Commentary

Six Months Later…

Six months ago today, President Obama signed the Patient Protection and Affordable Care Act, commonly known as Obamacare. The intervening six months have shown that this health care law offers neither patient protection nor affordable health care — in fact, quite the opposite.

Obamacare’s greatest selling point was that it would guarantee health insurance coverage to people with pre-existing conditions, starting with children, through government price controls that would prohibit insurers from charging higher premiums to those patients. Unfortunately, the only thing price controls guarantee is misery.

Even before the price controls affecting children took effect today, major insurers Wellpoint, Cigna, Aetna, Humana and CoventryOne announced they will simply stop writing child-only policies rather than suffer the inevitable losses. Thanks to this “consumer protection,” many parents will be unable to insure their children. Expect other insurers to follow suit as adverse selection causes premiums for existing child-only policies to rise.

When Congress inevitably repeals Obamacare, lawmakers should enact real reforms that make health care better, cheaper, safer and more secure.”

When those price controls go marketwide in 2014, they will force insurers to avoid sick adults as well. Economists have shown that unless insurers avoid the sick, the price controls will put them out of business. Look for insurers to avoid, mistreat and dump the sick by marketing themselves only to healthy people, skimping on claims processing and customer service, and dropping benefits that sick people value — not because insurers are heartless, but because that is what Obamacare rewards.

The law’s authors admitted as much when they included new subsidies and regulations (on marketing, claims payments and benefit design) to mitigate those perverse incentives. Unfortunately, the nonpartisan Congressional Budget Office says those subsidies can only succeed at a very high cost, while the regulations will stifle innovation.

For example, three years before they even take effect, the marketwide price controls are eliminating an innovation called “guaranteed renewability,” which protects sick patients from high premiums and skimping. Obamacare has pushed BlueCross BlueShield of North Carolina to dismantle its guaranteed-renewability feature and transfer more than $100 million from sick to healthy customers. Mr. Obama claims this is evidence the law is succeeding. Yes, but succeeding at what?

The past six months also have shown that Obamacare is making health care less affordable.

Starting today, Obamacare requires consumers to purchase 100 percent coverage for preventive services, coverage for dependent children up to age 26 and unlimited annual and lifetime coverage.

All that additional coverage comes at a cost. The Department of Health and Human Services projects that just one of these mandates will increase some premiums by nearly 7 percent. Many insurers say the combined effect is 3 percent to 9 percent. Anthem Blue Cross and Blue Shield of Connecticut says these mandates are forcing it to increase premiums for many of its customers by close to 30 percent.

Earlier this year, Mr. Obama described premium increases of that magnitude as “jaw-dropping,” while Secretary of Health and Human Services Kathleen Sebelius said they threaten “to make health care unaffordable.”

Indeed, Obamacare’s added costs could push many to drop coverage — particularly individuals and small businesses, who will be hit hardest. A recent Kaiser Family Foundation survey found that a similar mandate pushed many employers to drop mental health coverage.

Costs will keep rising. According to the consulting firm Milliman Inc., Obamacare’s price controls will increase premiums for young adults by 10 percent to 30 percent beginning in 2014.

Obamacare, the president now admits, “is going to increase our costs; we knew that.” If he knew that, why did he claim his health plan would reduce costs by as much as $2,500 per family?

More broadly, how can anyone call Obamacare’s mandates and price controls “consumer protections” when they leave some people with worse coverage or unable to afford any coverage?

Supporters now defend Obamacare largely by arguing that opponents haven’t agreed on how to replace it. When Congress inevitably repeals Obamacare, lawmakers should enact real reforms that make health care better, cheaper, safer and more secure.

But even if Congress did nothing more than repeal Obamacare, that would deliver a real dose of consumer protection by arresting this downward spiral of rising costs and deteriorating quality.

Michael F. Cannon is director of health-policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It (Cato Institute, 2005).