Things to Come 5 - The End of Health Insurance

From the day it was rammed through Congress using every political shenanigan and procedural trick in the book, Obamacare has been a ferociously controversial bill hated by half the population.  Never before has the federal government attempted to force individual people to purchase a product whether or not they want it.

Unfortuntely, the Supreme Court found this imposition Constitutionally tolerable because Congress has the power to tax anything and you don't actually have to buy insurance if you don't want to, you can pay a tax instead.  Mitt Romney's defeat ended the last hope of repealing this epic and tyrannical blunder; as John Boehner said, "Obamacare is the law of the land" and it's pointless to keep bashing our heads against that particular rock.

Instead, it's time for the rock to start bashing us.  As Nancy Pelosi predicted, only now after the bill is starting to come into effect are we beginning to find out what's in it.

Forests have been felled talking about the inevitable death panels, rationing, doctor shortages, and so on; there is no need to rehash all that here.  Setting aside the details, there is one profound, macro-level change which Obamacare will inevitably bring about which will deeply affect each and every one of us, and far sooner than you think.

What Is Insurance?

The idea behind insurance is to spread large, but rare, risks across a wide number of people.  Everyone pays for fire insurance but only a few people have their houses burn down; thus, each person pays only a few hundred bucks for the insurance but there's plenty of money to write a multi-hundred-thousand-dollar check for the unlucky "winner."  Since we don't know who that will be, though, it makes sense to avoid the small but real risk of a bankrupting disaster.

Originally, health insurance was intended to use the same principle.  In any given year, most people won't spend weeks in the hospital or need a heart transplant.

The problem is, modern medical technology has created a whole lot of treatments and tests that may not rise to the level of a whole new organ, but are still unaffordable for most people - and are needed far more frequently.  Do you have $3,000 for an MRI, $10,000 for a colonoscopy, or $40,000 for a new hip?  No, and I don't either.

So instead of doing occasional, very large payouts like the fire insurance company, health insurers are constantly making medium-large payments.  Not only does this raise the premiums, but it increases the overhead costs of paperwork and processing.

There's another difficulty with medical insurance: A house fire is a one-time event.  The house burns down, it's gone, you get the insurance check and rebuild it.

Medical problems are nothing like that.  A heart attack may be a one-time event also, but the recovery may take months and several expensive surgeries.  Worst-case scenarios like diabetes or AIDS may entail a permanent need for hideously expensive drugs for the rest of your life.

Demanding the Unaffordable

How can an insurance company deal with people who are already expensively sick?  The traditional method was simply to deny them coverage, but Obamacare now forbids that.  From 2014, sick people aren't even allowed to be charged more than the healthy - nice for them but destabilizing for the insurance company.

That's why the "individual mandate" was necessary.  If sick people can get insurance at the same rate healthy people can, the cost for both will be astronomical; it'll be more sensible for healthy people to go without and save their money until they get sick.

Thanks to the Supreme Court, that problem is moderated: we are all, indeed, required to buy health insurance.  Except we aren't: we can just pay the fine, and so can our employers instead of providing insurance.

A fine of $2,000 may seem awful, but compared to an insurance bill of $20,000 it's not so bad.  If you are healthy and don't expect to need $18,000 worth of medical treatments this year, you're better off paying the fine.  Of course, this means that the insurance company won't get the money it's expecting, and next year the premium will be $25,000 instead - leading more people to make the same decision, and so on, in a vicious cycle.  And don't forget: if you get hit by a bus, you (or your significant other) can sign up for health insurance on your way to the hospital and the insurance company has to let you in.

The end result is as predictable as it was intentional: It will not be possible for insurance companies to remain in business under the Obamacare laws as designed.  If they can't get the money to pay the bills they'll go bankrupt.  If there aren't any functioning insurance companies offering the product you're required to buy by law, what then?

