The Patient Protection and Affordable Care Act (ACA), also known as Obamacare, is a massive and unusually divisive piece of legislation.
Some Republicans want to repeal the entire law. That would be a mistake. Prior to the ACA, every American with employment-based health insurance faced the possibility of losing health insurance along with a job, and of having a health condition that would make it difficult or impossible to obtain insurance in the individual market. Any risk-averse person would want to buy insurance against that unfortunate event, but such insurance does not exist.
Policy analysts on both the left and right understand this problem and have proposed solutions, including some resembling the ACA’s health insurance exchanges, known in Minnesota as MNsure.
I sincerely hope the exchanges are successful. But it won’t be easy. In the 1990s, the Minnesota Employees Insurance Program attempted to offer health insurance to employers with as few as two employees. MEIP lasted for four years before going broke because the pool increasingly was made up of high-cost enrollees. The current exchanges have safeguards to defend against that sort of death spiral, but they still need healthy people to sign up.
Why should healthy people do that? Because the exchanges allow relatively seamless transitions between the group and individual insurance markets, regardless of health status. Not surprisingly, that extra protection comes at a higher price. Even people like me with good employment-based insurance should happily subsidize the exchanges, because they might lose their job and have a preexisting condition.
Unfortunately, none of this ever was explained to the American people by the president or the Democrats who passed the legislation.
Health insurance offered by large employers like mine also offers protection against higher premiums if you get sick — so long as you can maintain employment-based coverage. Even that limited protection costs more. When I started work at the University of Minnesota in 1980, making $19,000 a year, I paid the same health insurance premium as university employees making six figures. No one offered me the “healthy 30-year-old” premium.
Is that system fair? Why should young, healthy, lower-income people subsidize the medical costs of old, unhealthy, higher-income people? I certainly would support some type of means-tested premium structure that lessened the burden on younger, lower-income employees. The ACA’s approach is to allow a three-to-one ratio in premiums charged to older and younger people in the exchanges.
What about the rest of the ACA legislation? Here, economics can be helpful, and the most important lessons from economics usually are the simplest ones. For example: If you encourage an activity through subsidies or regulation, you are likely to get more of it — though you might simultaneously get less of something else you wanted, or more of something else you didn’t want. (The converse is true of activities you penalize.) The ACA’s requirement for employers to offer health insurance to full-time employees (now delayed a year) makes full-time employees more expensive. The likely result will be fewer of them and more substitution of machinery and software for people.
The Republicans’ response to the more controversial parts of the ACA is a mystery to me. Surely, come 2014, young healthy people won’t like facing premiums for government-designed health plans they can’t afford, nor will they enjoy being fined if they remain uninsured. Surely, a segment of the population is troubled by the government’s willingness to level ruinous fines against employers who have conscientious objections to offering insurance for abortifacients to employees.
I think Chief Justice John Roberts struck the right tone when he saved the ACA legislation by interpreting the penalty for not having insurance as a tax. In effect, his message was: “If you elect people who pass legislation like this, the Supreme Court will not rescue you.”
Similarly, the Republicans might say: “You gave the presidency and Senate to people who think they have a better plan for your life than your own plan, and they are prepared to use the police power of the state to force you to comply with their plan. Furthermore, they have no problem with astonishing levels of federal debt that pass the cost of our consumption on to Americans who are too young to vote, in some instances because they haven’t been born yet. We disagree, but if you turn enough of the government over to people like that, we can explain the consequences of their actions, but we cannot prevent them.”
Whether true or just political spin, this would seem to be a more productive approach than bringing the country to the brink of default, then taking most of the blame for it.
Bryan Dowd is a professor in the School of Public Health at the University of Minnesota.