Let the Individual Mandate Die

In May New Jersey imposed a health-insurance mandate requiring all residents to buy insurance or pay a penalty. More states will feel pressure to follow suit in the coming year as the federal mandate’s penalty disappears Jan. 1 and state legislatures reconvene, some with new Democratic majorities intent on “protecting” Obamacare. But conflicts with federal law will make state-level health-insurance mandates ineffective or unduly onerous, and governors and legislatures would do well to steer clear.

While states can require citizens to purchase health coverage, they will have trouble ensuring compliance. Federal law prohibits the Internal Revenue Service from disclosing tax-return data, except under limited circumstances. And there is no clear precedent allowing the IRS to disclose coverage data to verify compliance with state insurance requirements.

Accordingly, mandates enacted in New Jersey and the District of Columbia earlier this year created their own coverage-reporting regimes. But those likely conflict with the Employee Retirement Income Security Act, or ERISA, which explicitly pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” The point is to protect large employers who self-insure workers from 50 sets of conflicting state laws.

No employer has used ERISA to challenge Massachusetts’ 2006 individual mandate, which includes reporting requirements, but that doesn’t mean it’s legal. Last month a Brookings Institution paper conceded that “state requirements related to employer benefits like health coverage may be subject to legal challenge based on ERISA preemption.”

A 2016 Supreme Court ruling would bolster such a challenge. In Gobeille v. Liberty Mutual, the court struck down a Vermont law that required employers to submit health-care payment claims to a state database. The court said the law was pre-empted by ERISA.

Writing for a six-justice majority, Justice Anthony Kennedy noted the myriad reporting requirements under federal law. Vermont’s law required additional record-keeping. Justice Kennedy concluded that “differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”

Justice Kennedy’s opinion provides a how-to manual for employers to challenge state-level insurance mandates. A morass of state-imposed insurance mandates and reporting requirements would unnecessarily burden employers with costs and complexity. It cries out for pre-emptive relief.

Unfortunately, policy makers have ignored these concerns. Notes from the working group that recommended the District of Columbia’s individual mandate never mention the reporting burden or ERISA pre-emption. And in August the federal Centers for Medicare and Medicaid Services approved New Jersey’s waiver application that relied in part upon funding from that state’s new individual mandate, even though money from the difficult-to-enforce requirement may never materialize.

States already cannot require federal agencies to report coverage. This means their mandates won’t track the 2.3 million covered by the Indian Health Service, 9.3 million receiving health care from the Veterans Administration, 8.8 million disabled under age 65 who are enrolled in Medicare, 9.4 million military Tricare enrollees and 8.2 million federal employees and retirees.

If a successful ERISA challenge also exempts some of the 181 million with employer-based insurance from coverage-reporting requirements, state insurance mandates become farcical. States would have to choose between mandates that run on the “honor system”—thus likely rife with cheating—or taking so much time and energy to verify coverage that administration becomes prohibitively expensive.

States should take the hint and refrain from even considering their own coverage mandates. But if they don’t, smart employers should challenge the mandate’s reporting requirements. They’d likely win.

This post was originally published at The Wall Street Journal.

Are the Heritage Foundation’s Politics Betraying Its Policy?

When Ronald Reagan used the axiom “Trust but verify,” he meant conservatives should closely monitor organizations and individuals to ensure that their deeds comport with their words. This axiom should apply to a health-care plan that a group the Heritage Foundation leads will unveil this week. While the group’s website claims its plan would “restore a properly functioning market in the health care sector to lower costs,” Heritage’s own policy analysis suggests otherwise.

Specifically, the Heritage plan would in no way alter what Heritage research describes as the biggest drivers of Obamacare’s “seismic effects on insurance markets.” Nor does the Graham-Cassidy health care bill, the legislative basis for the new effort. In fact, a recent version of the bill further undermines the purported “flexibility” that Graham-Cassidy promises to states, making it even less consistent with the federal principles Heritage invokes in lauding the measure.

