Over at National Review, Veronique de Rugy highlights a recent Wall Street Journal article which brings home yet again the law of unintended consequences. (Assuming that the consequences of Obamacare are “unintended” based on the Pelosi theory of needing to pass the bill to find out what’s in it.) The short version of the analysis – and I know this will come as a massive shock to many of you – shows that employers will flock to lower cost, bare bones medical plans to avoid the increased costs and mandates of Obamacare, turning implementation into even more of “a train wreck”. Yes… yes… I know. Who could possibly have seen this coming?
Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.
Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.
The explanation here isn’t exactly long division. As employers seek to obtain plans which will meet the new mandate without busting their budgets, they will bring on bare bones, low premium plans which qualify. Younger workers, particularly those who are healthy and don’t have families yet, will flock to those options to save money. This means that the more expansive plans which offer full coverage will essentially be flooded with those who are ill, worried about their health, have dependents with high medical costs or who have many children. With fewer healthy, low cost employees in the system, per capita costs rise and those costs are passed on to the employer and then to the employees.
And yet, when the Wall Street Journal asked some of the key planners of Obamacare, they seemed mystified that this might happen.
“We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” said Robert Kocher, a former White House health adviser who helped shepherd the law. “Our expectation was that employers would offer high quality insurance.”
Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.
That’s the funny thing about a giant ball of string like the United States economy. When you decide to yank really hard on a loose end in a system which was essentially stabilized under its own momentum, you just never know what’s going to happen. Unless, of course, you happened to have listened to the millions of people warning you before you yanked on it.