The obligatory “yes, your health care premiums are going up” post

Look, we all told you that this would happen: ObamaCare, with all of its mandates, will make health care premiums go up.  Health insurance does not cost a lot of money in this country because insurance companies make too much money; they are high because we’ve set up a situation in which every darn thing is “covered” by insurance, which leads to (a) skyrocketing administrative costs from the doctor’s and the insurance company’s perspectives, and (b) over-utilisation of health care.  Third-party payer systems really only work efficiently when catastrophic and rare events are covered (e.g., auto accidents, a tree falling on your house, an ocean vessel sinking when hit by a meteor). 

Forcing people to buy more health insurance is about as likely to drive down the cost as it would be to eliminate obesity by forcing every restaurant to offer an All You Can Eat buffet in place of a la carte items, then demand that Americans eat every meal at a restaurant. 

So yes, your costs are going up.  They are going up the most for individual and small business plans, which is exactly what you would expect from this type of law.  Big employers can spread risk over a large population and have less of an adverse selection problem: few people get new jobs because they might have a heart attack next week, or have a nasty looking mole that has bred other nasty-looking moles.  But the same cannot be said of the individual insurance market, which is the most affected by the law that insurance companies can’t discriminate against people who are already sick.

  AAA does not do towing within a week of purchasing a policy; they charge a same-day fee if you buy a policy and need a jump start or a tire change; and they don’t let people get their gold membership (with free 100 mile towing) if they have old, broken-down cars.  Guess what?  AAA is a very reasonably-priced insurance package.  Homeowner’s insurance, which requires an inspection before issuance, is also priced reasonably.  You’re not allowed to buy insurance as a hurricane approaches; insurers shut down issuance of new policies.  No one says, “Crud, my house just burned down, I’m going to buy homeowner’s insurance!”   If that happened, if if Allstate were mandated to issue such policies, the cost would move from what it is now to something approaching replacement cost of a house.

Want to see health care be like AAA, homeowner’s insurance, or car insurance?  Then let it abide by the same set of rules.  Let people get insurance for catastrophic conditions only, permit insurers to deny gold-plated benefits to people who are already sick, and have some sort of non-accident grace period between the time you buy a policy and when you’re covered.

 

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Filed under Economics, ObamaCare

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