Pre-Existing Condition Rules Drive Premium Increases

The largest effect on premiums consists of a cluster of [Obamacare] insurance access requirements—specifically the guaranteed issue requirement and the prohibitions on medical underwriting and applying coverage exclusions for pre-existing medical conditions under any circumstances. This cluster of regulations collectively accounts for the largest share of premium increases.

The paper discusses at length how these provisions “appear to have had the greatest effect on premiums,” raising rates for the young and healthy to subsidize the sick. While Obamacare supporters hoped the individual mandate would compel enough healthy individuals to offset those costs, high numbers of people chose to pay the mandate tax or received exemptions from the tax.

“The net result was a constellation of rules that repelled relatively healthy people and attracted those who could reasonably expect their medical bills to exceed their premiums—which Obamacare’s individual mandate simply failed to counteract,” Heritage’s report says.

Rhetoric versus Reality on Graham-Cassidy

After analyzing how the pre-existing conditions provisions proved the prime driver of premium increases, the March Heritage paper claims Graham-Cassidy provides the solution, calling it “a conceptual framework for empowering states to repair or ameliorate much of the market dislocation resulting from Obamacare.”

Leaving all those regulatory requirements in place might sound good, but—just as the March Heritage paper noted—it causes major policy problems:

Insurance companies are required to sell ‘just-in-time’ policies even if people wait until they are sick to buy coverage. That’s just like the Obama plan. There is growing evidence that many are gaming the system by purchasing health insurance when they need surgery or other expensive medical care, then dropping it a few months later.

Those words were written in 2010 to describe the effects of Massachusetts’ health care law, but they apply just as equally to the Heritage plan, and the Graham-Cassidy bill, in 2018. Surprisingly, then, they came from another member of the group that is releasing the plan this week.

Despite these organizations’ own prior statements opposing these costly insurance requirements, the plan released by Heritage and others would leave them in place at the federal level, hamstringing states’ ability to manage their own insurance markets—and belying the supposed goal of devolving power away from Washington.

The Bill Is Getting Worse

Unfortunately, however, the revised draft takes major steps that would undermine states’ ability to create multiple risk pools. Language on page 31 would reduce the block grant allotment for states maintaining multiple risk pools, by a percentage not yet specified. Other new provisions on pages 44 and 45 of the revised draft would allow states to create multiple risk pools only if they follow a series of bureaucratic parameters—parameters that a future Democratic administration would likely use to quash any state’s attempt to establish or maintain multiple risk pools.

Not Flexible, Not Federalism

Even as the Graham-Cassidy bill moves further to the left, Heritage seems insistent on chasing it ever leftward. The bill never addressed what Heritage itself called the prime drivers of premium increases. Now a more recent version further erodes the little flexibility that earlier drafts gave to states.

As I wrote more than one year ago, Republicans can choose to leave the status quo intact on Obamacare’s major regulations, or they can choose to keep their promise to voters to repeal the law. But they cannot do both. It comes down to a binary choice that simple. And Heritage has chosen a path that would effectively break the promise of repeal.

This post was originally published at The Federalist.

A Vision of the Future on Health Care Access?

As has been pointed out by a Wall Street Journal editorial and other publications, the Massachusetts Medical Society released its annual survey of physician access yesterday – and the results show continued access problems following that state’s health care overhaul.  Waiting times increased for most specialties, and were reduced in only one (internal medicine).  For family practitioners, waiting times increased by an entire week (36 days in 2011 versus 29 days last year).  The report also notes that “the largest year-on-year changes recorded by this study date back to the initial implementation of [the] state health care reform law,” when waiting times to see an internist “increased by more than 50 percent” and waiting times to see an OB/GYN “also increased drastically.”  Also of interest: Access to physicians for patients without them remains limited in primary care fields – fewer than half of specialists in internal medicine (49%) and family medicine (46%) are accepting new clients.

This year’s report also analyzed acceptance of various government insurance products for the first time.  As might be expected, a sizable number of physicians do not accept Medicaid – only 62% of family physicians and 53% of internists accepted the Commonwealth’s Medicaid product.  Perhaps even more significant though is this finding:  In every medical specialty, the percentage of physicians who accepted Commonwealth Care (the subsidized insurance product sold through the Connector) was LOWER than the percentage of physicians who accepted Medicaid – and the percentage of physicians accepting Commonwealth Choice (the Connector’s unsubsidized insurance product) was even LOWER than the percentage who accepted Commonwealth Care.

