On the day of the Supreme Court decision, President Obama was ebullient. “Insurance companies can no longer impose lifetime limits on the amount of care you receive,” he said. “They can no longer discriminate against children with preexisting conditions. They can no longer drop your coverage if you get sick. They can no longer jack up your premiums without reason. They are required to provide free preventive care like check-ups and mammograms. . . . All of this is happening because of the Affordable Care Act.”
But the simplest way to explain the economics of insurance is: There’s no such thing as a free lunch. Every one of those “benefits” that the president touts makes insurance more expensive for the vast majority of Americans.
The law’s famous guarantee that you can buy insurance after you’re already sick—the situation otherwise known as “preexisting conditions”—gives Americans a huge incentive to go without insurance until they fall ill. The dirty secret of the law’s individual mandate is that it’s too weak: Millions will decide to pay the $695 fine, knowing they can buy insurance later, instead of ponying up $15,000 for health insurance. Their absence, in turn, will drive adverse selection, the process by which only the sickest people buy insurance, driving premiums to unsustainably high levels.
The law’s community-rating provision forces young people
to pay far more for health insurance, in order to subsidize the old. This is especially troubling given that the majority of people without insurance are under the age of 35. In some states, young people could see premium increases of as much as 75 percent, encouraging many of them to drop out of the system, thereby increasing costs for those who remains.
The law’s requirements that plans cover a government-approved list of “minimum essential benefits” requires that every American will have to pay for things he or she isn’t likely to consume, like acupuncture and substance-abuse services. It’s like going to a restaurant where you’re forced to have a seven-course meal when you would have been just fine with three, and you don’t like salmon anyway.
Indeed, by the very act of subsidizing insurance, the law drives up its cost. If you were given a clothes subsidy, would you spend the same amount on clothes as you did before, or splurge from time to time? The laws of economics don’t magically go away when you buy health insurance. One of the costliest aspects of the law is that it requires all plans on the new exchanges to have a generous financial value, called a “minimum actuarial value,” that will force everyone to buy costlier insurance.
A tiny minority of people will benefit financially from Obamacare: those who have serious illnesses, who are uninsured today, and who have low-enough incomes to qualify for maximal subsidies. Everyone else will pay more. Jonathan Gruber, an MIT economist who helped design Obamacare, has predicted that individual-market premiums in Colorado will go up by 19 percent by 2016, owing to the Affordable Care Act. And that’s on top of existing health-care inflation. In Minnesota, Gruber projects, premiums will go up by 29 percent because of the law. In Wisconsin, they’ll go up by 30 percent. And remember: It’s not like health insurance is cheap today.
There are two problems, politically, in explaining these issues to American voters. The first is that these concepts aren’t always the simplest things to explain. But it must be done. After years of conservative legwork, many Americans today understand that raising taxes on the “wealthy” means raising taxes on employers. Similarly, conservatives have to do the legwork of explaining how Obamacare’s nice-sounding insurance regulations are a Trojan horse for higher premiums.
The second problem is that the half of Americans who get insurance through their employers don’t get to see how much their insurance costs. We all know what our monthly paychecks look like, but very few of us know how much our employers spend on our health plans. All we know is that we didn’t get a raise last year, or the year before. But that’s what we have to explain to voters: how the rising cost of insurance is soaking up an increasing portion of their wages.
Finally, we have to remind voters that conservatives stand for lowering the cost of insurance by removing costly mandates and by giving people freedom to sign up for the insurance plans of their choosing. Candidates for the Senate must bone up on these concepts and explain them as they campaign for office.
Health care has long been outside of the Republican comfort zone. We find it easier to talk about taxes and the debt. But if we are to repeal Obamacare and gain a mandate for our own reforms, it’s not enough to say “Obamacare is a government takeover” or “I support Mitt Romney’s plan.” It’s important to explain why Obamacare will make health care more costly, and why free-market reforms are better.
If we don’t, we will lose. And if we lose, we will be stuck with Obamacare forever. And, even worse, we will have deserved it.
— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. He is a member of Mitt Romney’s Health Care Policy Advisory Group. You can follow him on Twitter at @aviksaroy.