The Precarious ObamaCare Individual Mandate

The government shut down could have ended in only three days. It did not because the President desperately needs to reconcile his pre-ObamaCare demagoguery and deception with the unbending laws of math and economics.

The partial shut down began on October 1 because the Democrat Senate refused a demand from the Republican House that ObamaCare be entirely defunded so that all of it’s functions would cease to operate and none of its legal and regulatory requirements could be enforced.  error-page-on-monitor

But on October 3, the third day of the shutdown the House dramatically shrank its demand to a one year delay of only one element of ObmaCare, the individual mandate.  This is the requirement that every citizen without employer provided health insurance must buy a government approved health plan from a private sector insurance company.

But Senate Democrats refused to consider this scaled back demand, even after major failures in the online exchanges that are supposed to sell these policies.  Thus the shutdown continues.

The President has already delayed several other provisions of the ObamaCare law.  But he dares not delay the individual mandate because to do so would expose a fundamental deception at the foundation of the health care law. 

During his campaign to sell ObamaCare back in 2009 and 2010, one of the President’s most often asserted claims was:Yelling Obama 3

We’ll make sure insurance companies can not discriminate against people with pre-existing conditions!

The emotionally charged “discriminate against,”  the same phrase that describes the exclusion of ethnic minorities by malevolent bigots, was meant to provoke revulsion against insurance companies, who were the designated bad guys in Obama’s pitch for a government take-over of health insurance.  Beginning 1/1/14 it will be illegal for an insurance company to refuse to cover someone with a pre-existing condition, no matter how sick they are, or how much it will immediately cost to provide the medical services they need.

The insurance industry term for accepting all applicants for health insurance, without consideration of pre-existing conditions is “guaranteed issue.”  To a large extent guaranteed issue was already in effect before ObamaCare.  A 1996 federal law, the Health Insurance Portability and Accountability Act (HIPAA), requires employers to offer guaranteed issue to employees, and prohibits charging extra premiums for employees or their dependents who have pre-existing conditions. 

The rapid rise in the cost of employer-based group health insurance coincides with implementation of guaranteed issue requirements.

To sell ObamaCare the President repeatedly castigated insurance companies for turning away applications from people who were already sick because that was “just when they needed insurance the most.”  Well, yes, if you get sick that’s the moment when you need health/hospitalization insurance most.  You also need fire insurance most the day your house burns, and auto insurance the most on the day your car is wrecked.  But everyone understands that if you didn’t sign up and start paying for insurance before the fire or the wreck you won’t be compensated.

However, Barack Obama has apparently convinced millions of people that government can command health insurance to work in reverse, to begin “covering” people after they get sick, before they buy a policy.  To “cover” and pay the expenses of people who are already sick is to add a costly,  non-insurance function to health insurance.  Guaranteed issue is in reality a government required, private sector, safety net financed by significantly higher insurance premiums paid by all policy holders.

Obama and the Democrats’ theory is that this scheme will “work” because the huge, immediate cost to insurance companies will be offset by millions of new healthy, young insurance customers who will obey the individual mandate to sign up for health insurance and  pay the premiums but will cost the insurance companies little or nothing because they will need little or no medical attention for many years.  Thus, the theory goes, the insurance companies will be able to afford the new customers with pre-existing conditions without significant premium increases.

But if the individual mandate is delayed, if young healthy people are not commanded to buy policies, the scheme implodes.  And, the President’s most compelling promise, that his government is so clever it can care for previously uninsured people with pre-existing conditions – without noticeable cost to anyone – implodes with it.

Even if the individual mandate is not delayed there are two strong disincentives pushing back on the never tested ObamaCare theory.  First, the fine for not buying insurance isn’t nearly as much as the insurance.  Second, guaranteed issue means we can all skip buying insurance until we get sick.  In other words, we need car insurance before we have a wreck, even if we never have a wreck.  But because of government intervention we don’t need health insurance until after we get sick!

Our next post deals with the likely result of these disincentives.

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