One can reach several conclusions based on the survey results:

  • Massachusetts’ lack of primary care physicians mean the promise of lower emergency room costs as a result of greater insurance coverage have thus far proved illusory; even liberals like the New Republic’s Jonathan Cohn have admitted that the Massachusetts law “obviously hasn’t” reduced ER usage “and critics have every right to point that out.”
  • The physician shortage in Massachusetts echoes the concerns raised by Medicare actuary Rick Foster, who last year wrote that “the additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases,” meaning health “reform” could have significant inflationary effects.
  • Despite claims that the Connector offers “good value” plans, insurance policies offered through the Connector actually have WORSE access to physicians than even Medicaid patients receive – results that may not exactly reassure those likely to end up on state-based insurance Exchanges beginning in 2014.

One Year Later: STILL Bad for Young People

Today the Administration continues to sell its unpopular health care law to younger Americans, hoping they will see its benefits.  In reality however, young people stand to lose, not gain, from the 2700-page measure:

Higher Health Insurance Premiums.  The law states that insurance carriers cannot charge older individuals more than three times the premiums paid by younger applicants – meaning premiums for the young will likely rise so premiums for older populations can fall.  A Rand Corporation analysis found that premiums for individuals under age 35 could rise by 17% due to this one mandate, while other analyses have even higher estimated premium impacts.  While supporting initiatives (such as state-based high-risk pools) that would provide affordable coverage to those with pre-existing conditions, the very narrow age variations allowed function as a significant transfer of wealth from younger to older Americans—and by raising premiums for young and healthy individuals, may discourage them from buying insurance at all.

Penalties for Those Who Cannot Afford Coverage.  The law imposes penalties on individuals who cannot afford to purchase a “government-approved” policy – one that meets all the new federal mandates and regulations imposed in the legislation.  As candidate Obama pointed out during his presidential campaign, in Massachusetts, the one state with an individual mandate, “there are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were.  They don’t have health insurance and they’re paying a fine.”

Employer Mandate Will Hurt Women and Young Workers.  The law penalizes employers who do not provide “acceptable” coverage, forcing them to pay a “fair share” penalty of $2,000 per full-time employee.  Harvard Professor Kate Baicker’s analysis demonstrates that at least 5.5 million low-wage workers would be “at substantial risk of unemployment” due to new mandates on employers.  What’s more, women and young adults “face the highest risk of losing their jobs under employer mandates.”  The Congressional Budget Office has also confirmed that such mandates “could reduce the hiring of low-wage workers,” and lead to wage stagnation as compensation is diverted to comply with new federal mandates.  At a time when nearly one in four teens is unemployed, these harmful tax increases will hurt exactly the workers that the law intends to help.

Marriage Penalty.  The law bases health insurance subsidy thresholds on multiples of the federal poverty level, and because the poverty level for a two-person couple ($14,710) is less than twice the poverty standard for a single person ($10,890), couples who marry will see their eligibility for subsidies automatically decline when compared to two cohabiting individuals.  Many may view this policy as providing perverse incentives for couples not to marry.

Rising Debt a Fiscal Time Bomb for Future Generations.  At a time of record budget deficits, the health law spends $2.6 trillion in its first 10 years of full implementation.  Growing the debt problem by adding trillions more of federal spending will only increase the debt burden to be faced by future generations.

A Cautionary Tale on Government Controlling Costs

The Boston Globe reports this morning on the rollout by Massachusetts Governor Deval Patrick of a series of “reforms” intended to lower skyrocketing health costs within the Commonwealth.  Among the key takeaways – the legislation would give the Commonwealth “the authority to scrutinize insurers’ contracts with, and fees paid to, hospitals and doctors and consider whether those fees are appropriate before approving insurers’ requests for premium increases.”  In other words, under the proposal, government would micro-manage not just insurance companies’ practices, but the spending habits of thousands of doctors and hospitals as well.

