One of the provisions in ObamaCare that has received the most media attention is the mandate that insurance policies be offered to individuals with preexisting conditions at any time. While well-intended to address a real problem in the current health care marketplace, this provision will increase the cost of health insurance for all buyers. Republicans have a better approach that will allow individuals with preexisting conditions to secure health care coverage without raising the cost of health insurance for everyone else.
The basic tenets of economics, combined with inherent self-interest, guarantee that people will wait until they are sick before they buy insurance now that Congress has guaranteed they can get it at any time.
Even liberals, such as Ezra Klein, understand this:
"The theory behind the [individual] mandate is simple: It's there to protect against an insurance death spiral. Now that insurers can't discriminate based on preexisting conditions, it would be entirely possible for people to forgo insurance until, well, they develop a medical condition. In that world, the bulk of the people buying insurance on the exchanges are sick, and that makes the average premiums terrifically expensive."
That is one reason why President Obama and Speaker Pelosi both rejected a smaller health insurance bill after Sen. Scott Brown's victory and insisted on imposing an individual mandate on all Americans to purchase health care coverage, regardless of whether it is affordable, in order to guard against "adverse selection."
This is the first time Congress has forced people to buy a product - a product some people have rejected previously because it was too expensive or simply not a good value for their money. CBO estimates that 15 million Americans will ignore the mandate and pay the penalty until they are sick.
Massachusetts is the only state that requires people to buy health insurance. Rates in Massachusetts are some of the highest in the nation, and on average much higher than a state that does not require its residents to buy insurance. People are jumping in and out of the system, and adverse selection is driving premium increases. Recently, Blue Cross and Blue Shield of Massachusetts reported that 936 people bought insurance for three months or less in 2009 and dropped it, but they spent four times as much when compared to more traditional customers. To recoup its losses, Blue Cross and Blue Shield of Massachusetts has raised rates for all its customers.
Under ObamaCare, the Council for Affordable Health Insurance projects rates will increase 75 to 95 percent for the self-employed, small business workers, early retirees, and millions of other Americans who buy their own coverage. Health care consumers are likely to act in their self-interest and pay the penalty rather than paying annual premiums for a product they can buy for a few months when they need treatment.
To try to help people with preexisting conditions, ObamaCare provides $5 billion for high risk pools before guaranteed issue for preexisting conditions and the individual mandate start in January 2014. However, Rick Foster, CMS's chief actuary, believes $5 billion isn't enough:
"We estimate that the creation of a national high-risk insurance pool would result in roughly 375,000 people gaining coverage in 2010, increasing national health spending by $4 billion. By 2011 and 2012 the initial $5 billion in Federal funding for this program would be exhausted, resulting in substantial premium increases to sustain the program; we anticipate that such increases would limit further participation."
Rather than commanding people to buy a product with benefits they may or may not want and cannot afford, the Republican plan (H.R. 4038) expands consumer choices through HSAs, allows people to buy a policy from any state, and allows associations to design their own health insurance plan. H.R. 4038 provides $25 billion (fully offset) to stabilize existing high risk pools, gives states an incentive to establish one, and provides security and affordable access for future enrollees without raising rates for all Americans. CBO estimated that the Republican plan would reduce the cost of health insurance by up to 10 percent in all markets, a better outcome for people with preexisting conditions.