Matthew Hancock

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Obamacare and What It Means to "Keep Your Plan"
In the early days of the debate about health care reform – or more accurately health insurance reform – and the months of hysteria that followed its passage there was one underlying question: what the hell does this whole thing mean? In the messaging wars that the Obama administration was losing and the mainstream media wasn’t helping by focusing on and boosting the tea party, there was this overwhelming pressure to cut through the noise with simple and precise statements. The one now getting attention is the "if you like your plan, you get to keep your plan" line. This was meant to reassure people, and it probably did. Now with insurance companies issuing cancelation notices to a small segment of an already small percentage of people that buy health insurance on the individual market, the statement is being treated as a complete falsehood. Of course scandal mongering being good for ratings and clicks, the media is piling on without adequate vetting and commentary. Telling stories of people "losing" their insurance or paying more for it. They ignore subsidies, or that the existing policies were health insurance in name only. Of course the myth debunking never gets the same attention.

First, let’s start with what the statement meant. A reasonable interpretation of "if you like your plan…" is that there is no aspect of Obamacare that forces you, the individual purchaser, to change your plan. The government isn't stepping between you and your insurer and rationing your care. That is true. A consumer doesn’t have to change their plan. Where it gets wonky is in how health insurance companies choose to implement their compliance with the law. The health care law, Obamacare, requires 10 essential benefits to be included in all health policies: no pre-existing conditions, no annual or lifetime caps, and other requirements to protect consumers. What insurance companies could have done is sent adjustments (as they do every year anyway) detailing increases in premiums and just bundling the new required benefits in with the existing policies. This is likely what they’re doing in some cases. With people that have catastrophic policies where they have super-high deductibles and co-pays and super-low premiums this would be a shock to consumers saying "here’s your new policy details, and your premium has increased ten-fold." Sending them a letter saying "your policy is not being renewed, we need to start over with a new policy next year" is allowing customers to opt-in to a new policy versus having to opt-out of a vastly different policy that would automatically take effect without action. I think in some cases this should be preferred. Health insurance companies are more than happy to do this: it gives them a scapegoat from the changes by blaming Obamacare and it gives them the opportunity to price gouge consumers while they aren’t aware of the health insurance exchange. Saying "your policy ends in 4 months, here’s what you can do now" while people are unfamiliar with their other options is a good way to make money. Of course it’s unethical, but what do you expect from an industry that up until Obamacare’s passage made every effort to deny paying their customers’ medical bills when the insurance was actually needed? Remember that? It can’t happen now because of Obamacare. How soon we forget how dire the health insurance system was and how much good Obamacare does.

So to tie it all together. There are people that will pay more for health insurance. With reform to any complex system there will be "losers." The vast majority of people will benefit, however. The whole purpose of Obamacare is a series of market-based reforms to efficiently allocate the costs of health care across the population and guarantee access to everyone. This system will function better as a whole than the previous one. If you paid less under the old system, I’m sorry you’ll pay more now but you were benefiting from a broken system. You aren’t paying too much now, you weren’t paying enough before.

There were over 700,000 bankruptcies a year as a result of medical expenses – a majority of those people having health insurance. Those bills are paid for by taxpayers in the form of higher medical costs, higher health insurance premiums, or taxes to cover the costs of local hospitals. Estimates range between 20,000-45,000 people died every year because of a lack of access to health care. People deferring needed care until they could get it for free in the emergency room, because they otherwise couldn’t afford it, and by that point being too far gone. The long-term costs of the Iraq War are estimated to exceed three trillion dollars and were related tangentially to one attack on this country that resulted in the death of 3,000 people. Imagine ten September 11ths a year in perpetuity. If paying a few hundred dollars more a year – or per month – is the price it takes to save hundreds of thousands of lives, so be it. The generous subsidies included in the Obamacare exchanges ensures that any additional costs will be allocated progressively so higher premiums will only impact those most likely able to afford them.

If you want to save money, advocate for a single-payer health care system. It will immediately cut your premiums by 25-30% without the overhead and profit taking of private health insurers. Medicare has overhead of 4-5% percent and that would decline as the entire population was covered: economies of scale. Additionally, hospitals would have less staff dedicated to fighting health insurance companies to pay bills and negotiating the prices of treatments. The lowered overhead of hospitals from a single-payer system I haven’t yet seen quantified but would probably only be a few percentage points – which is still important when dealing in the trillions of dollars.

Overall, the "if you like your plan…" line will hold true for about 97% of people and creates a gray area for the other 3% which already experience high churn in choosing their health insurance policies on a year to year basis. Did the end outcome reflect the statement 100% exactly? No. Is it close enough to the reality that it doesn’t deserve the scandal status it’s received? I think so. These issues are compounded by the failed launch of the web site, which I’ve previously written about. By this time next year the stories of people getting hit hard by Obamacare will be few and far between (they already are). The overwhelming consensus will be that Obamacare has worked and is working. I look forward to moving past these growing pains and the understandable confusion and anger they cause.