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What Does "Health Insurance Cost" Mean?
Supply and demand (In that order) ^ | 01/10/2013 | Casey Mulligan

Posted on 01/10/2013 6:59:21 AM PST by SeekAndFind

Beginning next year, people without health insurance through their employer will be able to buy it monthly on "exchanges." They are encouraged to buy the insurance, or else face a penalty for each month and family member not covered. Let's suppose for the moment that the penalty is enforced (even though law limits how the IRS can enforce it).

By law, people can let their insurance lapse for three months with no penalty. Moreover, they can choose when the three month lapse occurs, and accelerate and/or delay medical procedures to fall outside the lapse interval, without concern for being denied when they restart insurance because of "pre-existing conditions."

Arguably, essentially everyone without employer health insurance would find it in his interest to purchase insurance for only 9 months per year, and cram all of their medical procedures into the nine months of their choosing. Medicaid already experiences this phenomenon (namely people enroll if and when they get sick), and Medicaid participants do not pay premiums. Exchange participants will be paying really money.

There is no free lunch in the aggregate, so insurance companies will have to increase their monthly premiums by 12/9 so that they collect the same annual revenue from participants. When this happens, do we say that health insurance costs went up by 33 percent? Or that they were constant?

If you chose the latter, then you are saying that health insurance costs should be measured by premiums per person, where "persons" denominator includes people who are not currently insured. But then the historical trend for health insurance costs should be measured the same way, and would be less steep due to the fact that uninsurance rates have increased over time.

Another problem with choosing the latter is that exchange participants (suckers?) who do not play this game -- they pay their premium all 12 months of the year -- will pay more for health insurance on both a monthly and an annual basis.

Both proponents and opponents of the ACA will want to know whether the new law fulfilled its promise of "bending the cost curve," but my guess is that an army of economists will be needed merely to do the measurement -- to measure health insurance costs before and after 1/1/2014 in ways that are comparable.


TOPICS: Business/Economy; Government; Health/Medicine
KEYWORDS: deathcare; healthcare; healthinsurance; insurance; nothealthcare; obamacare; romneycare

1 posted on 01/10/2013 6:59:28 AM PST by SeekAndFind
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To: SeekAndFind

Take some Advil before reading this article. It makes your head hurt.


2 posted on 01/10/2013 7:08:27 AM PST by rarestia (It's time to water the Tree of Liberty.)
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To: SeekAndFind
This is exactly why it is illegal for government to require you to purchase something. The cost for the mandated article goes sky high, and if you don't buy it they charge you anyway...

The promise, no child left behind insurance, lower cost for everyone.
What was delivered takes the poor’s insurance payments from them in fines that you have to pay because you can no longer afford the insurance you had before it was “improved”.

A Mafia “protection” scheme right out of Chicago.

3 posted on 01/10/2013 7:21:43 AM PST by American in Israel (A wise man's heart directs him to the right, but the foolish mans heart directs him toward the left.)
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To: American in Israel

All carefully engineered to have people out in the streets screaming for their Public Option by the time midterms roll around.


4 posted on 01/10/2013 7:51:35 AM PST by Buckeye McFrog
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To: rarestia
Take some Advil before reading this article. It makes your head hurt.

Not really -- it boils down to: people will find and exploit the loopholes in the law to their maximum benefit, and this will, in turn, force insurers to raise prices to make up for the loss in revenue necessary to cover costs, resulting in no net change for the shell-gamers but higher costs on those who actually follow the intent of the rules.

Which, is just a snapshot of human behavior to start with.

5 posted on 01/10/2013 7:59:22 AM PST by kevkrom (If a wise man has an argument with a foolish man, the fool only rages or laughs...)
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