The left has two ideas to overcome the adverse selection death spiral and create self-sustaining exchanges. Reinhardt’s suggestion is to embrace the Swiss model, which involves imposing very stiff penalties on insurance scofflaws and then enforcing them harshly by garnishing wages. The other idea is creating a public option or a non-profit government-run insurance plan that would compete with the private underwriters on the exchanges and bring down prices.
These ideas are draconian. They are also politically unfeasible — and ultimately self defeating. Raising the penalty won’t happen without a bruising fight. Given that the Supreme Court ruled that the penalty was really a tax, any hike must be approved by Congress. That’ll be an uphill task even if Democrats control one or both chambers. Good luck with that.
The public option, meanwhile, would have the added problem of not even working conceptually. Why? Because private insurers can’t compete with an entity that has the power and backing of the almighty federal government behind it. So, odds are, they won’t lower premiums. They’ll just sprint even faster to the exits, effectively leaving the public option as the only option.
This would be tantamount to creating a single-payer system — a government-run monopoly. And the only thing worse than a private monopoly is a state monopoly.
Join the conversation as a VIP Member