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How Obama Stopped Worrying and Learned to Love Free Market Health Insurance Principles


Well, “love” is probably an exaggeration, but as Obamacare turns four President Obama and his enablers have uncharacteristically been defending several principles that conservative health policy advocates have been promoting for years.  It’s just one of many ways in which Obamacare has morphed into something completely different than its creators envisioned.

High-deductible coverage — Let’s start with that issue of “substandard” health insurance coverage.  For two decades Democrats have criticized high-deductible policies as junk insurance.  The only quality coverage—preferably from the government—exposed individuals to little or no out-of-pocket costs.  That same rationale was behind Obama’s demand for no copays on preventive care and contraceptives.

In the early 1990s many Democrats supported high deductibles and Medical Savings Accounts (now Health Savings Accounts). But once Republicans embraced high deductibles and MSA plans, Democrats decided they had to oppose both of them.

But it turns out that a high percentage of people getting coverage through Obamacare exchanges—when they can get the website to work—are buying … extremely high deductibles.

Last December the Wall Street Journal, citing a new HealthPocket, Inc., study, reported, “The average individual deductible for what is called a bronze plan on the exchange—the lowest-priced coverage—is $5,081 a year.”  That’s “42% higher than the average deductible of $3,589 for an individually purchased plan in 2013.”

There are numerous reports that people are choosing deductibles of $6,250 per individual, or $12,500 for a family—and the whole deductible has to be met before Obamacare pays a dime—because most of the other options are too expensive.

Had Republicans proposed something similar Democrats would have hooted them out of the room, claiming that only cold-hearted shills for big insurance companies and their profits would even suggest such a high deductible.  And yet, that’s exactly what Obama claims it’s “good insurance.”

Conservatives and Republicans embraced high deductibles and HSAs for economic reasons: They encourage people to be value-conscious health care shoppers, which tends to bend the health care cost curve down.  That’s why employers and individuals have been gradually shifting to HSA plans for a decade.

But here’s the irony: If Obamacare survives the “repeal and replace” efforts and people continue to buy the high-deductible plans because that’s their least expensive option, Obamacare will achieve—albeit unintentionally—something conservatives have been recommending for years.

Employer caps — When presidential candidate John McCain proposed eliminating the employee tax break for health insurance and provide everyone with a refundable tax credit to buy coverage, Obama condescendingly ridiculed the suggestion as being the first time employer-provided health insurance would be taxed.

So what does Obamacare do?  Why, it imposes the first tax on employer-provided health coverage, of course.  It’s referred to as the “Cadillac tax” because it taxes very expensive health coverage.  If a company spends more than $10,200 for an individual or $27,500 for a family, the employer must pay a 40 percent excise tax on the amount above that threshold (starting in 2018).  And while $27,500 may sound like a lot (and it is), a small company with older employees could easily be paying that much or more for basic family coverage.

The result of this new tax, as Bloomberg recently reported, is that employers are—you guessed it—raising deductibles and reducing coverage.

Former Texas Senator Phil Gramm was one of the first to propose limiting the tax break for employer-provided coverage back in the 1990s, but he backed off when liberals made it clear they were going to attack him for proposing what could be considered a tax increase—similar to the way Obama attacked McCain.

Gramm was trying to insert some economic discipline into health care.  He knew that the vast majority of employers and employees would adjust their coverage over time in order to stay under the tax-break threshold, which would have reduced health care spending.  But that’s not why Democrats included the tax; they simply needed new revenue so they could (ludicrously) claim that Obamacare was “paid for.”

Employer-provided coverage — Which takes us to the last point.  Obamacare promoter Ezekiel Emanuel has mentioned in his new book that the health care law could phase out employer-based health insurance.  And he’s right.

The law allows employers to provide a health insurance subsidy and let their employees go into either an Obamacare exchange—assuming it works—or a private sector exchange.  That option makes it easier for employers to get out of providing and managing health insurance; they simply provide their employees with some financial help to pay for their exchange-based coverage.

For decades conservatives have recognized the problems created by employer-provided coverage and proposed various ways to sever that connection.  But Democrats and unions would immediately accuse conservatives of trying to destroy employer-based coverage.  Along comes Obama and he pushes through a law that—again, unintentionally—could do exactly what he and other liberals accused conservatives of trying to do.

After years of pontificating about what was wrong with health insurance, Obamacare could eventually incorporate the very elements Obama was trying to fight in health care reform: high-deductible consumer driven plans, with a limited tax break and policies owned by the individual.  He tried to eliminate consumer driven health plans, and he just might actually provide them with their biggest boost yet.