Unintended-Consequences-of-ObamaCare Fact of the Day
Greg Scandlen is becoming uninsured. As he wrote in a recent e-mail:
I’ve decided to not renew my coverage when the bill comes in for the 4th quarter. I currently pay $320/mo for a $2,500 deductible BCBS plan. I have an HSA and have saved up a fair amount of money in it. Pretty good deal. So why drop it?
Answer below the fold.
Greg continues:
- I have never even come close to meeting my deductible. Everything I have done since HSAs came in has been paid for from my HSA. In fact, never in my life have I ever incurred more than $2,500 in medical expenses in one year. The odds are that will not change, even though I am older.
- I expect a pretty substantial increase in my premiums, but it doesn’t really matter. I would make the same decision anyway.
- If I guess wrong and my health does change, I will be able to sign up for the new federal risk pool — but ONLY after I have been uninsured for six months. I might as well get started on that six month qualifying period now while I am still healthy.
- There is no penalty for doing this. The federal risk pool is not allowed to charge me more than standard rates.
- Meanwhile I will be able to save $4,000 a year on insurance premiums, which is no small matter these days that I am semi-retired.
- I will not be able to contribute additional money to my HSA, but my income is low enough now that there is virtually no tax advantage to making an HSA contribution. My main tax issue today is the payroll tax, and the HSA has no effect on that.
So, I am joining the ranks of the uninsured. Thank you, Mr. Obama.
Another unintended consequence? Maybe it was intended. These people can’t be that stupid.
I suspect there will be a lot of people who will think just like Greg is thinking.
So Greg, if I understand what you’re saying, the problem is that the mandate requirement isn’t strict enough. That’s simple to fix, increase the fine for not enrolling. As for your canceling your insurance now, that you haven’t been sick doesn’t mean you won’t get sick. If you’re lucky you won’t be sick. If you’re not, all your assets will disappear down the black hole of the health care system.
artk, you are forgetting about guaranteed issue. After Greg gets sick he will be able to join the new risk pool and pay premiums no higher than the current market rates. Why should he insure when he is healthy if he can enroll as soon as he gets sick?
In 2014, as I understand it, he will be able to enroll in any insurance plan with no extra charge, not just the risk pool. I believe this is exactly what an increasing number of Massachusetts residents are doing.
So, Paul, I guess that Greg doesn’t live in one of the 34 states that had high risk pools prior to the health care act. Well, actually he does. He’s the President of a health benefits firm in Maryland, a state that already has a high risk pool. I would say that’s its disingenuous for him to say his high risk pool was “Obamacare” related when he’s had that option for years.
artk,you need to look at the fine print in all of this. Risk pools that already exist tend to charge 150% to 200% of market rates and if you are in one you won’t be allowed to switch to the new “ObamaCare” risk pools.
Greg is saying that since he is currently healthy, after six months of uninsurance he — if he got sick — would qualify for the new ObamaCare risk pool and pay the same premium he would have been paying had he remained insured all along.
So it’s in his self interest to become uninsured. I hope that’s clear.
artk, your comment makes no sense.
Mr. Scandlen had coverage. He had had it for years. Under the pre-ObamaCare rules, it made sense to pay for coverage. If one waited until one was sick to buy coverage from state high risk pools the rates were a) generally higher and b) one had to satisfy waiting period requirements before coverage took effect. The obvious reason for these requirements was to penalize people who failed to insure themselves before they became uninsurable.
The brilliant ObamaCare plan has changed this calculus. Its rules for high risk pools specify that the pools have to charge the low, low rates offered standard individual policies. This eliminates the financial penalty for depending on them. Plus, they have to charge the rates in the individual market, so they are among the least expensive options available. There are no waiting periods unless one has been insured. Those uninsured for 6 months get a policy immediately so it is better to be uninsured.
So, Mr. Scandlen calculates that as he has always paid cash for his routine health needs anyway, and has enough money saved up to make it through most health crises in the next six months, it makes sense to drop his private insurance now. After six months without insurance ObamaCare guarantees that he can have health insurance for the asking and that someone else will pay the freight.
Given these circumstances, please explain how ObamaCare rules make it rational for Mr. Scandlen to continue to pay for coverage?
When politicians and public health advocates lament the fact that people with pre-existing conditions are denied affordable coverage, they ignore the role incentives play. There needs to be a mechanism to induce people into maintaining continuous coverage throughout their lifetimes or they will game the system. The problem is the ACA tries to do this by mandating costly coverage that will be weakly enforced. I expect many people to game the system.
Linda:
While Greg could get the policy immediately, does Obama Care say that it will cover prior ongoing medical expenses?
Don Levit
I’ll answer Don for Linda. In general, insurance doesn’t pay for expenses you incurred prior to being covered. But once Greg is enrolled in a plan, it pays for everything going forward.
Actually, you guys are missing the one criticism that came in that made some sense. A friend (who is an Obama supporter and former chief deputy insurance commissioner) asked me what I would do if the pool freezes enrollment because they don’t have enough money.
Damn! Does that mean they passed a law but didn’t fund it adequately? In other words, they made promises they had no intention of keeping? No, no, no, that couldn’t possibly be true in this new age of transparency and accountability, could it?
Oh, well, all the more reason to jump in early before the money runs out. Plus, I’m quite sure they’ll find a way to raise your taxes so that I can get cheap coverage.
Two words: Murphy’s Law.
It’s a nice way to make a point, but it would make more sense for someone who doesn’t have access to inexpensive coverage. But even then, I’d like to see what the new risk pool coverage looks like before I take the gamble.