Why the Nature of Insurance Is a Policy Problem but a Political Benefit for Obamacare
Assuming the administration can eventually work out the glitches on the exchanges and not too many people are hit by large back taxes because their subsidies were incorrectly calculated, the Obamacare act should politically benefit from the nature of insurance.
One of my more significant concerns with the law is that the quality of insurance it provides for people is not good, but people are incorrectly being led to believe otherwise. After all if you call it the “Affordable Care Act” and the law only gives you enough help to afford the “silver” plan you might reasonably expect that this silver plan is good affordable insurance. Yet to keep the CBO score low the Democrats dramatically lowered their standards for what they called “silver.”
The reality is a 70% actuarial plan with limited networks and a $12,000 annual out of pocket cap is pretty bad insurance that does not deserve to be associated with even a semi-precious metal. By comparison annual deductibles for these silver plans will be more than twice what they are for typical employer provide insurance.
A middle class family who buys a government approved silver plan will probably think they have decent insurance can suddenly be forced into medical bankruptcy if a family member gets seriously ill. Most middle class families can’t afford a surprise $12,000 bill. After all most medical bankruptcies in the United States are people who had insurance, just not good enough coverage.
Of course these problems will not emerge right away for the vast majority of people. The nature of insurance is only a few people get really sick at a given time so only a small number will be directly experience the system’s biggest flaw.
As the old joke goes, people think their insurance is great until they go to use it. All indications are this will be the same with the Affordable Care Act. While this is a policy problem, it should be a political benefit. Many relatively healthier people using the exchanges will probably say they are “happy” with their new coverage up until the moment need to use it.