Current Flaws In Obamacare Actually Can Be Fixed With Public Option

Jared Bernstein has an interesting post that explores the fact that the rising premiums and shrinking number of insurers is not really a failure of Obamacare but the failure of the belief that “the market” is actually capable of providing quality health care to all Americans. Because of the realities of politics, Obamacare could only get passed by including the powerful health insurers in the solution. As Bernstein says, the theory “when the law was being crafted was, for both policy and political reasons—the latter being buy-in from private insurers, whose powerful lobby couldn’t be ignored—that the exchanges would be populated by private insurers competing for customers in the (relatively small!) non-group market.” Of course there was plenty of reason to be skeptical that this plan would work in the long run. Bernstein continues, “They had an incentive, for example, to set their initial prices too low to get customers, which would mean actuarial losses and a big jump in premiums.” This fear is exactly what is coming to pass right now.

There were a couple of policies in the original Obamacare plan that were supposed to deal with the situation we are seeing. The first of those is the risk corridor which created tiered system of compensation for insurance companies who lost money on the exchanges. Correspondingly, insurers who made excessive money on the exchanges would essentially be forced to refund some of those profits back. The idea was to provide some stability for the insurers in the initial 3 years of Obamacare. Republicans have attacked this provision as a “bailout” for insurance companies and in 2015 passed a rider to an appropriations bill that required the corridors to be revenue neutral. Because of that, insurers lost out on some reimbursements and have sued the government in ongoing litigation. The other pillar in Obamacare that was designed to deal with the issue of rising premiums and shrinking choices was the public option. Sadly, we all know that option never survived into the final bill. So the two policies that would have helped deal with the problems we are seeing now have been essentially gutted by Republicans.

The problem, then, is not necessarily a structural flaw in Obamacare. It merely reflects the reality that the free market is incapable of providing health care for all. There is a reason why every major industrialized country has some form of national health insurance. The answer to our current problems, as Bernstein says, “this is less a failure in the structure of the program than growing pains as insurers learn to price their products based on the health of those coming into the exchanges. If there’s a structural flaw in Obamacare, it’s that it doesn’t include the public option.” I think we can all agree on that.