Obamacare was intended to be the first step to a government run national health insurance system. Barack Obama, Nancy Pelosi and Harry Reid, with all the Congressional Democrats following their lead in lock step like lemmings, foisted this government mandated and partially government run insurance monstrosity on the American people. The promise they made was that Obamacare would make health insurance more available and more affordable while allowing insureds to retain their current doctors and plans. It didn’t take the American people long to discover that these promises were lies. In spite of losing the House, the Senate and the Presidency at least in part due to the American people’s dissatisfaction with Obamacare, the Democrats still cling to it on the pretense that is has provided coverage to millions who were previously uninsured. Of course all of the increase in the number of insureds has come through the expansion of Medicaid which could have been done as a standalone piece of legislation without ever having needed to pass Obamacare.
For seven years the Republicans have been promising to repeal and replace Obamacare. Getting rid of it was a central plank in the party’s platform, a sacred promise made by candidate Trump to the American people, and a promise that President Trump has repeatedly made since being elected. So what went wrong? Obamacare was drafted by academics sitting in their ivory towers—persons who had never managed an insurance company or regulated one. Ryancare was drafted by lawyers who viewed the world through inside the Beltway tunnel vision. Having them draft a bill dealing with insurance made no more sense than having the typical airline passenger design a jet engine. Instead of repealing and replacing Obamacare, the legislation they proposed only tweaked it. The American people owe a debt of gratitude to the Republicans who had the courage and the foresight to oppose and help kill this bill.
So how should we go about getting rid of Obamacare? To start we need to remember the first principle of insurance: the spreading of risk. Let’s look at auto insurance for a moment. When an insurance company writes an automobile policy it doesn’t know if that customer will be involved in an auto accident. What it knows is that out of the total number of policies it writes some number of its policyholders will file claims. In order to make a profit an insurance company must receive in premiums from its policyholders more money than it pays out in claims and that it spends in processing claims and on all other expenses, such as marketing and underwriting. A well managed auto insurance company can be quite profitable. Think of how enamored Warren Buffett is with the performance of GEICO.
What about the folks who can’t get auto insurance because of their age or their driving history? With a handful of exceptions, auto insurance is mandatory in the United States, so how do those who cannot buy insurance in the voluntary market get insured? Every state has a mechanism by which they can obtain insurance. While the mechanism varies by state, the most common approach is to have an assigned insurance plan. Under this plan those who cannot obtain insurance voluntarily are assigned by the state insurance department to one of the insurance companies operating in that state, and the price they pay for their insurance is set by the state. The additional risk that these assigned drivers add is spread over the company’s entire book of business, and so the impact on the company’s profitability is minimal.
Now there is no reason why what works for auto insurance could not be applied to health insurance. You would start by getting buy-in from the people who currently regulate the auto insurance industry—the state insurance commissioners and their staffs. Once they were onboard, you repeal Obamacare and replace it with a state regulated assigned insurance mechanism for those who cannot buy health insurance in the voluntary market. The state insurance commissions, in conjunction with the state medical societies and private insurance companies, would design affordable health care plans that focus on preventative care. These plans would include coverage for those with preexisting conditions, and the inclusion of extended family plans would provide for adult children living at home, so the two provisions of Obamacare that President Trump has pledged to retain would remain. The cost savings would be immense.
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Since Medicaid is already managed by the states, it would even be possible to roll it into this program at a huge savings to both the states and the Federal government. At the same time as you repeal Obamacare you allow health insurers to compete across state lines and you could even allow for larger contributions to and greater flexibility in the use of health savings accounts, although this is an issue that strictly speaking should be dealt with as a part of tax reform. The end result would be that every American who desired health insurance would be able to obtain it through the private insurance system which would allow them to choose the medical providers and services they needed at affordable prices.
The original Obamacare bill was about 2,000 pages, and it is estimated that the Department of Health and Human Services has issued some 20,000 pages of regulations in order to implement its provisions. By comparison, the Northwest Ordinance, one of the most important pieces of legislation ever enacted, can be printed on two pages. A bill to repeal Obamacare and replace it with state managed assigned health insurance plans would fit on just a few pages. Sadly, such a simple straight forward approach to repealing and replacing Obamacare is not likely to see the light of day, and in the end a frustrated electorate will choose a Democrat controlled House, Senate and White House which will take Obamacare to its next logical step, a government run single payer national health insurance scheme. The American people will then have the same interminable delays in seeking and receiving medical services, and the same limitations on the types of services and procedures they can receive that are currently endured by Canadians, and Barack Obama will have had the last laugh.
Al Kaltman is a political science professor who teaches a leadership studies course at George Washington University. He is the author of Cigars, Whiskey and Winning: Leadership Lessons from General Ulysses S. Grant.
