ground is being prepared with a relatively recent innovation: Private health-benefit exchanges.
According to a recent survey sponsored by a coalition of employers’ groups, 45% of employers have or are considering using private exchanges to offer health benefits to their employees before 2018. A November survey by David Franklin of the independent equity research firm Blueshift reported similarly high interest in private exchanges.
Most employers going into private exchanges are self-insured. That is, they take advantage of a federal law (ERISA) to avoid buying state-regulated health insurance and bear all the risk of medical spending for their beneficiaries. The health benefit is managed by a third-party administrator (TPA) or health insurer on an administrative-services only (ASO) basis. The most important thing to understand is that the insurer does not bear actuarial risk, as they usually do for smaller groups. (The employer can buy re-insurance to limit its risk.)
An employer wishing to use a private exchange, organized by a benefits consultant, can retain self-insured status. However, some experts surveyed in Mr. Franklin’s report thought that this was unlikely to persist. A private exchange provides a mechanism for an employer to make a fixed contribution to an employee’s coverage, which he can use to select a health plan from a portfolio on the private exchange. For the employer to continue to bear the risk of high medical claims in such a situation makes little sense, according to some experts, including sources with whom I have spoken.
So, what is emerging is large employers contributing fixed dollars to employees for them to buy state-regulated insurance from a portfolio in an exchange organized by a benefits consultant. To clarify: ACME, Inc., for example, as employees all over the country. Those employees are covered by a national, self-insured, ERISA plan, likely administered under a national contract with a benefits consultant. The benefits consultant has assembled a national network of providers by renting a large number of local provider networks. All the medical claims flow through the consultant to ACME for payment.
In the new world, the consultant organizes an exchange and solicits insurers in states where ACME has offices to join it. Employees now have a choice of state-regulated plans. ACME gives each employee a fixed contribution to pay premiums.
If private exchanges continue to grow as anticipated, it is easy to see how they could ease the transition into a future of individual health insurance, post-Obamacare.
Say an employee in Northern California quits ACME and joins ZIPPY, Ltd. There’s a chance that ZIPPY uses the same benefits consultant, or that the consultant who organizes ZIPPY’s network in Northern California has almost the same portfolio of insurers in its exchange as the previous consultant did. In that case, there need be no disruption of coverage whatsoever. The employer making the defined contribution changes, but the beneficiary’s plan stays the same.
As years go by, the culture will change. If potential employees already have plans that they like, they will be less likely to join employers that don’t have those plans on their exchanges. Consultants will anticipate this by ensuring that almost all insurers in an area are available in their exchanges. People will begin to think of health insurance as their personal asset, not a benefit granted by their employers.
Once this cultural change has taken place, we will be a long way towards our goal of freeing every American to choose health insurance that suits him, instead of his employer or the government. Free-market health reformers should cheer the rise of private health exchanges.
– John R. Graham
This article originally appeared here on the Independent Institute website.