The public option, that's what!  The left has always wanted America to have a universal single-payer national health care system like England and Canada have, and they were bitterly disgusted with Mr. Obama when Obamacare didn't look like one.

They needn't have worried.  No, Obamacare doesn't create a national health care system by law.  It does something far smarter and sneakier: it inevitably creates the situation where a national health care system will be the only possible end result, private insurers having gone broke and nobody but the Evil Rich being able to afford health care by writing a check to the doctor.  Where else to turn but to Almighty Government?

Health insurance costs are already crippling.  Your humble correspondent can speak from personal experience: my 2012 insurance cost, which I pay entirely, will be four times what I paid a mere five years ago.  You may be sure that my income has not quadrupled; in fact, I'll be lucky if it's the same this year as it was then.  And this is before the most crippling of the Obamacare regulations hit.

Something for Nothing

The fundamental problem is a simple one: Modern healthcare is insanely expensive for a whole host of reasons we've discussed elsewhere.  Until those excessive costs are addressed, there simply is no solution: many, perhaps even most Americans, do not earn enough to be worth the costs of their health insurance or the full panoply of modern care.  Insofar as we, as a society, decide to pay their health care costs anyway, they become an overall economic drag holding our economy and wages down.

It won't matter if we nationalize healthcare.  England's National Health Service is funded by crippling taxes, is famously slow in offering modern advanced care, and has created a system where dozens of elderly people die in the hospital from starvation because they're systematically neglected by the government employees responsible for giving them care.  Coming soon to a hospital near you!

More Rules = Less Benefits

There's one other severe problem caused by Obamacare that should have been predictable.  Obama's advertised goal was to force everybody to get health insurance, and as far as possible, to force employers to buy it for their employees.

Even he knew that wouldn't always be possible: you can't be expected to buy health insurance for your babysitter or the handyman who fixes your gutters over a few days.  Thus, Obamacare includes a commonsense exception: companies are required to buy insurance for their full-time employees or pay the fine, but not for part-timers.

That being so, what do you suppose virtually every business will do wherever they can?  Cut all the employees to part time, that's what!  The Orlando Sentinel reports:

In an experiment apparently aimed at keeping down the cost of health-care reform, Orlando-based Darden Restaurants has stopped offering full-time schedules to many hourly workers in at least a few Olive Gardens, Red Lobsters and LongHorn Steakhouses... 

Analysts say many other companies, including the White Castle hamburger chain, are considering employing fewer full-timers because of key features of the Affordable Care Act scheduled to go into effect in 2014. Under that law, large companies must provide affordable health insurance to employees working an average of at least 30 hours per week.

If they do not, the companies can face fines of up to $3,000 for each employee who then turns to an exchange — an online marketplace — for insurance.

"I think a lot of those employers, especially restaurants, are just going to ensure nobody gets scheduled more than 30 hours a week," said Matthew Snook, partner with human-resources consulting company Mercer.

Duh!  What else did Obamacare's supporters expect?  If the government makes having employees more expensive, companies will have fewer employees.  Why is anyone surprised?

It's not just minimum-wage waitresses either:

Pennsylvania's Community College of Allegheny County (CCAC) is slashing the hours of 400 adjunct instructors, support staff, and part-time instructors to dodge paying for Obamacare.

"It's kind of a double whammy for us because we are facing a legal requirement [under the new law] to get health care and if the college is reducing our hours, we don't have the money to pay for it," said adjunct biology professor Adam Davis.

Ya think?  Once again, Mr. Obama will create a massive, overwhelming demand for government-provided healthcare.  Companies won't pay for health insurance for anyone but their most essential employees, and everyone else won't be able to pay for it on their part-time non-benefitted jobs.  Another victory for Big Government!

One little problem: with companies scrupulously following the law so as to avoid paying either insurance bills or the Obamacare tax and with most people becoming part-timers that can't afford skyrocketing insurance prices, how is the government going to pay for all the healthcare?  You know the answer, but it's still worth discussing in the next article in this series.