It’s worth noting the sequence of events that led Massachusetts to this point – which provides a cautionary tale to those who believe the Patrick Administration’s latest plan will actually reduce costs:

  • In the 1990s, the Commonwealth (along with other states) enacted requirements requiring insurance companies to accept all applicants, regardless of health status.  This government regulation led many healthy Massachusetts residents to wait until they got sick to purchase insurance.  As a result, premiums skyrocketed.
  • Because the new insurance regulations quickly caused a market failure, Massachusetts legislators decided the solution to a government-imposed problem was…more government – specifically, a mandate that all residents purchase health insurance.  Unfortunately, data from multiple insurance companies show that many people are paying the tax associated with the mandate while healthy, only to obtain coverage and run up high health costs once becoming sick – placing more upward pressure on insurance premiums.  Moreover, the reforms passed in 2006 focused solely on expanding coverage, to the exclusion of cost control efforts – a further recipe for skyrocketing health expenses.
  • As costs continue to rise – and the Commonwealth is forced to hire private enforcers to police its controversial government-imposed insurance mandate – the Patrick Administration thinks the cost pressures created by the insurance regulations and mandates can be remedied by yet more government involvement, by regulating health insurers’ private contracts with doctors and hospitals.
  • And if the Patrick Administration’s proposals for new regulations don’t work, what will be the solution to them?  You guessed it – more government.  As one executive put it, if the new proposals don’t contain costs, “it’s likely we’ll see even bigger sticks coming our way,” imposed by government elites and bureaucrats.

The article admits that health costs are threatening to bankrupt the Commonwealth, and that the “reforms” of the past two decades if anything have increased, not decreased, those cost pressures.  At what point will Massachusetts learn that when it comes to containing costs, “government is not the solution to our problems – government IS the problem?”

Employers’ Choice: To Drop or Not to Drop?

Much has been made in recent days of Tennessee Governor Phil Bredesen’s Wall Street Journal op-ed suggesting that many employers will use the health care law’s passage as a reason to exit the group insurance market.  It’s a critically important issue, and not just because such a choice will determine whether or not millions of Americans will get to keep their current coverage.  If many employers decide to place their workers in Exchanges, receiving taxpayer-funded insurance subsidies, the federal budget deficit will necessarily skyrocket.

So it’s worth taking a few moments to analyze the claims made by health care law supporters as to why employers will continue to maintain coverage, and see the extent to which they have merit.

  1. The tax benefits of group coverage will keep workers in the employer-based system.

The tax benefits of group health insurance inure largely to the EMPLOYEE, not the EMPLOYER, due to the exclusion for employer-provided health coverage.  Employers can write off both salaries and health insurance contributions from corporate income taxes as a business expense – the income tax code is neutral toward the components of compensation (i.e., cash vs. benefits).  Granted, employers who provide salary increases instead of benefits will have to pay the employer’s share of FICA payroll taxes (from which health insurance benefits are exempt), but these are small by comparison – on a $10,000 family insurance premium, an employer pays $765 less in taxes than he would had he given the worker a $10,000 raise in wages.  It would be perfectly rational for employers to drop coverage and give their workers an offsetting increase in wages – knowing they may pay a bit more in FICA taxes in the short term – because by doing so, they will protect themselves from the liabilities associated with rising health care costs over the long term.  (Whether and how employers consider their workers’ preferences – including the tax benefits most employees gain for group health insurance – is something I’ll address below.)

  1. Employers will see savings as a result of the health care law that will encourage them to maintain coverage.

Tom Daschle made this argument in a BNA article Tuesday, citing a November 2009 Business Roundtable (BRT) report to claim that “employers offering health coverage to their workers could experience a savings of as much as $3,000 per person from the new law.”  Over and above the significant fact that the report was released BEFORE the enacted health care law was written – meaning it’s speculative for Daschle to claim the promised savings were actually achieved by the language – here’s what the operative paragraph of the BRT report stated:

If the cost trends of the past 10 years repeat, by 2019, employment-based spending on health care at large employers will be 166% higher than today on a per-employee basis.  This equates to an average of $28,530 per employee when employer subsidies, employee contributions, and employee out-of-pocket costs are combined.  We estimate that if enacted properly, the right legislative reforms could potentially reduce that trend line by more than $3,000 per employee, to $25,435.  If we are able to enact broader market reforms that eventually lower future cost increases to an average of 4% per year, we could potentially reduce average per-employee costs further to $23,151 per employee by 2019.

