STUMP » Articles » Obamacare Watch: 31 Mar 2014 -- Answering Jonathan Bernstein » 31 March 2014, 02:49

Jonathan Bernstein has a couple questions

At this point, do you expect the Obamacare health insurance exchanges to simply collapse on their own? Or will sufficient numbers of people sign up over time, with a sufficient number of healthy people, that the exchanges will “work” in a practical sense (regardless of whether they’re a good idea or not)?

I see what he’s getting at, and my main answer is: it doesn’t work that way.

For example, before Obamacare, there was an individual health insurance market in New York state. There were no risk corridors/reinsurance/risk adjustment payments. There was no individual mandate. They weren’t allowed to do medical underwriting (couldn’t change premium based on actual risks) and weren’t allowed to charge different premiums based on age (much less sex). There was a shitload of required coverages in comprehensive health coverage, like chiropractic and wigs for cancer patients.

Policies existed, but they were expensive as hell.

And there were only a couple of insurers willing to play in the market.

I know about this, because I tried buying health insurance on the NY individual market only a few years ago, when I was working for a start-up (that wasn’t based in NY).

I could only afford a hospital-only policy for my family. Luckily, nobody in my family needed much in the way of healthcare that year.

So I don’t think the Obamacare exchanges will collapse, per se. I think some insurers may withdraw if their experience is too horrible, and I think premiums will climb A LOT, but the subsidies will help prevent some of the healthy people from leaving. I think you’ll find the people who have been buying individual insurance all this time will stick around, or at least some of them will. They will tend to be older.

I don’t think enough young suckers will sign on to prevent the premiums climbing higher. And the regulators can’t do a huge amount about it.

Health insurance is a very low margin business. If they take on large losses and can’t price premiums appropriately, insurers will just leave the market. They can’t do the “we’ll make it up in volume” ploy for too long without becoming insolvent. And there are solvency requirements for insurance companies.

Now some may say “but if insurers withdraw from all markets, they won’t make any money off of health insurance!” — uh, yeah, but if their experience is horrid, they will be losing money on health insurance. Many insurers do not have only insurance as their profit centers. Over the years, companies have accumulated non-insurance profit centers. Such as fee-based services.

Such as owning medical care service providers, not only being a financing middleman.

As Obamacare has not really done anything about actually keeping costs down, it may very well be that the companies they thought to target will do just fine.

I am not really concerned about the exchanges as it is. I’m interested in measuring results according to stuff like “Are more people insured? Are costs going down or continuing to increase?”. The exchanges will do only so much.

So if Obamacare dies (as it has been already), it won’t be because of the exchanges. It will be because of a lot of poorly-thought out policy changes.

And it will be fairly easy to undo some of these shitty policy changes, like the “free” birth control and other required coverages. Heck, given how few people will have been directly benefited by Obamacare in any meaningful sense, it would be fairly cheap and easy just to directly provide for those people and remove the problems for everyone else.

Therefore, OBAMACARE MUST BE DESTROYED.