The New York Times editorial board, in a piece titled “Affordable Care Act Premium Increases Are a Fixable Problem”, understatedly says that the law is “far from perfect”, but can be fixed.
Among the problems with Obamacare is that insurance premiums “will increase by 25 percent on average for midlevel plans next year”.
Among the primary reasons for this are that “not enough healthy, younger people signed up; and those who did used more medical care than the insurers had anticipated”. As a result, some major insurers could no longer remain profitable and dropped out of some markets and those that remain had to raise their prices.
These, of course, were easily predictable consequences of Obamacare.
The reason it’s a “problem” that “not enough healthy, younger people signed up” is because the law was designed to force healthy people subsidize the costs of health care for the sick.
What it wasn’t designed to do, notwithstanding the law’s name, was to actually address any of the underling causes of rising health care costs. Instead, lawmakers just sought to shift the burden of costs around.
In doing so, they created all kinds of perverse incentives, like rewarding people who choose to live unhealthy lifestyles while punishing people who choose to eat right, exercise, and otherwise make wise decisions about their health — which of course only contributes to the underlying problems making health care in the US so unaffordable in the first place.
That’s the whole purpose of the individual mandate to purchase health insurance. The whole point of the law’s penalty for not buying insurance is to force younger, healthier people to buy insurance to subsidize the costs for those who require health care.
Which brings us to the second problem the Times editors identified, which was a natural consequence of the first. Naturally, subsidizing the costs of insurance for unhealthy people means increasing demand for health care. And if you force healthy people who wouldn’t otherwise use health care services to buy insurance, they’re going to want to feel as though they are getting their money’s worth and so will actually use it, even if unnecessarily. Even more increase in demand.
Which brings us to another problem the Times doesn’t mention, which is how the law forces insurers to charge the same premiums regardless of the health of the purchaser. Hence they are forced by law to under-charge the sick and over-charge the healthy (another manifestation of the same perverse incentive noted above).
So, under these circumstances, how have insurance companies responded? Simple. They want to attract healthier people to keep premiums down as low as possible. So they offer plans with narrower networks of doctors and hospitals (sure, you can go to whatever doctor you like, if you’re willing to pay out of pocket). They also offer higher deductible plans to keep premiums lower.
So, to sum up, Obamacare has predictably caused greater demand for health care, rising premiums, less competition among insurers, and less choice when it comes to getting health care. Brilliant!
The Times, of course, still thinks the law is wonderful. They assert that “Even with the big premium increases, health experts say that plans on the exchanges generally cost less and provide access to more medical care than the plans that they replaced.”
That’s complete nonsense, of course. How can the Times editors acknowledge that Obamacare has resulted in rising premiums while at the same time asserting that it’s lowering costs for health insurance? There’s a word for this in psychology: cognitive dissonance.
The “health experts” the editors are referring to, if you click their link, arrived at this conclusion by comparing average insurance premiums for all plans from before Obamacare went into effect with average premiums for the second-lowest cost silver plan, which is the second-lowest cost of the four tiered “metal” plans: bronze, silver, gold, and platinum.
Then they guessed at what average premiums would have been for all plans had Obamacare not been passed and compared that with the second-lowest plan in the second-lowest tier. Voila! Premiums are lower!
And then they argued that since the second-lowest cost silver plan has an actuarial value of 70% (the average amount the plan will pay for everyone in it compared to what they would otherwise have to pay out of pocket; a relatively small number of people tend to account for most of the costs) while the average actuarial value for all plans before Obamacare was lower than that, therefore Obamacare plans are “better”!
Also never mind, e.g., that silver plans have that actuarial value by definition (that is what makes a silver plan a silver plan), or that this goal is achieved through subsidies, meaning that the cost burden is just being shifted around.
As these so-called “experts” rather understatedly acknowledged, their method is “not a pure apples-to-apples comparison”. That’s their euphemism for “our methodology is completely unscientific”.
These “experts” use this fallacious comparison to arrive at the absurd conclusion that Obamacare has “been quite successful in lowering premiums for consumers while simultaneously providing better insurance”.
Um, no. Premiums are going up. And insurance plans under Obamacare are not “better”. The blog post the Times cites by these “experts” is actually pretty funny in places, like where they state that Obamacare has “greatly expanded the number of people purchasing coverage in the individual market” in part by “pushing premiums down both by increasing the sheer size of the market–the bigger the market, the lower the prices”.
What utter gibberish! These “experts” might know something about the health care system, but they clearly have no understanding of economics. Expanding the number of people who are insured doesn’t push premiums down by making the market “bigger”. What it does, as already explained, is increase demand without an accompanying increase in the supply of health care providers, which, of course, pushes premiums upward. It’s humorous how much time they put into producing such complete Alice-In-Wonderland-like nonsense.
So, after having identified some of the problems resulting from Obamacare, what were the solutions proposed by the Times editors?
First, “to increase the penalty”! Of course!
As a tangent, it’s hilarious how the Times accepts unquestioningly that Obamacare is constitutional while always referring to the penalty as a “penalty”. They seem blissfully unaware that the Supreme Court ruled it was constitutional by nonsensically declaring that it was “not a penalty”, since if it was a penalty, it would be unconstitutional. (It is a penalty and Obamacare therefore is unconstitutional.)
So let’s think about that for half a minute. What would increasing the penalty actually accomplish? Would it actually do anything to reduce costs? No, of course not. The whole point is just to force healthier people to subsidize the costs for the sick. And increasing perverse incentives will only add to the underlying causes of high costs. It will also mean more insured people, which means increasing demand. And what does that mean? You got it: higher prices! Sure, there will be winners under this scheme who will benefit with lower premiums, since their costs will be subsidized. But in the grand scheme of things, this “solution” is just doubling down on the same policy that helped cause the problem in the first place.
Second, the Times proposes to “further strengthen the health care law by offering subsidies to middle-income families who currently receive little or no help”.
So let’s think about that for half a minute. Who is going to actually pay for these subsidies? Apart from younger, healthier people? And what would that do to actually lower premiums? Why, absolutely nothing! It’s just more of the same cost-burden-shifting, which only introduces ever more inefficiencies into the marketplace, which only serves to drive up the underlying costs.
But, hey, what’s in a name? I mean, they couldn’t very well have called it the Unaffordable Care Act, right?
Then there’s Hillary Clinton’s idea for how to “fix” Obamacare. As the Times also reports: “She has supported the Affordable Care Act, but denounced ‘skyrocketing out-of-pocket health costs’ and said the federal government should have the power to block or modify unreasonable rate increases so coverage would be more affordable.”
Aha! Price fixing! Surely that will work. Right? Well, let’s think about that one, too, for half a minute. What happens in terms of supply and demand when government engages in such price fixing, legislating a price that is below where it would otherwise be? Demand increases. And what is the effect on prices when demand increases? They go up. And why are insurers increasing premiums? To remain profitable. So what would happen if the government engaged in price fixing to prohibit them from doing so? They will no longer remain profitable. So what will happen in the market? Less competition. And what’s the effect of that on underlying costs? They go up.