Health Insurance Reform

On March 23, 2010, then President Barack Obama, signed into law the Affordable Care Act. This program completely reshaped the personal health insurance market. The Affordable Care Act moved this country even further away from a free market solution for our health insurance needs. While the objective of this act was noble the attempt to reduce the number of uninsured Americans, the idea that the federal government could force citizens to purchase anything is completely unconstitutional, and I believe history will show the Supreme Court’s decision as improper. While this act decreased the number of uninsured Americans, it did so at an unsustainable cost, both to the taxpayer and those who purchase their insurance in the individual market. In 2016, the Congressional Budget Office (CBO) estimated the 10 year costs to taxpayers for the ACA would be $1.34 trillion. This was an increase of $134 billion from their 2015 projection. It is likely with each passing year the 10 year cost will increase, because government programs are nearly always the least efficient and most expensive solution. And what has been the cost to those who have purchased the insurance on the individual market?

We were told passage of the ACA would lead to reduced premiums and more coverage, but is this what really happened? The ACA went fully into effect in 2014; since then premiums in the individual market have increased from an average of $271 for an individual, and $667 for a family, to $393 and $1021, respectively. That’s an increase of 99% and 140% over costs in 2013, the year before the ACA went into effect. Additionally, the deductibles have increased from $4,164 for an individual and $7,771 for a family, to $4,328 and $8,352. In just four years the cost of purchasing insurance on the individual market increased over 100%! We were also told that insurance premiums were increasing rapidly in the individual market prior to passage of the ACA, and this legislation would eliminate drastic increases in premiums in the future. Clearly that is not the case with a near 25% increase per year. That leads to the logical question, what did policies cost prior to the ACA and how rapidly were they increasing?

If we review the cost of insurance policies in the four years prior to the ACA going fully into effect, we see a substantially cheaper product with much lower deductibles, and a modest growth rate year over year. In 2010, the average individual monthly premium was $167 with a $2,632 deductible. Family premiums were $392 with a $3,531 deductible. In 2013, the year before the ACA, individual plan premiums were $197 with a $3,319 deductible, and family premiums were $426 with a deductible of $4,230. For the four years prior to the implementation of the ACA, individual premiums increased $30 or 18%. Family plans increased $34, or a 9% increase. So we traded a not perfect, but affordable insurance product, for a massive increase in government debt, unconstitutional provisions, and premiums accelerating 5-15 times more than were previously occurring. And now you have representatives in Washington, like Elizabeth Warren and Bernie Sanders, championing “Medicare for all.” I’ve calculated the cost of “Medicare for all” and will address this in a future post.

Now to be fair, the pre and post ACA market is not a true apples to apples comparison. The ACA mandated 10 essential coverages, eliminated pre-existing conditions restrictions, and prohibited insurance companies from charging rates based on actuarial discretion, but instead on community ratings. Because of these new requirements, insurance companies had to increase premiums to be able to pay for these new mandated services and restrictions to adverse selection. There are some good things about the ACA, allowing children to stay on a parent’s policy until they are 24, and preventing insurance companies from denying coverage based on pre-existing conditions. But it really doesn’t make sense to mandate that every insurance policy have these 10 essential coverages built in. If you’re a single male with no children, or a postmenopausal woman, why should you be forced to pay for maternity and newborn care. If you don’t need mental health services, don’t have a chronic disease needing treatment, or take any medication why be forced to be pay for coverages you won’t use? There are millions of Americans who are in the same position. It doesn’t always make sense to buy collision insurance just because you own a car. It doesn’t always make sense to buy flood insurance when you buy a home. There is not another insurance product that is treated like health insurance. There is no logical reason why health insurance is treated so different from every other insurance product. I want you to be able to select the coverages and limits that work for you and your family, not what politicians in Washington D.C. have dictated you must have.

Below are the policies that would make health insurance in this country a better and more affordable product for all Americans.

  1. Decouple health insurance from employment. If you’ve changed jobs over the last few years, you likely lost your health insurance. I’ve had the same car insurance policy with the same company for over a decade, even as I’ve moved from state to state. If all insurance policies are individual policies, then when and where you are employed doesn’t affect your insurance coverage.
  2. Eliminate the mandate for essential coverages. I don’t think the government is really in the position to tell you what coverages you need or don’t need. I believe you, the consumer, are in the best position to decide which coverages you need.
  3. Allow consumers to not only select which coverages best suit their needs, but allow them to select a policy with different deductible levels. Again, there is no logical reason why you, as the consumer, can’t have more choice in your deductible amount. As you do with your car and renters insurance policy.
  4. Eliminate enrollment periods. You should be able to enroll in or change your health insurance whenever you feel it to be appropriate. Again, you can do this with any other insurance product in the market today.

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