The Paradox of Private Health Insurance.

Why, in a supposedly free market, do health insurance companies have to be forced to insure people?


Petr Swedock

3 years ago | 4 min read

It is a simple question of supply and demand: Any honest economist will tell you that basic free market theory says that if there is a demand for a service, somebody will supply it.

How then to explain the millions of people who want to pay for health insurance, but can not do so with the government forcing the insurers to accept them? How to explain the so-called protectors of the free market who want to allow insurers to continue to be able to deny coverage?

Mitt Romney, the Republican nominee for President in 2012 and presently the junior Senator from Utah, was once the Governor of the CommonWealth of Massachusetts. In 2006, as Governor of the Commonwealth, Romney signed a comprehensive health care bill into law.

One of the signature features of the Romney health care plan was the so-called ‘individual mandate,’ a state regulation stipulating that everybody had to sign up for health insurance. If they did not, they would have to pay a fine. In concert with the ‘individual mandate’ the Massachusetts legislature required that the health insurance companies must accept everybody: Everybody must have insurance and no insurer can deny somebody coverage. To achieve this the legislature forbade insurers from denying care on the basis of a ‘pre-existing condition.’

Recognizing some of the difficulties inherent to this scheme, the Massachusetts legislature ponied up subsidies for some and used the existing Medicare/Medicaid to provide subsidies to others.

In Massachusetts, prior to the implementation of the law, there were many people without health care. Of these many only a very small fraction, mostly young adults, were those who deliberately did not want to spend money on health insurance. The much larger remainder were people who very much did want to purchase health care but who were, at the time, denied coverage by the health insurance providers themselves. The law, in effect, forced people to buy insurance and forced insurers to sell insurance to these people.

The Massachusetts law, it seems, recognized and accepted the complete failure of free market economics even as it simultaneously required and forced the implementation of free market mechanisms to amend this failure. If a foolish consistency is the hobgoblin of little minds what, then, are we to say about such a dramatic inconsistency?

In 2010 the Democratic controlled House and Senate passed the Affordable Care Act — more commonly known as Obamacare — a fairly straightforward federal version of the Massachusetts law. (After the popularity of the term ‘Obamacare’ — a term which Obama himself embraced — the Mass law was retro-actively labelled ‘Romneycare.’) The federal law included the ‘individual mandate.’ It included the provision that insurers could not deny care: Just like in Massachusetts, the Congress forbade the denial of care based upon a ‘pre-existing condition.’ The law contained much the same in the way of subsidies and much the same in the way of economic dogma: failures of the free market were to be addressed with… free market solutions, even if those solutions had to be regulated into existence.

Of course, prior to the threat of its actual implementation, many Republicans initially expressed support for the ‘individual mandate’ only to discover an eleventh hour objection to it on Constitutional grounds. While the law passed the House and Senate in 2010, many conservatives continued the battle, taking the case to the Supreme Court. A now famous eleventh hour about-face by Chief Justice John Roberts, in 2012, swung the vote in favor of upholding the law: the decision stated that any fine imposed upon individuals who did not purchase health care was insuperable from a tax and, therefore, entirely and reasonably Constitutional; the individual mandate held.

Why do Republicans and Conservatives, now, object to the ‘individual mandate?’

Republicans and Conservatives found that the elimation of care denial based because of pre-existing conditions was — not to put too fine a point upon it — exceedingly popular. People, across the board, loved the very idea that care could not, and would not, be denied based upon a ‘pre-existing condition.’ Even Ted Cruz would not come out against the idea. It’s not like they could challenge that idea.

What to do? If supply was forced against the backdrop of ‘pre-existing conditions’ and demand fueled by both a mandate and a subsidy, then either the subsidy or the mandate had to be attacked. Well, even Republicans may have found it too far beyond the pale to oppose a subsidy — free money is, after all, free money — and so they choose to attack the mandate. Limit the demand, the thinking goes, and insurers won’t have to supply. However, once Chief Justice Roberts legitimized the actual mandate, what could Republicans do?

They waited until they controlled the Congress and the Presidency.

Once Donald Trump was in the White House the Republican Congress, unable to wholly eliminate the fine that was at the heart of the individual mandate, simply reduced the fine to zero. Technically, if you don’t purchase health insurance you still have to pay a fine, only now that fine is a big fat zilch. Nothing. Nada. Bupkiss.

Once the Congress did this, and President Trump signed the law, the State of Texas (backed by 20 other states) again sued in court on the grounds that the the mandate was inoperable. How’s that for inconsistency? It’s the reverse of the old Pottery Barn rule: they deliberately broke it so you can’t buy it.

Further, Texas argued, once one component of ‘Obamacare’ is declared null-n-void, then under the legal doctrine of severability, all the components must fall.

And that’s where we are now.

This article was originally published by Petr Swedock on medium.


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Petr Swedock

A 50-ish blend of the sacred and the profane uneasily co-existing in an ever more compromised frame. Celebrating no-shave November since September of 1989.







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