In other words, under the ideal scenario Daschle described, health insurance premiums would “only” more than double over the next decade, from $10,743 in 2009 (also cited in the BRT report) to $23,151 in 2019.  That’s not a savings of $3,000 – that’s an INCREASE of $13,000.  (It’s also far from the $2,500 per family reduction in premiums that candidate Obama promised.)  Such a rapid increase, coupled with new insurance options for employees, would give firms a strong incentive to drop their current plans.  After all, even under Daschle’s “ideal” scenario for cost-savings, in 2019 firms could pay the $2,000 per employee tax for not offering coverage, give their workers a $20,000 per year raise to offset the loss of their employer insurance policy, and STILL come out $1,151 per employee ahead.  Granted, most firms aren’t paying the full cost of workers’ premiums, particularly for family plans, but the same logic still applies.  If an employer promised you a $10,000 per year salary increase as a trade-off for accepting new Exchange coverage instead of your current policy – a realistic number, given the projected cost of family plans for most firms – how many workers wouldn’t take that deal?

  1. The individual mandate will increase demand for employer coverage.

There are several problems with this argument.  First, the low penalty of only $695 for not buying health coverage will likely encourage individuals to flout the mandate and purchase coverage only when they need it, just as carriers in Massachusetts found.  Second, if individuals decide to comply with the mandate – and it may not be a rational choice for many to do so – it’s not entirely clear that individuals will prefer group insurance to the federal Exchanges.  For instance, low-income individuals by definition will receive a small tax subsidy for buying coverage from their employer (because they’re in a lower tax bracket), but a large taxpayer-funded subsidy if their employer doesn’t offer coverage and they buy a policy through the Exchanges.  Thirdly, whether an employer offers coverage is ultimately a decision for the employer, and not the employee, to make.

  1. Massachusetts saw an increase in coverage as a result of its reforms.

Jonathan Gruber, among others, has made this argument.  Unfortunately, it’s hard to equate how employers will respond to a statewide initiative to their possible responses to a national reform effort.  When Massachusetts passed its reforms, national employers (e.g., Wal-Mart, General Motors, etc.) couldn’t drop their health plans ONLY in Massachusetts – they still needed to provide coverage for their workers in 49 other states.  But now, if they so choose, they can shed their employee health benefit obligations entirely.

It’s also worth noting two other important points.  First, the Massachusetts legislation included a more robust Exchange “firewall” than the federal law.  Under the Massachusetts plan, individuals with an offer of employer-sponsored coverage CANNOT utilize the Commonwealth Connector to buy unsubsidized plans using only their own money.  Conversely, the federal law includes no such prohibition – so if employees believe they can get a better deal by buying a plan with their own funds on the Exchange, they can and will do so.  This potential “leakage” from the employer system could encourage some firms to drop coverage entirely, particularly if the individuals migrating from employer plans to the Exchanges are their young, healthy employees (leaving them with an older, sicker, and costlier population).

Second, the federal initiative expanded taxpayer-funded insurance subsidies further up the income scale – Massachusetts subsidizes insurance for families with incomes under three times poverty, while the federal effort gives subsidies up to 400% FPL.  According to the Census Bureau, in 2007 there were 121.5 million non-elderly Americans (46.4%) in households with incomes under three times poverty, but 158.2 million non-elderly Americans (60.4%) in households with incomes under four times poverty.  In other words, nearly 37 million more Americans will be eligible for income-based subsidies under the federal statute than if the Massachusetts law were extended nationwide.  That fact – more than three in five Americans will qualify for taxpayer-funded health subsidies based on their income – will only encourage employers to drop health benefits, because the majority of their workers can get new federally-funded insurance instead.

