Magazine | November 21, 2016, Issue

Obamacare Unravels, Cont’d

(Illustration: Roman Genn)
Premium hikes reveal the law’s design flaws

When Congress was debating whether to enact Obama­care, conservatives said that one of the reasons it had to be fought was that it would make the middle class more dependent on govern­ment and bind it to the Democrats. So far Obama­care has not confirmed this particular fear. The law remains unpopular, and it is a frequent source of political trouble for the Democrats.

The latest trouble comes in the form of major premium increases. The Obama administration confirmed that the average price of insurance policies on Obama­care’s exchanges will be 22 percent higher next year. Supporters of the law point out that most people on the exchanges receive subsidies and that these subsidies will increase to offset the premium in­crease: a point that may reassure the people on the exchanges but not taxpayers.

The underlying reason for the premium hikes is as troubling for the future of Obamacare as the premium hikes themselves are. The young and the healthy have been staying away from the ex­changes. Enrollment is far below the original projections. Insurers can neither charge low fees nor make much money catering to a relatively old and sick population — and some of them have exited the exchanges as a result.

Democrats have suggested several ways to shore up the exchanges. President Obama has revived calls for a “public option” that would let people buy insurance directly from the government. That idea was stripped from Obamacare be­cause it could not pass even in the very Democratic Congress of 2009–10. The administration would also like to funnel tax dollars to insurers participating in the exchanges. Some liberal policy experts have also suggested stiffer fines for people who do not buy insurance.

These ideas are going nowhere if Re­publicans retain control of the House in the upcoming elections. Even a small Democratic majority in the House and Senate might have trouble passing some of them. The fines for going without insurance are one of the least popular features of Obamacare, which may be why Obama did not raise the possibility of increasing them in a recent speech he gave about the law.

Some of these ideas have little to do with what ails Obamacare, either. The original argument for the public option was that the government could charge lower premiums because it would not have to worry about making a profit. But too much profit-taking is not a problem on the exchanges. Obamacare established 23 non-profit insurers, 16 of which have al­ready had to close.

Obama nonetheless accuses Republicans of partisan irresponsibility in refusing to work with him on these alleged im­provements to Obama­care. He puts that accusation in the context of a story of continued Republican pigheadedness. They op­posed Obamacare even though it incorporated conservative ideas, he says, and even though he tried to work with them on it. He argues further that it has been a major success; all it needs are some adjustments.

It’s true, as he says, that the law has led to a substantial increase in the number of Americans with insurance coverage. His boasts that the law has reduced health-care inflation, on the other hand, are less well grounded: Those rates were declining years before Obamacare became law. The law’s costs have come in below budget mainly because enrollment has been lower than expected.

Obama’s story about the origins of Obamacare misses the forest for the trees. Yes, some conservatives have proposed health-care plans that included exchanges, tax credits, a mandate for people to buy insurance, and a reduction in the tax preference for employer-provided health insurance. The Heritage Foundation, above all, promoted these policies. Other conservatives, however, opposed some of these ideas. The individual mandate in particular was always controversial among conservative health-policy ex­perts.

And even Heritage’s plan did not in­clude some of Obamacare’s crucial features. The conservative think tank would not have had the federal government displace the states as the main regulator of health insurance, and its goal was to ensure that all Americans had access to catastrophic insurance — that is, to insurance that protects them from financial adversity in the event of a health crisis but may leave them to pay out of pocket for routine care. Conservatives tend to think of this financial protection as the major point of health insurance. Obamacare is de­signed very differently, which is the source of some of its high-profile difficulties.

Obamacare’s regulations result in in­surance policies that are not attractive to the young and healthy. Those regulations limit how much less insurers can charge young people than older customers. They also require all insurance policies offered on the exchanges to cover preventative services. The result is higher premiums. Some Obamacare policies have both high premiums and high deductibles. So they are expensive and yet do not protect people from major financial risk.

President Obama, in his recent speech, denied that Republicans had any seri­ous alternatives to Obamacare. But while Republicans have been slow to propose their own health-care legislation, Speaker Paul Ryan has gotten the House Repub­licans to endorse the outline of a plan to replace Obamacare — a plan that addresses the law’s core problems.

The Republicans would scrap most of the Obamacare requirements that raise the price of health insurance. They would also give people who do not have access to employer-provided insurance a tax credit that would enable them to buy a policy that provides at least catastrophic coverage. Young and healthy people might be more likely to buy policies that offer relatively cheap financial protection.

Republicans would also handle the problem of covering people with pre-existing conditions in a different way from Obamacare. The law forbids insurers to discriminate against those people. It’s a popular feature of the law, but it means that people could wait until they get sick to buy insurance. If a lot of people did that, insurance markets would be unstable. The fines on people who don’t buy insurance are there largely to prevent this scenario.

Republicans would loosen the regulation: Insurers would be forbidden to discriminate against people with preexisting conditions only if they had maintained insurance coverage. Thus healthy people would have an incentive to stay covered rather than to game the system. And because of the tax credit, they would also have the means to stay covered even if their employer did not offer them insurance.

Many liberals argue, as Obama did in his speech, that insurance that covers only catastrophic health-related expenses is not good enough. If the goal of health-insurance policy is to get the population to share health-care costs in general, then the options are limited to something like Obamacare, a single-payer system in which the government provides health insurance directly, or something in between the two. Obama does not appear ever to have been willing to contemplate a different kind of health policy, which is one reason he was never going to win the support of more than a handful of Republicans. (Indeed, he was not even willing to offer Repub­licans reforms to medical-malpractice law, which would have ap­pealed to them without disturbing the basic structure of Obamacare.)

Liberals remain dead set against the kind of health policy that dominates Republican health-policy thinking. So if Hillary Clinton is elected president, the Republican plan is not going to happen. Obamacare would instead keep going for at least another four years. Given that situation, Republicans would probably be well advised to offer people some relief from Obamacare’s burdens rather than insist on a full replacement for Obama­care or nothing. They could even invite the Democrats to make their own suggestions on solving Obamacare’s problems, while noting that they will act on those suggestions only if they move away from Obamacare’s regulation-heavy model. At the same time, though, they should continue to make the case for replacing Obamacare, as soon as possible, with something better.

National Review magazine content is typically available only to paid subscribers. Due to the immediacy of this article, it has been made available to you for free. To enjoy the full complement of exceptional National Review magazine content, sign up for a subscription today. A special discounted rate is available for you here.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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