Many news stories have noted the importance of getting young, healthy people to sign up for insurance on the exchanges created by President Obama’s healthcare law. The Washington Post‘s Ezra Klein reported that the White House considers this the single most important factor in making the law work.
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Klein is a huge fan of the law. To his credit, he has also honestly reported on the disastrous rollout of the exchanges and HealthCare.gov. Like many other fans, he worries that the website problems will discourage the young and healthy from signing up.
That would be a disaster for the healthcare law.
If “adverse selection” leads to less healthy “risk pools,” it will drive up the cost of insurance dramatically, causing even fewer people to sign up and more insurance companies to opt out. Some describe this scenario as a “death spiral.” When you talk about the law in such policy terms, the solution seems to be fixing the website and getting a trendy marketing plan together that will entice the young. Get enough young people to sign up, the theory goes, and we can all live happily ever after.
But the Washington policy talk obscures the reality of what is going on. The millions of Americans losing their existing health insurance are not about adverse selection or risk pools. It’s about the government trying to force young people (and others) to buy more insurance than they need and pay more for it than they should. If a private company behaved in such a manner, the Obama administration would be conducting an investigation.
For most young people, the best insurance would cover only major medical expenses to protect them against the small risk of an unexpected hospitalization or dreaded diagnosis. It would also save them thousands of dollars in premium payments every year. Sure, those with major medical coverage have to pay for routine care out-of-pocket. But, except in rare circumstances, the premium savings would more than cover the costs. The rest of the savings could be used for education, a down payment on a house, or set aside for a rainy day.
Not every young person would be comfortable with such an approach. Some might prefer to pay more in premiums and less for routine care. That’s fine. Others might prefer a very low deductible and high premium while still others might head in the opposite direction. All are reasonable trade-offs to consider.
These are the kind of commonsense consumer choices that Americans make every single day. We recognize there are trade-offs and make rational decisions based upon what meets our needs at the time. We know, for example, that a Rolls Royce is a better car than a Ford. But when we consider the cost, all but a very few choose the Ford. It’s a better value and the money we save could be put to a better use.
In the same sense, an insurance policy that covers us every time we sneeze is “better” than a major medical plan, but for most of us, the less expensive insurance would be a better value. We could put the savings to good use. Unfortunately, the president’s healthcare law doesn’t allow us to do that.
© SCOTT RASMUSSEN
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