There are a few very simple truths about how health insurance works, which some commentators and politicians can’t seem to grasp. The result is a constant drumbeat of disingenuous statements that misrepresent how health reform will work and why the Affordable Care Act was written as it is.
The latest failure to grasp comes from Florida Senate candidate Marco Rubio, who told a group of reporters this week that he wants to repeal “Obamacare,” but not the provision requiring insurance companies to cover pre-existing conditions. “There are a couple of things that stand on their own that people like, like the pre-existing condition clause, I think there’s widespread support for,” said Rubio.
Well, sure there is widespread support, but that’s not a reason this provision should be implemented as a stand-alone regulation. (Rubio later backed down, saying he wants the whole health reform law scrapped, but his first statement betrays an apparent misunderstanding of how insurance works.) If insurers had to cover all pre-existing conditions without a mandate that everyone maintain insurance, premiums for everyone would go through the roof almost immediately. People wouldn’t buy insurance until they needed it, meaning insurance would be less “insurance” – protection against unforeseen costs – and more discounted medical care. Insurance companies would need to cover the cost of treatments for pre-existing conditions and wouldn’t have years of premiums paid in by these folks to fall back on.
In other words, you can’t cover everything at an affordable rate unless you cover everyone. And you won’t cover everyone unless you require, by law, that everyone have insurance. (The individual mandate, as this is known, is the provision of the Affordable Care Act that’s most hated by Republicans, as evidenced by the multi-state lawsuit challenging its constitutionality.) The idea is that if risk is spread around a whole group – say the population of the United States – insurers can cover pre-existing conditions at affordable rates and not go out of business. Peggy Noonan also lacked awareness of this simple truth when she wrote in January that the only reason President Obama didn’t push just for coverage of pre-existing conditions is that he was “greedy.”
The public in 2009 would have been happy to see a simple bill that mandated insurance companies offer coverage without respect to previous medical conditions. The administration could have had that—and the victory of it—last winter.
Instead, they were greedy for glory.
Here’s Paul Krugman explaining the ridiculousness of this.
While we’re at it, here’s another simple truth about insurance that often gets lost in the shuffle is: Good insurance costs more than bad insurance.
Part of the reason there’s such wide variation in insurance premiums even among the healthy is that insurance is priced, for the most part, on what it provides. Policies with low co-pays and ample reimbursements are more expensive than plans with high deductibles and strict coverage limits. In other words, there are no “good deals” in the health insurance marketplace. Suspect a policy if it seems dramatically cheaper than other options – chances are something is missing from the policy. See here for more.
This simple truth is one of the primary reason critics of the Affordable Care Act say it could cause costs to increase. The Act will set a baseline for acceptable insurance coverage that is better than much of the insurance now carried by Americans.