Shrewdness or luck: Obamacare may result in better market-driven system

I am not much of a conspiracy theorist, but the United States Supreme Court on Thursday carefully placed the seal of approval on what may be the most shrewd political maneuvering in modern history.

There were so many machinations and what-ifs along the way that if this was all deliberately orchestrated, it was sheer brilliance.

And in the end, it may not be a bad thing.

Stick with me through this.

The Patient Protection and Affordable Care Act, aka Obamacare, is now the law and on sound footing. We need to prepare for it. Abandon your illusions that it will be repealed after the November elections. It’s not going anywhere.

Even if Mitt Romney wins in November, the Republicans retain the House and win a filibuster-proof majority in the Senate — a combination of events almost prohibitively unlikely — Obamacare still isn’t going away. Our federal legislators can’t even pass a budget for fear of political backlash. Imagine the same spineless bunch trying to take away health insurance protections for children with pre-existing conditions. It’s a non-starter.

Forget about the individual mandate for the moment. It’s important, but it’s a bit player in a bigger drama. The Affordable Care Act requires employers with more than 50 employees to provide health insurance or pay a $2,000 penalty per employee each year, though they get a pass on the first 30 they don’t insure.

Most companies about our size pay about $400 per employee per month for health insurance. That means that by dropping health insurance for their employees and choosing to pay the penalty, they would be in the black in fewer than five months ($400 per month over five months).

Companies like The Daily Sentinel could dump all of their employee health insurance, bump everyone’s compensation so that they would have funds to purchase insurance through the state health insurance exchanges and still come out in better shape. Plus, these companies wouldn’t have to deal with the nightmares of negotiating with health insurers, managing problems and filling out loads of paperwork for their people.

Every big company in the country has already evaluated these numbers. Insurance brokers even offer firms calculators to decide whether they should offer insurance or pay the penalty.

Any policy analysis must assume rational economic actors, so we have to assume that almost every company will prefer to pay the penalty, stop providing health insurance, boost employee compensation and send their employees into the exchanges.

This is exactly the opposite of what the Obama administration has stated it wanted, by the way. It claimed to want to work within the existing system of employer-provided health insurance, merely adding competitive forces to lower health care costs.

Here is where it gets interesting. When large companies drop health insurance for their workers — and it will only take one to start the dominoes falling — they will cast millions of people and billions of dollars into state health care exchanges. There, insurance companies will have to fight over those dollars in pitched competition.

This is the best part. As I rack my brain, I cannot recall a single advertisement of a health insurance company touting its rates. I can, however, recall with specificity countless ads for car insurance — the mayhem-inducing Allstate guy, the Geico caveman, the Progressive rate-saving lady, et cetera. Car insurance companies are in intense competition with one another, and they retain the very best marketing companies to go at each other like Rodan vs. Gozilla. Consumers, are the beneficiaries of this free market at work.

Imagine what will happen when health insurance companies are forced to compete in a free marketplace for the millions dumped by their employers (but flush with new cash) and required by the individual mandate to buy health insurance. I can’t wait to see Cigna and United Healthcare battling for my dollars. Their run of record profits will soon come to an end.

It’s reasonable to expect that this added competitive pressure on the payers will thereby press on hospitals and doctors — two demographics insidiously immune to traditional market pressure — to take their long-overdue haircuts.

Is it possible that the crafters of the Patient Protection and Affordable Care Act were so Machiavellian to have set this chain of events in motion? Is it possible that a single-payer system was what they had in mind all along?

Any human endeavor is susceptible to the Black Swan effect of unintended outcomes. I seriously doubt that this was the plan from the beginning. Maybe they got lucky, but in the end, those of us who consume health care services (in other words, all of us) may be the beneficiaries.

Jay Seaton is the publisher of The Daily Sentinel.


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Two items in Sunday’s Sentinel – Jay Seaton’s “Shrewdness or luck:  Obamacare may result in better market-driven system” and Dr. Michael Pramenko’s “Individual mandate is critical for guaranteed health coverage” – require readers’ attention, because they afford invaluable insights into the potential benefits and practical wisdom of the Patient Protection and Affordable Health Care Act (“Obamacare”).

  The “American system” of private health insurers arose during World War II, as military materiel manufacturers competing for scarce skilled labor began offering health insurance coverage as a benefit to attract workers and executives.  The “market place” responded to that demand, resulting in some 1300 commercial health insurers today.

  However, due to that “policy decision”, many American corporations are now saddled with burgeoning health insurance costs that make their products and services less competitive in world markets – thereby costing jobs.  Obamacare will change that.

  Meanwhile, profit-driven insurers maximized “return” by increasing premiums while minimizing costs—avoiding higher risk applicants, denying benefit payouts, and canceling coverage when actual and/or potential benefit payouts rise.  Consequently, too many policyholders too-often found themselves with no coverage when they needed it.

  To legitimize such decisions, for-profit insurers hired doctors to evaluate claims for the purpose of denying them (based on “pre-existing conditions”, etc.).  The result was some 1300 separate “death panels” whose salaries and bonuses – and those of executives rewarded for maximizing profits – further increased premiums for individual and corporate policy purchasers.  Obamacare “kills” those jobs by making them illegal.

  Unfortunately missing from Obamacare because of Sarah Palin’s “death panel” meme was its biggest potential cost-saving provision – the Republican proposal to pay physicians for providing “end of life counseling” to elderly patients.  Anyone who has observed the process of dying in a hospital versus hospice knows that the latter is both more humane and dignified, and much less wastefully expensive.

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