The Bronze Age

[This post is based on what I think I know about ObamaCare. It doesn’t have links to back up my understanding because I’ve picked up and integrated this understanding from lots and lots of reading over the past month (and previously) and I can’t easily find where I read what. I may be wrong about some or all of my understanding and if so, I hope someone lets me know. I can say I’ve read everything I claim to know somewhere; however, part of the problem with ObamaCare is that even people who should know how it works and/or who claim to know how it works often seem not to. So take everything in here with a large grain of salt.]

Marc Thiessen is writing about those who are currently insured seeing their policies cancelled due to ObamaCare. He agrees with me that the penalties, at least in 2014, are too weak to force “a healthy person who does not think they need insurance” to buy a policy. He then says (emphasis mine):

So the administration needed some way to force currently insured healthy people into the exchanges. How serendipitous, then, that millions of mostly healthy people are suddenly seeing their health plans cancelled. If they cannot afford the skyrocketing prices to keep similar coverage, they have no choice but to join the exchanges. The result? A massive involuntary transfer of Americans out of private health insurance they were happy with into Obamacare plans.

I don’t think that bolded claim is correct; people whose insurance is being cancelled have other choices. They aren’t good choices but they may be better than the exchanges.

First, of course, they can elect to go without health insurance. I don’t imagine I would ever do so but for some people it may make sense. As T99 points out:

In the past, I always defined "medical catastrophe" as expensive medical treatments that would be needed for years and years, possibly for the rest of our lives, which might well be decades.  Now, a medical catastrophe is only what we may be faced with for a year of treatment, after which we can sign back up, assuming Obamacare is not repealed--and when are entitlements ever repealed?

She also talks about the options of medical tourism and of simply refusing very expensive medical treatment. Forgoing health insurance is not a path I would take but a possibility.

The second choice other than the exchanges is to buy health insurance directly from an insurance company, without going through the exchanges. With one possible exception (which I discuss next), the prices will be the same as buying through the exchanges. If someone is eligible for a subsidy, he cannot get it if he buys direct but if not, there’s no advantage to putting all that personal information into a insecure government data base - assuming you can even get it in there. Financially, for a non-subsidizable person it makes no difference to the individual or, as far as I can tell, to the insurance company if he buys direct: the premiums are the same and the direct buyers go into the same risk pool as the exchange buyers.

The third choice is the most intriguing. As I understand it, if an insurance company elects to sell policies via the exchange, the company must offer a range of policies. They have to offer a Silver policy; I believe they also have to offer a Bronze and a Gold, or possibly at least one or the other. Behind the scenes, participants in the different metals go into one big risk pool. The Silver plans are likely to attract sicker people than the Bronze plans (Silver is better coverage) so an insurance company offering a Silver plan - that is, any insurance company selling via the exchanges - must figure on a sicker pool of insured than they would see if they could offer only Bronze policies.

From what I’ve read, this will result in the cost of the Bronze plans being higher than they would be if the company offered only Bronze plans; I do not know whether this is because ObamaCare restricts the premium differences between the plans; because the subsidies are pegged to Silver plans (I can’t figure out how that would make a difference but trying to think it through makes my brain hurt so I give up early); or because it simply makes sense to the insurance company to spread the risk out across the whole pool. Anyhow, that’s the story with companies who want to sell through the exchanges: they can sell in the exchanges and out of the exchanges but they must sell the same plans both ways, and they must offer a Silver plan which drives up the rates on their Bronze plans.

However. An insurance company can choose to forgo selling on the exchanges and sell only direct. As far as I know, they must still offer only plans that meet the ObamaCare parameters. They cannot sell true catastrophic coverage or coverage without maternity benefits or coverage that makes the insured pay for a wellness visit and so on. In other words, even insurance companies who are not going to sell on the exchanges can only offer Platinum, Gold, Silver, Bronze, and Restricted To The Young And The Somewhat But Not Totally Poor Fake Catastrophic policies.

However. A company selling only outside the exchanges does not have to offer a range of metals; they can elect to sell only Platinum or only Gold or only Silver or only Bronze or, presumably, only RTTYATSBNTP Fake Catastrophic policies. If an insurance company elects to sell only Bronze policies they can reasonably anticipate that they will be selling only to healthier individuals because the Bronze policy provides the least coverage. Therefore, they can also reasonably anticipate that their insured pool will pose less risk and therefore they can offer Bronze policies at a lower premium than those insurance companies who are also offering Silver and/or Gold polices.

So a third option for someone who is currently insured and whose policy is being cancelled is to buy a Bronze policy from an insurance company that is selling only Bronze policies. Or at least to make sure his comparison shopping includes looking for such companies. He may find that a Bronze policy from a non-exchange seller is cheaper than a Bronze policy from an exchange seller and may find that to be the case even with a subsidy (depending, of course, on the size of the subsidy).

As I said, these are not great options but they are alternatives to joining the exchanges. I think having choices, even lousy ones, is always better than being trapped. If nothing else, it can cool incandescent rage down to mere white-hot anger and that has to be better for our health.