How ‘reform’ leads to more uninsured

Imagine you’re driving in a city, trying to find a place to park your car for the whole day. A parking garage costs $30. Right next to the parking garage entrance, you eye a parking spot on the street. Next to the curb is a sign that says, “No parking. Fine $5. No-tow zone.”

Many people wouldn’t choose the garage.

Likewise, imagine if you saw a sign that says, “Health insurance for sale: $200 a month,” and right next to it was another sign. This one says, “Fine for not buying insurance: $33 a month — but you can still buy it if you get sick.” How would you respond?

That describes the situation under the health bill passed by the Senate Finance Committee. The bill would require insurers to cover all comers at the same price, at any time. People could choose to carry insurance year-round, paying insurance premiums every month. Or, if they prefer, they could choose to pay a fine, wait until they are sick or injured, and sign up for “insurance” then. The fine for an individual would be $33.33 a month in 2015 (or $66.67 for a whole family) and even less before then.

Here’s the catch: Everyone else’s insurance premiums would skyrocket.

Every American deserves to have access to an affordable insurance policy, and there are people with prohibitively expensive preexisting conditions who can’t afford coverage and need help. But there are ways to solve this problem that wouldn’t dramatically raise everyone else’s premiums. And there are far better ways to solve the problem than to give millions of insured Americans a strong incentive to quit carrying insurance year-round.

A study by actuarial and consulting firm Milliman Inc. showed that when New Jersey and Washington adopted reforms similar to the finance committee bill’s, the number of people without health insurance in those states rose– both in actual numbers and in relation to the national average.

Meanwhile, a PricewaterhouseCoopers study found that under the Senate Finance Committee bill a typical American family’s annual insurance premiums would cost about $4,000 more in 2019 than they’d otherwise have cost.

To be sure, federal subsidies would go to some families to cover some of these new expenses — subsidies paid for by other families in the form of taxes. Over 20 years, the Congressional Budget Office projects the bill would raise Americans’ taxes by $2.3 trillion.

None of this is sensible or necessary. There’s a better way to ensure access to care for those who can’t get health insurance at a reasonable price. Congress could help expand efforts under way in the states. For example, 34 states already have state-run high-risk pools to help cover the costs of care for those with some expensive preexisting conditions. We should strengthen those efforts, which would help those in need without disrupting the entire system.

The CBO says over 20 years the bill would cost $3.6 trillion, would raise Americans’ taxes by $2.3 trillion and would pilfer $2.3 trillion from Medicare and related federal health programs.

What would Americans get for their money? Their insurance premiums would substantially rise, while the number of Americans who have health insurance might actually fall.

The reason for this is simple. Many people won’t pay to park in a garage if they can park on the street, pay their fine and come out ahead. And many people won’t pay for insurance if they can drop their plan, pay their fine and sign back up at any time.

But everyone else would pay plenty.

Michael O. Leavitt was secretary of Health and Human Services from 2005 to 2009. Jeffrey H. Anderson is a senior fellow at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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