The Democrats who dreamed up, wrote and rammed through ObamaCare are getting worried that millions of Americans, especially the young and healthy, will refuse coverage under the program. Democrats are right to be concerned, but that doesn’t necessarily mean people will remain uninsured. They may opt for a less-comprehensive and much more affordable policy instead.
Many of us in the health policy world warned Democrats that ObamaCare created a number of perverse economic incentives. In most cases they simply refused to listen. Now that the actuaries have started weighing in on the cost of coverage (here and here), pointing out that some young, healthy people could see their premiums more than double, ObamaCare backers are worried that millions of Americans will game the system. That is, remain uninsured until they need coverage and then sign up.
Of course, our health insurance solons decided to put in a penalty (or is it a tax?) for being uninsured to try to encourage people to get in the system and stay in. But the penalties are much less than the cost of coverage, especially in the first few years. And thanks to President Obama’s demand that his law ignore actuarial principles that have existed for hundreds of years, people can get coverage even if they have a medical condition.
Oh, and the IRS has no authority to go after someone’s assets or wages in order to collect the penalty. It only has the authority to deduct the penalty from a person’s tax refund at year’s end. It won’t take long for people to figure out how to fix that problem by trying to ensure they have only enough withheld to meet their tax obligation. Those who are uninsured and successful at hitting the tax mark will face no effective penalty.
But just because millions of Americans refuse to get ObamaCare-qualified coverage doesn’t mean they will be uninsured. There are policies available now that would work very well for the ObamaCare avoiders.
Some of these policies are built on a life insurance platform rather than health insurance — which, incidentally, means they are outside ObamaCare’s long arm of regulatory control.
The customer buys a life insurance policy that pays up to $250,000 upon death, which I believe is the current maximum available for this kind of policy.
Along with life insurance coverage the policy includes what’s called a “critical illness” component. If the policyholder needs, say, surgery, the insurer writes the policyholder a check based on a schedule. Let’s say, for example, it’s $10,000.
The policyholder has $10,000 in hand to pay for the medical care — or, frankly, anything else since the money belongs to the insured — but the value of his life insurance benefit is reduced by the same amount, to $240,000. Thus the critical illness component simply accelerates the benefit payout.
One existing policy pays 100 percent for heart attack, stroke, life-threatening cancer, major organ transplant, kidney failure, Alzheimer’s and paralysis, among other medical conditions.
The policyholder could also be part of a provider network that provides a discounted rate for the care — one of the most important current benefits of having health insurance.
How much would such a policy cost? For one company, a 30-year-old male would pay $1,438 a year, and for a 50-year-old male it’s $3,234.
And remember, this isn’t just health coverage. In the event of a tragic accident or illness, whatever is left of the benefit goes to the estate upon death.
If ObamaCare proves to be the train wreck that Democratic Senator Max Baucus fears — who, incidentally, is largely responsible for its current structure — then millions of Americans from all income categories may decide to opt out. Many will still want something, at least until they get a major medical condition whereupon they can then go back into ObamaCare coverage. And they can still keep their life insurance policy along with its critical illness benefits. Good times!
And if the demand were large enough, other insurance companies would begin offering a range of similar policies in an effort to meet consumer demand — something health insurers operating under ObamaCare won’t be able to do because of the heavy hand of federal regulation.
See, that’s the amazing thing about markets. They try to meet the needs of consumers rather than the wants and political aspirations of politicians. And sometimes they can even undermine those political aspirations.
Merrill Matthews is a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow at http://twitter.com/MerrillMatthews