Yevgeniy Feyman & Aobo Guo write,
The ACA’s limits on age-based rating, elimination of risk-based rating, and mandated generous minimum benefits have forced premiums to rise. Deductibles and out-of-pocket costs are higher now as well: cost-sharing offers insurers a sharp tool for varying the amounts that consumers pay.
Apparently, for all the hostility toward catastrophic health insurance voiced by Obamacare advocates, the way that competition is structured on the exchanges is leading health insurers toward policies with higher deductibles. For those of us who want market-oriented reforms, this is good news. American consumers need to get used to paying for at least some of their medical services with their own money, and this way the “blame” is placed on the government’s system of health insurance, not on the market.
Ad hoc, chaotic dismantling of the insurance concept…that is looking on the bright side.
If only we could have another financial catastrophe to reform banking!
By that, I mean, I hope nobody every thought I(we, libertarians) thought the virtue was in spending your own cash on hand. Risk pooling is fine (and is a type of financial innovation), except it represented a big pile of cash that politicians find too enticing to leave alone.
This consequence is not hard to predict, and really is the result of some pretty simply arithmetic that even ordinary people would intuitively understand in, say, the auto insurance context. So, my guess is that this was not unexpected, and may be part of the design of the system.
But that doesn’t mean it’s a positive thing.
For instance, I also suspect that the much lower cost of the penalties than the provision of health insurance was a calculated maneuver to get businesses to kick people of employee-plans and force them on the subsidized exchanges or Medicaid, in order to build a constituency with large market share.
And it’s pretty clear that progressives are exactly happy with the current design of the ACA, and they are viewing is a way-station and stepping stone to nationally socialized health care like they admire in other developed countries. They really only pretend to like ACA to defend it against attack from the right long enough until it becomes entrenched and practically irreversible as a matter of widespread public reliance.
If people of ordinary means start facing exploding premiums and deductibles and a real cost of health care, then, yes, the first order effect is some better incentives and prioritized decision-making on the part of the consumers.
But the second order effect – which I think is part of the calculation – is to create pent-up frustrations with how unaffordable a lot of previously covered care suddenly seems to be. This gives political types the ability to exploit the economic situation, to shift blame to designated fall guys, and then eventually agitate for the full transition to the nationally socialized model.
Whether or not the insurance companies, which have been cooperative up to this point, know this and are planning for it is an open question. Are they playing with fire, or do they think they can fend off the flames when the time comes?
“they are viewing is a way-station and stepping stone to nationally socialized health care like they admire in other developed countries.”
As I like to point out, every country has a different qualitative and quantitative version of this. The US version actually happens to pay more than nearly all countries. In short, about half our healthcare spending is government-funded and in aggregate dollars this is more than nearly all other governments spend. This is hand-waved away, actually, it was never even addressed as being the market’s fault too.
What Handle said.
My guess is that we will soon start seeing clamoring for subsidies for expenditures under the deductible. I find it hard that the politicians will allow the market affects to realized. In the end, the most likely scenario is a net transfer of wealth from tax payers and un-subsidized patients to medical providers.
“Whether or not the insurance companies, which have been cooperative up to this point, know this and are planning for it is an open question. Are they playing with fire, or do they think they can fend off the flames when the time comes?”
Surely, the insurance companies have seen this end-game coming all along, and are prepared to adapt by becoming contractor-administrators of the universal Medicaid system that eventually results.
Perhaps they want to avoid the admittedly low chance of it going the opposite direction of a vibrant free individual market where people can buy low-cost plans.
So, a guarantee of a regulated monopoly may be the devil they know.
The insurance companies going to their deserved doom at the hands of the socialists they thought they could cut a deal with for spoils, will be the only enjoyable part of the socialism to certainly come to all medicine. Worse healthcare, especially innovation we won’t get, and the deaths from this lack we will never see (so the socialists will never be blamed), well that part is gonna suck…
Higher deductibles only applies market forces to whether to consume a certain good or not. This is the part of the consumer decision where market pressure is least useful and most dangerous, especially when all the other signals in the transaction are so horribly broken.
There still is no price signal to either party in the transaction. This is the part where market approaches will benefit society. We need to focus innovation there. Higher deductibles will probably do more harm than good without market forces affecting prices. It needs to matter to a patient whether they are getting an MRI that costs $2000 or one that costs $600.
My deductible is 4X higher on my new plan going into 2015 than it had been over the last 10 years. It costs the same amount, of course…
But as an HSA advocate, and consumer these past 7 years….Suddenly this year my premiums jumped by 50% or so…and the deductible doubled…for a very similar plan.
I am happy to call this a silver lining in the dark cloud…but it’s a pretty big dark cloud even for HSA advocates.
Exactly. There will be dark clouds all around, and that’s the point.
It’ll become a textbook ‘election issue’, with the entire modern pageantry of a ‘reform movement’ pre-choreographed.
Here is a troubling undeveloped thought. I started thinking about how the problem with pricing is that they hide part of some guy’s MRI in charging you $20 for an aspirin. Then I thought the remedy is smaller service providers who can’t as easily or as readily cost-shift. Then it hit me that deductibles hit these hardest. Ruh-roh raggy.
A substantial bloc of health csre expenses are completely involuntary. Ask anyone who has had a spouse with stage IV cancer, or an injured child, or a nearly fatal heart attack.
Adding higher deductibles to these events is just cruelty. Virtually all other advanced nations have lower deductibles when there is no patient choice.
Now one can have a debate over the percentage of these terrible health events in the total picture of health care. But it is an error to paint all of health care as a kind of Sears catalog where we can cut all costs by making better choices.