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POV: How Not To Fight Against Socialized Medicine
by Ayn Rand | 1963
50 Years Down the Road of Socialized Medicine
by Rituparna Basu | July 30, 2015
Is Obamacare Here to Stay?
by Don Watkins | August 11, 2014
What’s missing from the Obamacare debates
by Tom Bowden | March 11, 2014
Obamacare creates a new class of free riders
by Rituparna Basu | January 23, 2014
Obamacare Is Suffocating An Already Sick Health Insurance Patient
by Rituparna Basu | January 22, 2014
The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
by Rituparna Basu | January 21, 2014
Obamacare is Really, Really Bad for You, Especially If You're Young
by Rituparna Basu | August 21, 2013
How Obamacare Law Fleeces the Young
by Rituparna Basu | April 26, 2013
It’s time to unplug Medicare’s third rail
by Rituparna Basu | November 26, 2012
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Will FDA choke off promising adult stem cell research?
by Keith Lockitch | August 10, 2012
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)
by Yaron Brook | April 06, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions (Part 2)
by Yaron Brook | March 10, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions
by Yaron Brook | February 10, 2011
The Avastin Travesty
by Tom Bowden | December 12, 2010
You Are Not Your Neighbor's Health Care Provider
by Yaron Brook | May 11, 2010
What About Private Health Emergencies?
by Tom Bowden | April 08, 2010
The Right Vision Of Health Care
by Yaron Brook | January 08, 2008
Be Healthy or Else!
by Yaron Brook | October 22, 2007
No Right to “Free” Health Care
by Onkar Ghate | June 11, 2007
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Health Care Is Not a Right
by Leonard Peikoff | December 11, 1993
Medicine: The Death of a Profession
by Leonard Peikoff | 1989

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Obamacare Is Suffocating An Already Sick Health Insurance Patient

by Rituparna Basu | January 22, 2014 | Forbes.com

As Obamacare’s troubles mount — premiums are soaring, millions of policies that people like are cancelled, and contrary to the president’s promise, many can’t keep their doctors — proponents try to convince us that the law was a good idea. How? By reiterating their fictitious tale of life before Obamacare.

“It is important to understand,” the president insisted recently, “that the old individual [health insurance] market was not working well, and it’s important that we don’t pretend that somehow that’s a place worth going back to.”

Why was it not working well?

Obamacare Is Suffocating An Already Sick Health Insurance Patient

According to proponents of Obamacare, the problem was that insurers had too much freedom. Premiums were continually rising, for example, because insurers were supposedly free to jack up rates whenever they felt like it. People with pre-existing conditions had difficulty finding insurance, they told us, because insurers were free to deny them coverage. On this view, the diagnosis was a lack of regulations, and the remedy prescribed was a heavy dose of government controls called Obamacare.

In reality, America’s supposedly free market was made a scapegoat for our health insurance woes. As I show in a new paper published with the Pacific Research Institute, available online, government has long regulated almost every aspect of the business.

Consider just three government controls in place before Obamacare, and their impact.

A major source of government distortion in the health insurance market is the tax code. If your employer pays for your health insurance, you don’t have to pay taxes on those premiums. But if you buy insurance directly from an insurer, you do. The tax exemption for employer-sponsored coverage has tied health insurance to our jobs (one reason why the individual market is so distorted). A consequence is that when people leave their jobs, they are eventually kicked out of their insurance plans. When reapplying for coverage, these individuals risk being turned down if they have developed a pre-existing condition.

Long before Obamacare, the government also restricted the kinds of health insurance products which could be sold. For decades state governments have dictated coverage that insurers must provide. Everything from in vitro fertilization to wigs have been mandated, and each mandate increases the cost of a policy (some states impose more than sixty different mandates). If you were looking for a policy without these services, good luck. It was illegal for an insurer to sell it to you.

Prior to Obamacare almost every state also manipulated how insurers priced polices, forbidding them from offering low-priced policies to those younger and healthier. Insurers were instead required to charge these individuals higher premiums in order to subsidize the coverage of those older and less healthy. When New York implemented these laws in the early 1990s, premiums for thirty-year-old single men almost tripled, and one in six New Yorkers with policies in affected markets had no choice but to drop coverage or see his employer drop it. As a result of the exodus of younger and healthier individuals from the market, premiums for everyone in the state rose higher than they were prior to regulation. Since then, premiums in New York’s individual market have been, on average, more than twice as high as those for the rest of the nation.

For decades, government controls in health insurance were pervasive: from licensing who can sell insurance and where to regulating how insurers organize their finances, to dictating how they price their policies, to decreeing to whom they must sell their services, to mandating what conditions they must cover, to restricting how they advertise. The list goes on and on.

Was the health insurance market plagued with problems?  Yes. The health insurance market was mostly controlled by government. 

And yet, despite the passage of Obamacare, the greatest expansion of government in almost fifty years, the free market continues to be blamed for our problems. For example, in light of skyrocketing premiums last year, a New York Times editorial called for “more [government] power” to fix the state of “lax regulations.” Talk about scapegoating! Not once did the Times consider the impact of distortions caused by Obamacare.

Here’s an idea: perhaps Obamacare is more of the poison that is killing the patient.

About The Author

Rituparna Basu

Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.