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The Federalist Capers: The Twilight of Obamacare

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The absurd debacle known as Obamacare is not something about which I normally write. However, like a secret vice, I maintain a fascination with federalism and with the nature of the relationship between the feds and the states. Having done professional research into the subject for quite some time, including geeky 10th Amendment matters and all that. OK, it’s kind of dry. But if we don’t pay attention, some of us may have less money for vital necessities like cigars and bourbon. And those I know about. So, listen up.

Also, national economic well-being is a factor in national security. No cash—because it is being spent on awkwardly implemented health care “reform”—no guns.

That’s why it’s interesting that the Trump Administration is proposing a plan that would allow states to expand the use of short-term, limited duration health insurance. Currently, the plans last for up to three months before you can sign up for a longer-term plan through existing Obamacare exchanges. The new rule would permit the short-term plans to last for up to 12 months, and could potentially allow people to renew these plans. Sounds good, eh? Well, as always, the devil is in the details.

The plan has the advantage of introducing market-based reforms and greater federalism into the healthcare system. Proper stuff.

Nevertheless, states shouldn’t exercise their new authority by expanding the use of short-term plans. Because Congress failed to repeal Obamacare last year (thanks again, John McCain!) extending short-term insurance plans would actually increase costs on many in the states. The cost will also increase for the feds given that subsidies from the treasury would increase in kind to account for the rise in premiums on the insurance market. In reality, this means the elves at Fort Knox would have a lot more heavy lifting to do.

Here’s Why Costs Will Go Up
Why shouldn’t the government do what seems to make eminent sense by principle?

For starters, the middle class will see premium increases because they will not be eligible for subsidies if they have to buy Obamacare plans. Particularly in light of Congress’s vote to repeal individual penalties for not having coverage, the enrollment of healthy individuals in short-term policies will mean that coverage costs will increase for those with health conditions.

Okay, you’ve lasted this long with this piece. Now go to the fridge and get a beer, you deserve it.

Waiting . . . 

Now, dear comrades, back unto the breach.

Compared to just 27 percent on the standard Obamacare exchange, 60 percent of individuals purchasing short-term plans in 2017 were between the ages of 18 and 34. These numbers may become even more out of whack next year with the loss of the individual mandate penalty. Many will just opt out of coverage completely. If younger people who need healthcare as they get married (or in my case, divorced) opt out when soon they should be buying houses, having babies, and building their lives, then the burden potentially of paying out of pocket, or landing in a government program, during a health crisis will show in decreased disposable income, purchasing, and a possible economic slowdown.

Economists also predict an 18 percent increase in premiums next year if short-term plans are expanded. For 60-year-olds purchasing silver coverage, the AARP Public Policy Institute projects as much as a $4,000 increase in premiums. That’s a lot of early bird dinners.

And will it affect federal spending? Is the pope Argentinian?

Subsidies from the federal Treasury will increase for rising premiums in the insurance market. A study by Medicare’s chief actuary, that thrill-seeking wildman, found the plan would cost the government $1.2 billion next year and a total of $38.7 billion over 10 years due to subsidies for rising premiums. You can imagine the lovely effect on the federal deficit.

How Much Worse Could It Get? Well . . .
Given that they already lack coverage for essential health benefits such as maternity care, prescription drugs, and mental health, expanding short-term plans could push more people, especially Millennials (as if they don’t whine enough already) into other government-run programs.

Not to mention, as the Kaiser Family Foundation notes, ”Policyholders who get sick may be investigated by the insurer to determine whether the newly diagnosed condition could be considered pre-existing and so excluded from coverage.”

Case in point, from the unexpectantly lucid New York Times:

One case pending in federal court involves Kevin Conroy, who had a heart attack in 2014 and underwent triple bypass surgery, just two months after his wife, Linda, obtained a short-term policy over the telephone. Their insurer, HHC Life, refused to pay the bills.

“We freaked out,” Ms. Conroy said. “What were we going to do? It was $900,000.”

The insurer informed the Conroys the policy was “rescinded,” to use the industry jargon. After poring through his medical records, HCC claimed Mr. Conroy failed to disclose he suffered from alcoholism and degenerative disc disease, conditions he said were never diagnosed. “When one thing didn’t work, they went to another,” Mr. Conroy said.

Oh, joy. The happiness continues. According to the Commonwealth Fund:

The out-of-pocket maximum for each best-selling plan is higher than that allowed in individual or employer plans under the ACA, when adjusting for the shorter plan duration. When considering the deductible, the best-selling plans have out-of-pocket maximums ranging from $7,000 to $20,000 for just three months of coverage. In comparison, the ACA limits out of pocket maximums to $7,150 for the entire year.

So, yeah, a superficially interesting plan now, but it might trap you into a deal down the road when the cost could skyrocket even more than before. Sadly, as with many other things, early gratification can lead to long-term problems. No fun, but there it is.

This administration does a lot of things right. This bit of federalism is one of them. Just the other day, the president made the EU President crawl to Canossa. Good economic news continues to abound, much to the consternation of those who would prefer a return to a pre-industrial state if it would drop Trump’s poll numbers down 5 percent.

But this question requires some fine-tuning at the state level so it doesn’t continue to saddle us with the twilight of Obamacare.

Photo credit: Margaret Johnson/EyeEm via Getty Images

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