A caller to my radio show last week had a really good analogy for insurance.
He said that we should imagine an insurance company as a bucket. The premiums we pay for coverage is water flowing into the bucket. In the bottom of the bucket, though, are holes which represent health care the insurance company is obligated to pay for. The problem we’re having is finding a balance between the water pouring into the bucket and the water dripping out of the bottom.
The problem is that the government is controlling both sides. In the past, and under Obamacare particularly, the government has not only restricted how much “water” can flow into the bucket but also punched more holes in the bottom by creating all sorts of mandates insurers must cover. What I’m talking about are policies like covering “children” until they’re 26 years old or “community ratings” which require insurance companies to charge the same price to everyone in a given region regardless of things which impact the cost of their health care.
Like age. Or pre-existing conditions.
Which brings us to the health care bill passed by the House last week. It contains four major reforms:
- Repeals the individual mandate
- Repeals the employer mandate
- Repeals the essential health benefits mandate
- Repeals community ratings
For insurance companies it’s a mixed bag. On one hand they’re losing a legal mandate for people and/or their employers to buy their product. On the other hand, they’re regaining some ability to price coverage based on actual costs and not political idealism.
Naturally this has caused the left to flip out and accuse Republicans of wanting to kill people and deny coverage to rape victims and stuff.
Former state lawmaker Ben Hanson has a letter to the editor in the Forum today calling Rep. Kevin Cramer’s vote for these reforms “appalling.” Other reactions from the left were even less nuanced:
House Republicans vote to sentence millions of Americans to death https://t.co/nXH5jnnoUH
— Daily Kos (@dailykos) May 4, 2017
It’s literally genocide, you guys.
But partisan hyperventilating aside, the health insurance policy problem we’re facing is the reality of that bucket my caller was talking about. Governor Doug Burgum told me last week that he doesn’t believe the House health care bill will become law. I agree, but we’ve got to do something.
It would be nice if everyone could get away with not paying for health insurance until they’re sick, or pay the same premiums whether they’re a 65 year old smoker or a 20 year old vegan, but insurance doesn’t work that way. It can’t work that way. You don’t have to take my word for it. Insurance companies are abandoning Obamacare because that policy, rammed through Congress unilaterally by a Democratic majority, fails the math test.
Our friends on the left are making an argument about health insurance which is something akin to those magic weight loss commercials which claim that you can get skinny and healthy without dieting and exercising. People buy in because they desperately want it to be true. Heck, I’m a big fat fatty, and I’d love if it were true.
But it’s not true.
You can’t get skinny and healthy just by taking a pill, and you can’t have a working health insurance market without price signals.
This has to be corrected, and unfortunately the correction will have to happen over protests and tantrums from the children who think we can all live in a political fantasy world where things like price signals don’t matter.