Obamacare

ObamaCare: Paying the Same Amount For No Insurance As You Do Now For Having It?

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In today's Wall Street Journal, New Yorker Andrew Heinze looks at how health-care reform could affect his future:

I'm a registered Democrat living in New York City, and I buy my own health insurance. But now, having seen the health-care reform bill that passed the House, I'm preparing for life without health insurance. And unless I'm the only person covered under the Empire Blue Cross/Blue Shield "Tradition Plus" plan, a lot of other people will end up just like me, uninsured.

I will gain one thing, though—an annual fine for losing my insurance. The exact amount of that fine isn't clear yet, but so far it looks like I'll be paying about the same amount—$2,000 a year—for having no insurance as I do now for having it.

Heinze, a writer, currently has a "hospital-only" insurance plan and pays for routine medical treatment out of his own pocket. By purchasing a hospital-only plan instead of a traditional comprehensive insurance plan, he saves $11,000 a year—comprehensive plans purchased on the individual market being enormously expensive in New York because of regulations enacted several years ago that have significantly driven up the cost of such plans.

Hold on a minute: Isn't health-care reform supposed to cover nearly everyone? That's certainly the idea. But coverage increases are achieved through a mandate: You are required to buy insurance or pay a penalty for not doing so.

The problem with mandates is that they require minimums. In order for the government to determine whether someone has successfully complied with the mandate, they have to determine what the floor is for acceptable coverage. And in the bills going through Congress, Heinze's affordable, hospital-only plan would be under the floor, and therefore off limits.

As Heinze explains:

The House health-care reform bill hinges on what it calls a "qualified" health-care plan. Individuals will be required by law either to buy a plan that meets the criteria of a qualified health-care plan or pay a fine. What are those criteria? They're the basic components of a comprehensive HMO-type plan, which means that Empire's "Tradition Plus" will not qualify because it covers only hospital costs. In other words, if President Obama signs into law the kind of health-care reform bill that is currently on the table, I will have only two choices: buy an expensive qualified plan or pay a fine for being uninsured.

Now, we are missing one piece of information here: Heinze's income. The reform bills do include subsidies to help lower-income people purchase those expensive plans on the individual market. Depending on how much he makes, he might qualify for some assistance. But those subsidies are based on multiples of the poverty line, which is federally defined and doesn't take into account regional variance in the cost of living. Heinze lives in New York, where housing and transportation are incredibly expensive and, in general, dollars just don't go nearly as far as they do in, say, Lexington, Kentucky. So it's entirely possible that Heinze makes enough money that he wouldn't qualify for a subsidy—but also wouldn't be in a financial position to easily afford insurance.

Reform advocates have argued that cases like Heinze's are the reason we need to increase funding for insurance subsidies. But that, of course, increases the overall price tag of reform and makes it even more difficult to achieve CBO-certified deficit neutrality. The politics, already dicey, just don't work.

But even more than that, Heinze's story exposes the fundamental absurdity of the health-care reform game-plan: New York's initial set of state-level reforms pushed premium prices high enough that Heinze decided to exit the market for comprehensive coverage. Yet the response from universal coverage boosters, as far as I can tell, is that we should expand those reforms to the national level, couple them with new mandates, new fees, and more government administration, as well as a massive amount of new spending—all so that we can get back to the point where someone like Heinze will either have to shell out far more money than he wants to for insurance, or pay a fine not to have it at all.