Truth of Health Insurance Reform by the New York Times

In Sunday’s edition of the NY Times, buried in the Regional section, comes an analysis of the current health insurance reforms in the state of New York that were implemented over fifteen years ago.  Similar to Obama Care, the state of New York required all health insurance carriers to issue guaranteed acceptance policies to people with pre existing conditions as a means of making the health industry fair and imposes community pricing rather than risk based insurance premiums.  So how did this work for New Yorkers?  About the same way Obama Care critics predict.

According to the New York Times Sunday Edition
“New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences. Premiums for individual and small group policies have risen so high that state officials and patients’ advocates say that New York’s extensive insurance safety net for people like Ms. Welles is falling apart.

The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market. In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.
New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.

Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.”

That death spiral has nearly wiped out the individual health insurance market in the state.  New York has the highest annual premiums for individual policies in the country, at over $6600 for an individual and double for families.

Obama Care supporters argue that the federal individual health insurance mandate will solve this problem. However, the mandate in Massachusetts hasn’t kept costs in line. The New York Times is also skeptical.

“The new federal health care law tries to avoid the death spiral by requiring everyone to have insurance and penalizing those who do not, as well as offering subsidies to low-income customers. But analysts say that provision could prove meaningless if the government does not vigorously enforce the penalties, as insurance companies fear, or if too many people decide it is cheaper to pay the penalty and opt out.

Under the federal law, those who refuse coverage will have to pay an annual penalty of $695 per person, up to $2,085 per family, or 2.5 percent of their household income, whichever is greater. The penalty will be phased in from 2014 to 2016.”

The math is very simple. If an individual has to pay $6600 per year for a policy they feel they don’t really need or pay $2500 on a salary of $100,000, which one will healthy young earners take? Of course this is based on the assumption that the government will actually enforce the mandate, which Democrats insisted the Obama Care bill couldn’t do.

Arguments to this will be that most young  people earn much less and will get federal subsidies, but that still depends on them deciding whether to pay anything for a policy that clearly doesn’t suit them.  The argument has neglected the fact that the actual costs will absolutely skyrocket and that taxpayers will be on the hook for the subsidies, which will have to increase to match the premium hikes to remain effective.  Instead of having premiums based on a rational risk assessment, we have the young and healthy subsidizing premiums for the older and the much less healthy in comparison, who then subsidize the younger and healthier through federal handouts. A crazy way to run health care in the U.S.

The individual health insurance mandate is nothing more than a way to get young people to create a proxy welfare state by forcing them into a extorting health insurance model.  It does nothing to reduce actual costs at all, and in fact makes cost increases both more frequently and more rapidly.

Easy To Insure ME .com would also like to note that this story was buried in the regional section and not the front page.  This reflects on the arrogance of the whole Obama administration and their gag orders on speaking out about health insurance reform.

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