The Corner

Gaming the System in Mass

For the home page today, I wrote about what happened to Kentucky when, in the early 1990s, it enacted health-care regulations similar to the ones in Obamacare: “insurance premiums skyrocketed, healthy people stopped buying insurance, and insurance companies exited the market in droves.”

The Boston Globe reports today, coincidentally, that the same thing is happening in Massachusetts, which enacted a version of Obamacare in 2006:

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

The problem is called adverse selection — when insurance companies are prohibited from charging higher rates based on medical history, people opt in when they’re sick and opt out when they’re healthy. It’s why, as Ramesh writes in the latest NRODT, the core elements of Obamacare interlock: To accept the ban on discrimination against the sick, you have to force people to buy insurance. But in Massachusetts, the penalty for non-compliance is small. According to the Globe:

The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.

Liberals have a solution to this problem, I wrote in my piece on Kentucky:

When the big problems with Obamacare start surfacing, they will push, not for repealing the bill, but for nationalizing even more of the health-care industry. They will call for a stronger penalty for not purchasing insurance or, if the Supreme Court invalidates that provision, they might push for a “public option” to offer a taxpayer-subsidized alternative to the private insurance companies they have broken. When the public option doesn’t work (and we know it won’t, thanks to another failed state experiment in Maine), liberals will argue that the only way to fix the broken system is to make the government the “single payer” for all medical costs.

Opponents of Obamacare must be prepared to make the opposite case, starting with this election cycle. The strongest lesson from Kentucky is that the longer Obamacare stays on the books, the more damage it will inflict on the economy. Conservative candidates such as [Kentucky Senate candidate Tray] Grayson can and should run on this issue. Health-care reform “is clearly on the minds of voters,” he says — it’s the second thing people want to talk to him about, after the University of Kentucky’s performance in the NCAA tournament — “and most folks I talk to are not real pleased. I think voters want us to do something about it — hopefully before the damage gets done.”

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