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Lost in the season’s political noise pollution is a simple fact: This election likely will decide whether U.S. health care irreversibly slips into a single-payer government-run system. Obamacare’s signature creation was the state health insurance exchanges. Exchanges were to be the private-sector vehicle for insuring the uninsured. They aren’t working.
And no wonder. In insurance-speak, policies on the exchanges are required to be “guaranteed issue, community rated.” That means every applicant is approved and pays more or less the same premium. Insurers have limited ability to charge more for older customers (who tend to have higher health care costs) and no ability to charge more for customers with expensive preconditions.
Exchange policies are, therefore, a good deal for those with expensive preconditions and a lousy deal for the healthy. As prices rise, the healthy drop out, causing prices to rise further, causing even more healthy folks to drop out—a death spiral. Compounding the misery, insurers had been shielded from 50 percent to 80 percent of their exchange losses by a federal program euphemistically called “risk corridors.” These end in 2017.
The results are a bloodbath. Premiums for 2017 are expected to rise an average of 25 percent nationally. Deductibles are way up: For low-cost “bronze” plans, they’re set to average $7,000 next year. Many individuals, and couples with incomes up to $64,000, are partially shielded from the full cost of insurance via federal subsidies. Even so, unless they get very sick, people are apt to feel they’re paying a lot for nothing. With no risk corridors, Aetna, Humana and UnitedHealthcare are heading for the exits in many markets. They were already bleeding red ink. Without risk corridors, it will be worse. Like the “Mission Impossible” tape, the system will self-destruct in five seconds.
Candidate Clinton’s fix for this mess is to allow anyone age 55-65 to enroll in Medicare, and add a government-run insurance scheme (“public option”) to the remaining shrinking, unaffordable exchange plans. Do these two things, and we might as well take out our membership card in the American Branch of the British National Health Service. For the record, Bohanon and Styring aren’t fans of this outcome.
Candidate Trump is vague—he promises the Republican mantra of “repeal and replace” Obamacare, but nothing definitive.
Regardless of which path you prefer, remember that a lot more than the future of the Supreme Court is at stake this fall.•
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Bohanon is a professor of economics at Ball State University. Styring is an economist and independent researcher. Both also blog at INforefront.com. Send comments to ibjedit@ibj.com.
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