Obamacare: What the Future Holds
By Bryan Caplan
The “Affordable Health Care for America” timeline that Arnold shared is… interesting. Assuming that its seven pages accurately summarize the multi-kilopage bill (a big if), four measures stand out.
1. It provides “immediate access to insurance for uninsured individuals with a pre-existing condition,” creating a big adverse selection problem with one swoop. The provision “ends when Exchanges are operational” in 2014. But beginning in 2014, “Health plans can no longer exclude coverage for treatments based on pre‐existing health conditions.” So apparently consumers will be free to play “Heads I win, tails I break even” from now on.
2. A while back, Krugman loudly insisted that if you ban pre-existing conditions clauses, you also have to mandate insurance. While the new bill has a mandate, it doesn’t begin until 2014, and the penalty clause is absurdly small. Here’s what passes for “promoting individual responsibility”:
Requires most individuals to obtain acceptable health insurance coverage or pay a penalty of $95 for 2014, $325 for 2015, $695 for 2016 (or, up to 2.5 percent of income in 2016), up to a cap of the national average bronze plan premium. Families will pay half the amount for children, up to a cap of up to a cap of $2,250 per family. After 2016, dollar amounts are indexed. If affordable coverage is not available to an individual, they will not be penalized.
In practical terms, then, “Heads I win, tails I break even” remains the winning strategy. And as adverse selection drives up the price of insurance, paying the uninsured penalty until you’re seriously ill gets smarter and smarter.
3. While new regs penalize firms that
don’t offer insurance, the penalty seems to asymptote to $2000/employee:
Requires employers with 50 or more employees who do not
offer coverage to their employees to pay $2,000 annually for each
full‐time employee over the first 30 as long as one of their employees
receives a tax credit. Precludes waiting periods over 90 days. Requires
employers who offer coverage but whose employees receive tax credits to
pay $3,000 for each worker receiving a tax credit up to an aggregate
cap of $2000 per full‐time employee.
I have a feeling that post-recession jobs are going to be a lot less
likely to offer health insurance.
4. The “Cadillac tax” doesn’t kick in until 2018. But given the regulation-induced adverse selection problem, plus many other provisions to hobble discount insurance, I wouldn’t be surprised if half of the insured ended up paying it:
Tax is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (single coverage), increased to $30,950 (family) and $11,850 (single) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation…
Notice that the thresholds are indexed to inflation, even though medical costs have increased at a much faster rate than inflation for ages.
I won’t propose any bets until I get a better sense of what’s going on. But once my head stops spinning, I’ll probably want to bet on the fraction of private insurance in 2020 that’s subject to the Cadillac tax. Considering the weak incentives on individuals and firms to buy insurance, though, maybe I should just bet on the fraction of the population that still has private insurance in 2020.