The Homa Files

Ken’s Take: Article cuts to the chase on 2 critical reform issues: guaranteed coverage and community rating … both of which will push up premiums for folks who currently have health insurance …

Excerpted from WSJ, The Truth About Health Insurance, Aug 12, 2009

9 out of 10 people under 65 are covered by their employers, most of which cover all employees and charge everyone the same rate.

The tax code subsidizes private insurance only when it is sponsored by an employer

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President Obama’s horror stories are about the individual insurance market, where some 15 million people buy coverage outside of the workplace.

The individual market is relatively small and its turnover rate is very high. Most policyholders are enrolled for fewer than 24 months as they move between jobs, making it difficult for insurers to maintain large risk pools to spread costs.

If you develop an expensive condition such as cancer or heart disease, and then get fired or divorced or your employer goes out of business — then individual insurance is going to be very expensive if it’s available.

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By forcing insurers to cover anyone at any time (“guaranteed coverage”) and at nearly uniform rates … many people will buy insurance only when they need medical care. This raises the cost of insurance for everyone else, in particular those who are responsible enough to buy insurance before they need it; they end up paying even higher premiums. 

Another proposed reform known as "community rating" imposes uniform premiums regardless of health condition. This also blows up the individual insurance market, by making it far more expensive for young, healthy or low-risk consumers to join pools — if they join at all. And if the healthy don’t join risk pools, then premiums go up for everyone and insurers have little choice but to reduce their risk by refusing to cover those who have a high chance of getting sick, such as people with a history of cancer.

New York, New Jersey and Massachusetts have both community rating and guaranteed issue. And, no surprise, they have the three most expensive individual insurance markets among all 50 states, with premiums roughly two to three times higher than the rest of the country.

In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family, versus the national average of $2,613 and $5,799, respectively. ObamaCare would impose New York-type rates nationwide.

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ObamaCare would impose on all 50 states rules that have already proven to be failures in numerous states.

Because these mandates would raise the cost of insurance, ObamaCare would then turn around and subsidize individuals to buy the insurance that the politicians made more expensive. Only in government could such irrationality be sold as "reform."

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Full article
http://online.wsj.com/article/SB10001424052970204908604574332293172846168.html?mod=djemEditorialPage

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This entry was posted on August 12, 2009 at 7:32 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.