Obamacare’s Assault on Insurance and Employment

As the disastrous effects of Obamacare continue to manifest, the flood of disastrous anecdotes — some true, some apocryphal — rages on. Let me be first to say that in the midst of this, while it is important to show empirically the damage that the law has caused, it is most important to remain focused on the broader issues surrounding the law and for Republicans to argue against it on moral terms, without getting bogged down by arguing against it on a case-by-case basis. The truth is that in the end you would have to tell about 320 million such stories to show the law’s true effects, as, in the end, all Americans will face its consequences. However, bearing that in mind, allow me to offer just one more anecdote of the injury Obamacare has inflicted on the rights of average Americans.

Last week, a courier at a firm in metro Atlanta was called to the firm’s main office. She was an older woman and had been with the company for a number of years. She was there to be terminated. The decision was financially motivated, stemming from her costs to the company’s health plan, which had not been a problem until this year.

The courier suffered from chronic knee issues that required frequent medical treatment. Under a free market health system, this would never have been seriously bothersome to the employers if it did not interfere with her job-related tasks. With the American healthcare market so distorted by government controls, however (especially after the implementation of Obamacare provisions in January of 2014), an otherwise good employee ceased to be an asset and instead became a financial liability.

The reason is rooted in one of the most trumpeted provisions of Obamacare: the requirement that healthy individuals cannot be charged less for the same coverage than an individual with existing health issues. A corollary provision, that younger individuals can also not be charged less than older individuals (beyond a legally determined ratio), is also at fault.

Insurance is an industry based upon calculated risk in which insurance providers agree to cover certain unexpected expenses at a cost based upon the likelihood a customer will suffer from such expenses. The premiums collected from many customers’ plans are then used as a pool of resources from which a customer who suffers an expense covered by their insurance contract can draw. Those with higher risks will pay higher premiums while those with lower risks will pay lower premiums. This allocation of costs is formulated in such a way as to ensure that the pool will remain full while the cost to customers remains lower than simply covering the expenses themselves.

The reasoning is simple: so long as a customer pays less for insurance coverage than they believe they would for potential unplanned expenses, they will likely purchase insurance. If, however, the cost of insurance is equal to or more than potential unplanned expenses, then the customer will have no interest in purchasing insurance coverage and would rather cover the expenses themselves. It is through calculating an individual’s risk of drawing from the insurance pool and keeping the cost of covering said expenses lower than the cost of the expenses themselves that an insurance company provides a valuable service to its customers. For this service, the insurance company receives a portion of the premiums, calculated through the same formulas, in payment for saving its customers money in the event of catastrophe.

Government intervention has thrown a wrench into that process, damning as evil an insurer’s pursuit of profit and demanding the impossible – that everyone be covered for every possible expense at little or no cost.

The Obamacare provision that prohibits insurers from turning away people with preexisting conditions demands that insurers offer a service to customers who would benefit little from it. Why? Because when a person’s likelihood of drawing from the insurance pool is certain, that person’s premiums will be equal to or greater than the cost of their existing medical expenses anyway. They would deposit essentially the same amount as they would receive.

When insurers are required to charge the ill individuals (those most likely to draw from the pool) the same as healthy individuals (those least likely to draw from the pool), it is necessarily the healthy who will be charged more to ensure that the pool itself does not run out. The same applies to the provision that younger individuals (those least likely to draw) cannot be charged less than one-third of what older individuals must be charged (those most likely to draw).

This causes the service once offered by the insurer to no longer be competitive against alternatives, such as merely covering the expenses oneself, and so healthy individuals may want to forgo insurance altogether. But when the government threatens those individuals with punitive fines if they do forgo insurance, the same individuals are forced to forgo their own self-interests (which have already been injured by government intervention) and purchase a product that has ceased to be valuable to them.

And so insurance has morphed from a moral industry offering a valuable service into a redistributive welfare regime operating through extortion and force – the government’s rather than that of the insurers.

All of this contributed to the employer’s decision to terminate the woman mentioned earlier. Faced with the option of either increasing the contributions made by all employees into the company’s health plan, or risking the pool running dry as a result of the woman’s medical expenses, the firm chose instead to terminate her employment. Obamacare was not her fault, but nor was it that of her coworkers or her employer. Nevertheless, she ended up being injured as a result of a policy supposedly designed to her benefit. The firm, too, was injured, as it was required to needlessly terminate an otherwise valuable employee.

Indeed, in all of the available calculations of the costs of ObamaCare to the US economy over coming years, one thing that is almost impossible to calculate and include is the opportunity cost that will result from the gross misallocation of resources that it will spur: employees, financial capital, and resources being shifted around in arrangements contrary to what a free market would render.

Unfortunately, Obamacare is but one of many policies damaging America’s healthcare industry in the twenty-first century. It is just one example of the stranglehold that government already has on the insurance industry as a whole. Likewise, this woman’s story is just one example of countless such tragedies all across America.

The damaging effects of these policies can only be undone if the policies themselves are repealed, which requires challenging their most basic premises. Obamacare is built on the assumption that the pursuit of profit is evil, that insurers exist not to provide a valuable service for a fee but to act as charitable organizations at their own expense, that the incomes of the young and healthy belong to the elderly and the sick. Not only are these impractical assumptions as demonstrated above, but immoral ones. Man lives for his own sake, whatever his profession. Insurance is no different.

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