Say a street thug breaks your nose, robs you, and then offers to “help” by driving you to the hospital. Would you accept? Of course not. But some Colorado legislators have accepted on our behalf through their support of the Washington-controlled health insurance exchange in the recently passed Senate Bill 11-200.
Insurance exchanges seem appealing because they give employees more health plan options and relieve employers of insurance-related administrative costs. Policies bought through an exchange are also portable, so changing or losing your jobs does not mean losing your health plan.
But creating an exchange run by Washington empowers politicians to “fix” problems resulting from bad policies they have preserved. Among these problems is the tax code, which favors employer-provided insurance and punishes those who buy it directly from insurers. Insurers have little incentive to please patients, who are stuck with the one or two options most employers offer. Buying from a competitor means either changing jobs or paying a large tax penalty and forgoing the employer’s contribution to premiums. Getting sick could mean losing your job and insurance, and then becoming uninsurable because of a pre-existing condition.
Exchanges sound like a way to mitigate problems caused by politicians’ bad policies. But you shouldn’t trust government to run them any more that you’d let that thug drive you to the hospital. Government-run exchanges mean politicians and government bureaucrats control them. The plan selections won’t reflect what patients want, but what benefits politicians and the lobbyists they are beholden to.
For example, Massachusetts residents face penalties if their insurance does not meet “minimum credible coverage,” which includes a $2000 deductible, maternity care, substance abuse treatment, and other mandated benefits. The “reform” bill that created the Massachusetts exchange “increased single-coverage employer-sponsored insurance premiums by about 6 percent” concludes a study by Stanford University researchers.
ObamaCare exchanges are also a bad deal for sick people, as they require insurers to charge the same rates regardless of an applicant’s health risk. Economist John Goodman explains: “Plans … profit on healthy enrollees and suffer a loss on less healthy enrollees.” Insurers “have strong financial incentives to attract the healthy and avoid the sick. After enrollment, their incentives would be to over-provide to the healthy (to retain their membership and attract more of them) and under-provide to the sick (to discourage their continued membership and repel others just like them).”
Worst of all, establishing a federally-funded exchange abets the implementation of ObamaCare. ObamaCare entrenches, rather than reforms, the worst part of national health care policy: “Customer is king,” but patients are rarely the customer. Insurers are. The tax code favors paying for health care through insurance rather than buying it directly, so “insurance” has become prepaid medicine that covers routine expenses. Like business travelers dining on their employers” expense accounts, patients have little incentive to compare prices or inquire about more economical treatment options. Prices soar.
This is much worse than a street thug breaking your nose. Politicians should fix problems caused by government suppression of health care choice instead of peddling politically controlled exchanges as a solution to the problem they created.
Brian T. Schwartz is a research associate for the Independence Institute, a free-market think tank in Golden.