Wintery Knight

…integrating Christian faith and knowledge in the public square

A simple introduction to Obamacare

Here’s a helpful article from the UK Daily Mail that Dina sent me that explains the basics for people who are wondering what all the fuss is about. The author Diana Furchtgott-Roth has a B.A. and M.A. in economics, the latter from Oxford University.

Excerpt:

Although the Court has upheld PPACA, the law as currently structured is unworkable. This is because the penalty for not signing up for insurance, which is now termed a tax, $750 a year, is too small relative to the cost of health care coverage, about $5,500 a year.

Since insurance companies are required to take all applicants, healthy people, especially the young, will pay the tax rather than buy the insurance. This makes the pool of insured individuals sicker and more costly, on average, and their premiums will be higher. With higher premiums, more people will choose to pay the tax, and a downward spiral will unfold.

Unless Congress raises the tax to the level of premiums, the system will have to be replaced with a public option.

[...] It is clear that PPACA has severe economic costs, and is at least partially responsible for the slow economic recovery, and needs to be replaced.

PPACA raises employment costs by requiring employers to offer qualifying insurance coverage or pay a penalty—now a tax.  Because this requirement will apply, starting in 2014, to firms with more than 49 full time employees, it will discourage the hiring of full-time workers, especially low-wage hands whose work can more easily be divided among part-timers. Firms with over 49 workers will have to pay $2,000 a year for each employee without qualifying coverage.  Expanding to 50 workers would, in 2014, cost a firm $40,000 a year (the first 30 workers are exempt).

PPACA encourages employers to substitute part-time for full-time workers to avoid the tax. A firm with 60 employees would pay a tax of $60,000 a year if it did not have qualifying health coverage. But if it put 11 workers on part-time, and hired another 11 part-timers, it would not owe a tax, because it would have 49 full-timers. The full-timers who become part-timers and lose salary and benefits would be worse off.

PPACA raises health insurance costs by requiring an overly-generous plan. In order to be counted as a ‘qualified benefit plan’ and be able to sell health insurance in the exchange, an underwriter must cover routine health care—such as check-ups, and contraceptives—without copayment. It must also cover maternity care, mental health and substance abuse.

Unfortunately, plans that encourage shopping around, such as catastrophic plans with large deductibles combined with health savings accounts, where people can save tax-free for medical care, are prohibited by PPACA for Americans ages 30 and above.

A health insurance system needs to be accessible, portable, and inexpensive, just like other forms of insurance.

[...]The same should be true of health insurance. Those who can’t afford it should be offered refundable tax credits, or vouchers, to purchase it themselves, so they can have the same choice of doctors and services as other Americans.

Just as in other forms of insurance, America can lower costs by reducing unnecessary regulation, increasing competition and patient choice. Patients should decide what type of coverage meets their needs, not be told what they must purchase by the federal government.

For example, if some people want their children to be on their insurance plan until age 26, or age 28, or age 30, they should be able to purchase plans that cover their children, at a price. Others who do not have children, or who do not want their children on their plans, should not have to pay the costs.

How would such a system operate?

Congress could give all Americans tax credits for buying health insurance; allow plans to compete over state lines; and set up state risk pools to insure those with uninsurable conditions.

What an excellent article. Her suggestions are also good, and the Republicans have offered a plan to achieve those goals: Paul Ryan’s health care plan.

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