Since 1990, culminating with Obamacare, progressives progressively destroyed health insurance. How? By switching definitions. Old definition: Insurance is fixed, smaller payments to protect yourself from future potential unforeseen catastrophic events. The potential future loss multiplied by the percentage probability of occurrence equals the cost of insurance. For example, a $1 million catastrophe exposure multiplied by a 1 percent probability equals $10,000 insurance cost. Insurance was a square deal, not a good or bad deal.
New Definition: Insurance is a means to spread some people’s known high medical costs onto everyone else.
This “cost redistribution” is achieved via three new mandates on all health insurance. 1. No pre-existing condition exclusions — even people with known health conditions can’t be denied coverage. 2. Community rating with limited exceptions, healthy people can’t pay less than unhealthy people. 3. All policies must cover all issues. These cost socialization mandates are what Obama means by “it’s better insurance.” But they’re also a three-pronged pitchfork prodding insurance costs skyward.
Insurance’s mathematical sense becomes nonsense. Pre-existing conditions are 100 percent probability — 100 percent multiplied by $1 million is $1 million. Forcing these three redistribution mandates into everyone’s insurance not only eventually doubles cost, it dooms health insurance to destruction. Insurance’s “square deal” becomes a bad deal. Anyone understanding financial math won’t buy insurance costing twice what the actuarial equation dictates, except the chronically sick. Because the healthy won’t voluntarily buy it, that’s precisely why Obamacare mandates everyone must buy insurance. Hence, Obamacare’s noncompliance penalties.
But Democrats who passed Obamacare (with zero Republican votes) failed grasping simple math. Even maximum penalties in 2014-2015 are far cheaper than mandate-stuffed Obamacare insurance, so many healthy people will simply opt out of Obamacare and pay penalties, some opting for limited-coverage, high-deductible policies that fail Obamacare’s requirements.
Others will avoid penalties entirely by using Obamacare’s 21 exemptions: Have you received eviction, utility shutoff or foreclosure notices; health insurance cancellation; experienced domestic violence, disaster, family death, increased care expenses for ill relatives, bankruptcy, unpaid medical bills or Medicaid rejection? Are you participating in a health care sharing ministry; or homeless, low-income, Indian, incarcerated or an illegal immigrant, etc.? (All these are allowable exemptions with minimal or no documentation.)
Healthy won't buy it
Precisely because Obamacare insurance is cost socialization, it only works if many young/healthy people pay to cover the high cost payouts of the old/sick. PolitiFacts proclaimed Obama’s “If you like your current insurance you can keep it” the Lie of the Year. Why? Low-priced existing policies without the mandates couldn’t be allowed to coexist alongside Obamacare, or healthy people wouldn’t voluntarily switch to higher-priced Obamacare.
Once the young/healthy do the math, realize their options and start abstaining, a rate death-spiral begins. Obamacare needs 38 percent of enrollees to be young, yet already young enrollment languishes 14 points below that. With fewer healthy paying in, to maintain Obamacare system solvency rates on the remaining insured will skyrocket. By 2016, when Obamacare penalties escalate to 2.5 percent of your income, Obamacare insurance rates will have escalated even faster, such that financial comparisons will still leave many financially savvy, healthy people opting out regardless of penalty or exemption.
The taxpayer-financed Obamacare low-income subsidies (averaging $5,290 each) only exacerbate problems. Total cost of $1.1 trillion will weigh increasingly heavily on our children’s economic future, as the rate death-spiral drives Obamacare insurance rates skyward. Seventy-five percent of Obamacare’s 20 new tax increases hit the middle-class heavily, yet still fall far short of paying the tab.
Prognosis? Obamacare is on three-year life support.