Obamacare vs. Flexible Insurance Plan Design



Obamacare is often described as an attempt to make sure that most everyone has, or at least has access to, health insurance. But it's more than that: It's an attempt to make sure that everyone has a specific kind of health insurance. It's not enough for the law's authors and administrators to tell you that you need to be covered. They also want to tell you how.

Case in point, a regulation proposed last month by the Department of Health and Human Services (HHS) which would prohibit people in most states from purchasing standalone fixed indemnity insurance. Fixed indemnity coverage is a form of limited, low-cost insurance that pays out a flat rate in response to certain prescribed events—say $75 for a doctor's visit or $15 for a prescription—regardless of the cost. Because the coverage payouts aren't variable, and because some major medical costs aren't covered at all, monthly premiums are often quite low, meaning that it offers a way for people to have some coverage at relatively affordable rates.

It may not be an option for much longer. The proposed regulation would essentially outlaw standalone indemnity policies, making it illegal to sell them except as an addendum to the more robust, more expensive plans that meet the law's minimum essential benefits requirements.  Under the proposed rules, indemnity insurance sold by itself would be classified in such a way that it has to meet all the requirements for "major medical coverage."

It's as if regulators suddenly decided that anyone selling scooters had to make sure those scooters were as powerful (and thus expensive) as motorcycles. Otherwise, scooters could only be sold as sidecars to people who already owned motorcycles.

The result is that scooters probably won't be available at all. Basically, the indemnity policies would have to meet a slew of Affordable Care Act requirements that would increase their cost and, in the process, make them too expensive and troublesome to sell.

In some ways it's really sort of bizarre. Prior to this proposal, the expectation was that individuals would be able to pay the mandate penalty and then purchase fixed indemnity insurance on the side. If this proposal goes through, that won't happen. Which would likely mean fewer people with some kind of coverage.

In other ways, of course, it makes a certain sort of sense. If you understand that the goal of the law is not merely to drive people into some form of health coverage, but also to specify what type of coverage they have, then this certainly fits the bill.

It's another example of the many ways the law attempts to control and limit the flexibility of insurance carriers to offer a variety of plans and coverage types. The health law's supporters have regularly sold it as a market-based system that promotes private insurer competition. But as we see with these sorts of rules, it in fact ends up heavily restricting the kinds of insurance market competition that is acceptable, and transforming the individual insurance market into what is effectively a quasi-public regulated utility. 

NEXT: Gene Healy on Obama's Soon-To-Be Transparent Kill List

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  1. Market failure!

    1. Yeah. I can hear the proggies now.

    2. OT: Will proggies ever realize that it’s only the markets they create and/or manipulate that fail?

      1. Intentions good. Corporations bad. Any questions?

        1. What if my intent is to create a bad corporation to suck money out of taxpayers?

          That’s exempt under FYTW right?

          1. You never actually say that. Come on!

          2. First rule of FYTW Club: don’t talk about FYTW Club.

      2. Those arent markets.

        Markets dont fail, they merely are.

        They are a description of what has happened, not something that can succeed or fail.

        1. Oh yeah? Well what do you call it when markets fail to give the results that we want? Huh? How is that anything but a market failure? Huh? The rich get richer and the poor get poorer! Power to the people! We need to give more power to the government that is controlled by the corporations so it can control the corporations that control it because government is really us the people and power to the government is power to the people except corporations control the government that is us…. Fuck all that thinking! It’s confusing! Power to the people! Fuck yeah! Emote with me! Eat the rich! Power to the people!

  2. Peter,

    This regulation is actually quite rational when you realize the point of the entire law. The law is designed to force health people to buy insurance they don’t want so that their money can be used to subsidize coverage for the poor. If you let people buy these policies, they won’t be buying the Obama policies and thus won’t be subsidizing the various mandated coverage ponies.

    When you think of it that way, this regulation makes perfect sense, at least in the Alice and Wonderland world this law has created. Back in reality, the entire idea of creating a law that forces the entire population to buy insurance coverage they don’t want or need is insane and most certainly evil.

    1. ‘There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.’

      1. Actually, I can think of one that is worse:

        A tyranny than to force a man to pay for what he does not want merely because you think it would be good for someone else.

        1. But slavery worked out so well!

        2. Yeah. The person that Hennlein was talking about at least likes the people he is ruling. Obama I think actively despises the middle class. He sees them as exploiters who have benefited from racism and colonialism and the evil history of the USA.

          Whatever Obama’s concerns over this law, the fact that it is actively harming millions of middle class Americans is not one of them. Every time I hear one of his cult members tell me about how they voted for him because he “cares so much” I just want to vomit.

          1. All that false consciousness has to be dealt with.

        3. It is so incredibly telling how some people just jump straight to compulsion without even trying to work on negotiating a voluntary, cooperative solution.

          1. The sad part is that they see Money as the compulsory solution and Government is just there to save them from evil capitalist pigs/kocks/etc.

    2. Yeah, I think I take issue with the entire premise that “health insurance is a desirable and necessary product.”

      I find it to be neither.

      1. Insurance is not care. Everyone at some point will need medical care. Only some will ever need medical insurance.

        Funny how even people on the right can often not understand that. It is like our entitle political class is in some kind of trance. In the past the reaction to the problem of “poor people who can’t get health care” would have been to build more hospitals and to do something to give them care. Now our top men’s response to that is to do this. Amazing. They are not even progressives anymore. They are something much much worse.

        1. Definitely sick of people conflating insurance with health care.

          I have no fucking idea how anyone can be this dumb.

        2. Insurance is not care.

          Intentions are not results.

          Money is not wealth.

          Not giving does not equal taking.

          Coercion is not voluntary.

          Raising minimum wage does not help the very poor.

          There are too many of these fallacies to count or bother to point out.

    3. Right. If they are allowed to buy these alternative policies, then the healthier low-risk people could opt out and avoid subsidizing the higher-risk people.

      Ergo, the policies must be banned.

  3. In some ways it’s really sort of bizarre.

    Why would it be bizarre? It’s the government!

    “And while the Frog gasped its last breath, it said to the Scorpion ‘Why? Why would you do it? Now both of us will perish?’ To which the Scorpion replied ‘Because, that is what I do.'”

  4. Obamacare is often described as an attempt to make sure that most everyone has, or at least has access to, health insurance.

    Emphases added. Surely we can better weasel-word what Democratcare is!

    1. I really hate that nobody even questions the “has access to” part.

  5. Well it really shows that the goal of the mandate is to force people to subsidize other people’s insurance.

    And that the “tax penalty” isn’t really just a tax, since they clearly intended to force people to actually pay for the insurance and not allow them to just pay the penalty.

    There might be a court case there.

  6. I wonder how long the Christian Health Sharing Ministries will be left alone by regulations? The only good thing is that they were specifically included in the ACA. We’ve been very happy with our health sharing ministry–read my complete review of Christian Healthcare Ministries here: http://www.christianhealthcare…..eview.com/

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