The Supreme Court decision upholding the Affordable Health Care Act requirement that individuals purchase health insurance or pay a tax, as well as most other provisions regulating the health insurance market, may ultimately instigate a single payer system, akin to the British National Health Care Service.
The vast majority of Americans believe that all citizens are entitled to some reasonable access to health care. However, folks with chronic conditions or a medical history indicating high risk often cannot purchase health insurance and face financial ruin from medical bills.
Also, many people tend to forgo health insurance until they develop a chronic condition or otherwise expect to encounter large medical bills. Consequently, individual policies, even for the healthy, are often prohibitively expensive or offer severely limited benefits.
Both groups end up in emergency rooms and hospitals when conditions become acute and can't pay their bills. The rest of us pick up the tab through significantly higher insurance premiums and government subsidies.
Most liberals and a few conservatives argued the individual mandate was necessary, along with the ACA requirement that insurance companies not deny coverage or set rates on the basis of preexisting conditions, is necessary to ensure that everyone have access to reasonably priced health care.
Maryland already compels insurance companies to take all comers and not discriminate in the rates they charge, but unlike Massachusetts, the state does not impose an individual mandate. However, thanks to a requirement that employers cover employee dependents until the age of 26 and a well regulated system as compared to other states, an individual mandate was proven unnecessary to spread the extra cost of insuring individuals with preexisting conditions or without employer coverage across the entire insured population.
Rather, the individual mandate was just a political deal between the Obama administration and insurance companies — the latter will get millions of new healthy policyholders and attendant profits—and it is much like other deals the president made to co-opt pharmaceutical manufacturers and health care providers and dragoon a bad law through Congress.
However, the ACA does not solve the broader affordability problem bedeviling business and middle class families facing rising premiums, co-pays and burdensome claims processes
The law provides subsidies for low and moderate income individuals to purchase health care and assistance to small businesses—together with the individual mandate, these should lower the number of Americans without insurance from 50 million to about 30 to 35 million. These subsidies will accelerate health care inflation—the costs of drugs, doctors’ visits, hospital stays, administrative costs, and malpractice suits will rise faster than ever, making health insurance increasingly unaffordable for businesses and middle-income individuals.
The ACA requires the Office of Personnel Management (OPM) to sponsor, through private firms, two health plans—those public options will be advantaged by larger taxpayer contributions and exemptions from critical regulations imposed on private insurers.
Businesses will have a strong incentive to push employees into one of the two public plans or drop coverage altogether and pay the $2,000 penalty imposed by the ACA. Middle and upper income employees displaced from employer-based plans will likely find one of the “public options” the least expensive and most sensible choice.
Once one major firm in a market—be it a national market like autos or local market like dry cleaners—drops private insurance in favor of a government plan, or drops health coverage altogether and simply pays the $2,000 per employee fine, others will be compelled by price competition to follow.
All along, the OPM-sponsored plans were a Trojan Horse. They will be advantaged over private insurers even with the individual mandate helping pull down the latter’s costs per enrollee. With the ACA pushing health care costs ever higher, the artificial price advantage of government-sponsored insurance will be too big to resist.
Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.