Together, the individual mandate and the preexisting-coverage rule make up the basic policy architecture of Obamacare. There isn’t a feasible way to have the popular preexisting-conditions coverage without the unpopular mandate. In fact, in order to make the system work, we would need to put some more teeth into that mandate: Because the penalties associated with it are very mild, many people, disproportionately young and healthy, prefer to pay the fine than pay a great deal more for insurance. Hence, the pool of newly insured people under Obamacare has been much sicker than insurance companies had expected, which has them squealing. And more than that: It has them pulling out of ACA exchanges and markets around the country, leaving consumers with fewer choices and much higher premiums than they had expected.
If you want to keep the preexisting-coverage rule — and Republicans say they do — then you are going to end up with Obamacare, or at least a version of it. It might be a slightly better or slightly worse version, but that is what you will have.
There are a few ideas for finessing that problem away, such as creating a series of “high-risk pools” or a single federal high-risk pool for sick people seeking health insurance. What this means is that the sick people without insurance who want it would go into a separate insurance pool full of other people likely to require lots of expensive medical care. Naturally, the premiums in this market would be much higher than in the regular market, meaning that state governments and the federal government would be expected to subsidize them heavily, lest sick people be entirely priced out of the market and we’re right back where we started. But this creates the same moral hazard as the familiar Obamacare system: Why not just wait until you are sick to buy insurance if government is picking up the economic penalty for being in the high-risk pool?
The way to cut this Gordian knot is to treat insurance like insurance.
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