  1. Employers will not anger their workers by dropping health benefits.

There are several responses to this criticism.  First, as explained above, many firms will save so much money by dropping their coverage that they can afford to give their workers an offsetting pay raise to “sweeten the pill” of losing their current coverage.  Former CBO Director Doug Holtz-Eakin has previously run the math about the millions of workers who would benefit – as would their employers – if firms dropped coverage and raised salaries instead, with workers relying on federal insurance subsidies in the Exchanges.

Second, employee goodwill only goes so far when compared to basic economic realities.  If a struggling firm faces a choice between dropping coverage and laying off workers – or closing entirely – it will be much more likely to do the former than the latter.  Laying off workers or other efforts to reduce a firm’s costs could reduce its productivity and future earnings potential.  But particularly once workers have an acceptable alternative source of insurance coverage through the taxpayer-funded subsidies on the Exchanges, dropping coverage may seem like the best possible way for a firm facing financial difficulties to streamline its expenditure base.

And once one company in an industry drops coverage, others will be forced to follow suit in order to remain competitive – witness what happened with pensions and health benefits in the auto, steel, and airline industries (to name but a few).  As one consultant put it in an Associated Press story, “What we are hearing in our meetings is, ‘We don’t want to be the first one to drop benefits, but we would be the fast second.’  We are hearing that a lot.”

Long story short: Most of the arguments used to suggest employers will not drop coverage under the health law’s new order cannot withstand rigorous scrutiny.  Even some Democrats appear to admit this reality: A former staffer for Finance Committee Chairman Baucus acknowledged (subscription required) that the law could push industry toward a “tipping point scenario, where some large employers in particular sectors make a decision to drop, which then makes it acceptable for their competitors to drop coverage as well.”  Unfortunately, such a scenario would also point the federal budget deficit well past the tipping point – where skyrocketing expenditures on new health care entitlements, coupled with soaring health care costs, overwhelm future generations in an avalanche of debt.

More Lessons from Massachusetts

Yesterday the Robert Wood Johnson Foundation released a policy brief providing additional information about the remaining uninsured in Massachusetts after the enactment of that state’s health insurance expansion.  Two particular items of note:

  • First, the study admits that the uninsured “were more likely than those with insurance coverage to be male, young, and single;” elsewhere it points out that “young adults continue to represent a disproportionate share of the uninsured in Massachusetts.”  The report confirms earlier findings that individuals in Massachusetts were paying the tax penalty when healthy, only to obtain insurance when they got sick and needed coverage – thus raising premiums for all residents.  Because the mandate tax penalty under the Massachusetts law is actually higher than the new federal statute (at least $1,068 in Massachusetts versus only $695 when the federal law is fully phased-in), “young invincibles” will have an even greater incentive to drop coverage under the federal mandate.
  • Second, the study finds that “at least 42 percent of uninsured adults in Massachusetts were potentially eligible for MassHealth [i.e., Medicaid] or Commonwealth Care [i.e., government-subsidized health insurance] in 2008.”  While some may question whether those who can obtain taxpayer-subsidized health coverage at any time are truly uninsured, it’s important to note this finding in the context of the spiraling costs to the Commonwealth’s taxpayers for the existing coverage expansions.  If costs to taxpayers are rising to the point that Massachusetts has contemplated dropping coverage for some individuals, how much greater will the Commonwealth’s fiscal burden be if all the uninsured citizens who are actually eligible for taxpayer-funded coverage enroll in government programs?  Just as important, how great will the unfunded mandates on all states be if the same scenario occurs as a result of the federal law?

In Town Halls, Democrats Admit Obama’s Broken Promises

The start of this year’s August town hall season has brought important developments on the health care front, as comments at Democrat-hosted events are illustrating how the law falls short of Barack Obama’s campaign promises.  For instance, at a meeting yesterday in his district, Tom Perriello admitted that while rising health care costs were the reason to pass the overhaul, “the reforms [in the law] will not, however, start to lower premiums until after all the reforms are implemented” – i.e., after 2014.  But candidate Obama promised that he would “save a typical family up to $2,500 on premiums” – and do so “by the end of my first term as President.”

