Analysis Of Obamcare Problems Misses Two Big Points

The recent news about Obamacare has been great in terms of the number of people covered and reducing the uninsured. The negative news has revolved around insurers pulling out of certain markets and the projected large increase in premiums that is coming next year. But there are a couple of points that continually get neglected in this coverage.

First, one of the issues for the insurers is that not enough “healthy” people are signing up which drives up their cost. Many pundits blame this on the lack of younger people signing up. But the overwhelming factor for this has nothing to do with youth or the millennials. It has to do with the fact that the original estimates of the number of employers who would forgo offering employer-sponsored health insurance was greatly over-estimated. I’m not sure why employers are so determined to keep this up. After all, employer-sponsored health insurance is a huge cost for employers, both to administer and to subsidize and the penalty for not offering a plan is substantially lower than the per-employee cost administering one. But apparently they believe they need to offer it to keep their competitive advantage and they do not want to be the first among their competitors to not offer it.

Secondly, even after you account for the increases in premiums next year, the cost will still be below the initial projections that were made when the plan was passed. And the real question is not how much more will you pay next year but whether you would be paying more if there was no Obamacare. And the clear answer is, yes, you would be paying substantially more or, more likely, you would not have any insurance at all.

Fixing the issues with Obamacare are probably relatively easy – adjusting the risk pools for insurers and perhaps increasing subsidies. But they are probably impossible to get done in the current polarized political climate. But it would be nice when people discussed the problems, they would at least make the above two points relatively clear.