The Corner

Panic at the Disco: Obamacare Might Not Completely Outlaw Cheap Insurance

Some supporters of the law are getting nervous about the prospect:

One challenge in implementing healthcare reform is that there’s a lot of fine print in the Affordable Care Act (ACA). And some of that fine print could subvert the goals of the overall legislation.

One example — the subject of a recent Kaiser Health News report — is the waiver process that would allow insurers to continue offering low-cost, low-benefit plans that don’t provide real access to healthcare when the insured become seriously ill. Favored by small businesses and larger companies with low-wage workers, these “mini-plans” have low benefit limits. They may cap the amount the plan will pay for doctor visits or hospital care or may have low overall limits on coverage. For example, some plans will not pay more than $50,000 a year.

Under the ACA, the minimum annual coverage limit for health plans is supposed to be $750,000 per person, rising to $2 million in September 2012. Ceilings on annual coverage are supposed to be eliminated entirely by 2014. But insurance companies can obtain waivers to keep their mini-plans if they can show that switching to comprehensive coverage would lead to significant premium increases or force employers to drop insurance benefits.

The horror! If you’re a reasonably healthy young person and you’re asking yourself, “Why should I be forced to pay top dollar for limitless coverage that, in my view, I don’t really need? Isn’t that a risk/reward scenario that I should be allowed to game out on my own, based on my own risk tolerance and income?” The answer is this: The idea behind Obamacare is to get you, the healthy young person who probably doesn’t make that much money, to subsidize the high-risk older person at the peak of his earning potential. It’s a back-door tax — a smokescreen to disguise the fact that the “Affordable” Care Act does shockingly little to make health care more affordable by controlling costs.

Update: From a reader, good stuff:

I am most definitely in your corner regarding the basic issue of the role government should play in health care.  With regard to this specific post, though, I disagree with your contention that it makes sense for young, healthy people to buy low cost, low maximum benefit insurance.  In fact, a young, healthy, working person can afford to pay for medical expenses up to a certain point; it is the catastrophic illness that he or she may need help paying for.  My brother developed lymphoma at age 35.  My brother-in-law had a bad snowmobiling accident at about age 40 or so.  These things happen, and cost much more than 75k.  Without insurance, the consequences of catastrophic illness become complicated by bankrupty and all of the travails that go along with obtaining medical care without being able to pay for it.  Much better to have a high deductible, but high limit plan.  Make the deductible as high as you can imagine paying for, and it will save a lot of money, but make the limit as high as you can make it.  Being covered, you will be paying the heavily discounted fees that your insurer has negotiated in whatever expenses you encounter while meeting your deductible, and, if you really are healthy, you won’t incur these expenses anyway.  Best of all is an HSA, which allows you to cover these costs out of pre-tax dollars.  Unfortunately, the government greatly constrains the flexibility of the insurance companies in offering catastrophic style plans.  The extent of the deductible you are “allowed” to have differs from state to state.  Given the option, I’d personally choose a plan allowing me a 10k deductible per person, 30k for the whole family (of five).  Wouldn’t work for everyone, but would be great for us.  Sadly, I am not “allowed” this option in my state.

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