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Exchanges Will Raise U.S. Health-Care Costs
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Issue
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| Contributor | Imperator |
| Last Edited | Imperator Oct 08, 2013 06:39am |
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| Category | Analysis |
| Author | David Goldhill |
| News Date | Tuesday, October 8, 2013 12:00:00 PM UTC0:0 |
| Description | Ignore the inevitable startup glitches. The new health-insurance exchanges will work just fine -- in the sense that all government health-care programs work: Many people will ultimately become dependent on them for coverage. That won’t mean the exchanges have fulfilled their promise, however.
Forget the superficial comparisons to a commodity exchange, an online retailer or even a bulletin board. The health exchanges won’t resemble any other marketplace. Over time, rather than encourage insurance providers to offer ever more attractive and affordable policies, the exchanges are poised to push up the cost not only of insurance but also of health care itself. That means, if the history of U.S. health-care policy is any guide, the exchanges’ very “success” will have the effect of limiting access to care for the 30 million people who are estimated to remain uninsured.
Why are things set to go so badly? Because the architects of the health-care exchanges have relied on three crucial assumptions, all of which are probably wrong.
First, they have assumed that if insurers are prevented from competing on benefit design or on underwriting, they will compete on price. But why should they compete at all?
Limited Competition
The exchanges embody what seems like a simple trade: In return for many new customers, insurers accept broad restrictions on their freedom to design and market policies. The biggest requirement is that they agree to insure at the same policy price any and all customers, regardless of their health (with only small formulaic adjustments for age and smoking). From a consumer point of view, that sounds great, and indeed it’s one of the most popular elements of the Affordable Care Act. But from the insurer’s perspective, it courts disaster. With too many sick or high-risk people in its pool an insurer can lose money. So the insurer’s smartest approach is to set premiums high enough to make a profit even if it winds up with a lot o |
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