by Yuval Levin
In the frantic effort to actually implement Obamacare, some of the law’s champions are grudgingly coming to acknowledge that many of its critics’ key concerns were right. The latest example is the insurance companies’ panic over the perfectly obvious fact that the law is designed in a way that will encourage young and healthy people to avoid getting insurance until they get sick. Even the unconstitutional individual mandate (or as roughly one person in America would describe it, the constitutional uninsurance tax) doesn’t come close to making the economic incentives line up. One person who should know better put it this way to Politico this week:
“The key really is, how do you get younger people to buy coverage?” said Justine Handelman, vice president for legislative and regulatory policy at the Blue Cross and Blue Shield Association. “If you can jump in and out every time you need services, costs will go up.”
Well yes. If only every single conservative economist and commentator had warned the insurers about this in advance then maybe they wouldn’t have supported the law that will destroy their industry. Now that they’re facing the prospect of a massive flight of their most prized customers, the insurers are begging the Department of Health and Human Services to add various penalties on top of the mandate/tax. Here’s Politico again:
America’s Health Insurance Plans, the main trade group for health insurance companies, has asked HHS to impose late enrollment fees, so people who don’t sign up until they need the coverage will pay more than people who enroll right away. It’s the same concept that Medicare uses now for doctors’ and prescription drug coverage: Seniors don’t have to enroll right when they turn 65, but if they wait too long, they pay a penalty when they do sign up — and their premiums will always be higher as a result.The insurers have suggested other penalties for people who delay, such as not letting them choose the most generous health plans and allowing insurers to impose waiting periods.The Blue Cross and Blue Shield Association is asking HHS for the late enrollment fees and penalties, too. The National Association of Health Underwriters, which represents health insurance agents and brokers, called for late enrollment penalties too, warning that the impact on premium costs would be “enormous” if too many people wait until they’re sick or injured to buy coverage.And the American Academy of Actuaries — the people who crunch all the numbers for health insurers’ costs — suggested late enrollment penalties and other measures, like not letting people sign up for coverage as often and requiring small employers to sign their workers up automatically.
Some of these “innovative” ideas—treating sick and healthy people differently when selling insurance, using closed enrollment periods to incentivize coverage, and the like—might make for an interesting health-insurance system someday, though it would certainly be one based on very different principles than Obamacare. But how exactly are they expected to work in conjunction with the particular system that these insurers supported, and the enactment of which they did a great deal to enable? And here’s an old fashioned question: What legal authority does HHS have to do any of this anyway?
America’s insurers, welcome to the “Obamacare won’t work” club. But you should know that the club has a very expensive “late enrollment penalty” for you: economic ruin.