So not only will premiums not fall as promised, they will continue to rise – in fact, the Congressional Budget Office estimates that individual health insurance premiums will rise by $2,100 MORE than would have occurred had the law not been enacted.  And individuals will be forced to buy this more expensive insurance – another broken promise from the campaign, when candidate Obama pointed out that in Massachusetts, the one state with an individual mandate, “there are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were.  They don’t have health insurance and they’re paying a fine.”

Likewise, at a Ted Deutch town hall event in Florida, a representative from Families USA (invited at the Congressman’s request) talked about Medicare Advantage, and “predicted some plans will shut down” as a result of the law – yet another violation of candidate Obama’s pledge that “you will not have to change plans.”

Thus far the Democrat town halls have educated constituents that premiums will continue to go up, those who can’t afford these skyrocketing costs will be taxed if they don’t pay, and millions of seniors will lose the health coverage they have – and like.  Some may wonder: How is this “reform” – and if these are the consequences of the health care law, why did Democrats vote for it in the first place?

Cautionary Lessons from Massachusetts

Yesterday’s Boston Globe had a detailed story about how “the relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead.”  Brokers report that skyrocketing costs – Massachusetts insurance premiums are the highest in the nation – have prompted businesses to pay the $295 per employee fee to drop coverage, “because they know their people can go to Commonwealth Care” and receive taxpayer-subsidized policies.  Of course, as the article also points out, this trend also significantly increases state costs, as more people move from coverage funded by employers to policies subsidized by taxpayers.  This trend, coupled with the fact that small businesses with fewer than 50 workers are exempt from the federal “fair share” tax (as opposed to Massachusetts’ $295 per employee fee for firms with more than 11 workers), indicates that many employers nationwide could drop coverage shortly after 2014, when the federal overhaul takes full effect.  Such a scenario would likely result in skyrocketing costs to the federal government, representing yet another troubling consequence of Democrats’ nationwide health “reform” – one that was entirely predictable, and predicted prior to passage by Republicans.

In the same vein, Robert Samuelson’s op-ed column in the Post this morning also compares the Massachusetts plan to the national health care law jammed through by Democrats earlier this year.  While the article notes that insurance coverage increased within the Commonwealth, emergency room treatments remain stubbornly high – indicating that expanded coverage has not helped improve health outcomes (perhaps due to high waiting times to see physicians).  Costs continue to rise, resulting in Gov. Patrick’s showdown with insurance carriers over rate increases earlier this year.  And, just as the Medicare actuaries predicted the federal overhaul will raise costs, Samuelson predicts that weak cost containment in the federal overhaul means the Commonwealth’s controversies represent the future of the nation’s health care system at large:

Obama dodged the tough issues in favor of grandstanding.  Imitating Patrick, he’s already denouncing insurers’ rates, as if that would solve the spending problem.  What’s occurring in Massachusetts is the plausible future: Unchecked health spending shapes government priorities and inflates budget deficits and taxes, with small health gains.  And they call this “reform?”

I Thought the Bill Was Supposed to LOWER Premiums…

The New York Times has a story out today regarding Secretary Sebelius’ meeting yesterday with insurance industry executives, at which she asserted that insurance rates were at a “crisis point” and that “more and more people are dropping coverage because of the increase in prices.”  She also said that “the worst of all worlds is to have more Americans driven out of the market [by higher premiums] in the next couple of years,” before the coverage expansions take effect in 2014.

The Secretary’s comments are a startling admission from an Administration elected on a promise to cut the average family’s premiums by $2,500 per year “by the end of my first term as President.”  But it shouldn’t come as a shock to anyone who’s read the Congressional Budget Office report noting that the health care law would RAISE premiums in the individual market by $2,100 per year.  And the idea of people dropping coverage because of higher premiums will only be encouraged by a law that encourages healthy people to drop coverage, pay a tax penalty, and buy insurance only when they need it, as multiple studies suggest is occurring as a result of Massachusetts’ health care law.

So the real question to the Secretary is: Instead of turning insurance companies into a political punching bag, why won’t the Administration own up to the fact that, rather than helping lower premiums, as the President repeatedly promised, their government takeover of health care is making the problem worse?