POV: Have Gun, Will Nudge
by Ayn Rand | March 1962
It's Not the Unions — It's the Labor Laws
by Doug Altner | March 19, 2014
Regulatory Strangulation
by Steve Simpson | March 13, 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
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out
by Tom Bowden | June 20, 2013
The Forgotten Man of the Minimum-Wage Debate
by Doug Altner | June 19, 2013
Why Delivering Beer Isn’t Easy
by Doug Altner | June 11, 2013
What Explains GM’s Problems With The UAW?
by Doug Altner | May 20, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Protect the Defenseless, We Must Abolish the Minimum Wage
by Don Watkins | March 27, 2013
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Why The Glass-Steagall Myth Persists
by Yaron Brook | November 12, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
3 Things Everyone Needs to Know About the Apple Antitrust Case
by Don Watkins | April 10, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
The Entitlement State Is Morally Bankrupt
by Don Watkins | September 13, 2011
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
Atlas Shrugged: With America on the Brink, Should You “Go Galt” and Strike?
by Onkar Ghate | April 29, 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
In Defense of Finance
by Yaron Brook | February 15, 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
Apple Now Targeted for Success Like Microsoft Was in the 1990s
by Tom Bowden | October 04, 2010
The Un-American Dream
by Don Watkins | August 27, 2010
What About Private Health Emergencies?
by Tom Bowden | April 08, 2010
What’s Really Driving the Toyota Controversy?
by Don Watkins | March 26, 2010
Anti-Smoking Paternalism: A Cancer on American Liberty
by Don Watkins | March 06, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Smash the Labor Monopolies!
by Tom Bowden | September 15, 2009
America’s Unfree Market
by Yaron Brook | May 2009
Atlas Shrugged and the Housing Crisis that Government Built
by Yaron Brook | March 2009
The Green Energy Fantasy
by Keith Lockitch | February 25, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
The Resurgence of Big Government
by Yaron Brook | Fall 2008
The Government Did It
by Yaron Brook | July 18, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
How Government Makes Disasters More Disastrous
by Tom Bowden | April 29, 2008
Life And Taxes
by Yaron Brook | April 17, 2008
War On Free Political Speech
by Yaron Brook | March 21, 2008
To Stimulate The Economy, Liberate It
by Yaron Brook | February 14, 2008
Exploiters vs. Victims in the Grocery Strike
by Elan Journo | January 30, 2004
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Drop the Antitrust Case Against Microsoft
by Onkar Ghate | March 17, 2002


Government And Business in Voice for Reason
Government & BusinessRegulations

Obamacare Is Suffocating An Already Sick Health Insurance Patient

by Rituparna Basu | January 22, 2014 |

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.