ObamaCare is predicated on the idea that health insurance will be affordable. Good premise! The insurance companies that are participating in the exchanges expect to enroll 30 million people which is a powerful incentive for participation. The federal government proclaims that premiums will be low and that there will be subsidies for those who qualify. This may appear to be a boom for many people but there is a trap.
It is simply a matter of revenues versus expenditures. The insurance companies must have sufficient revenue to cover the medical expenses of the people insured.
Here is the trap. The law allows the insurance companies to pass along additional costs to enrollees in the form of higher premiums, higher co-pays and higher deductibles. According to the law, the deductible for an individual cannot exceed $5,950 and the deductible for a family cannot exceed $11,200. The federal government focuses exclusively on the low premiums and not the danger with co-pays and deductibles.
There are a variety of reasons why insurance costs will increase such as:
1. Need to cover the “ten essentials” required in all health insurance policies.
2. No cap on annual benefits.
3. No cap on lifetime benefits.
4. Continuous coverage of children under their parents plans up to age 26.
5. People with pre-existing conditions which require costly procedures.
6. Enrollments are below the projected 30 million
7. Legal restrictions on the profit margins of the insurance companies.
8. Administrative costs for ObamaCare.
We have all had the experience of being granted a low initial interest rate for credit cards. For six months the cards are used to make an assortment of purchases that create a major debt. Then suddenly the interest rate is tripled by the bank. Since a debt was already incurred, the bank collects huge amounts of money through the interest which just creates a deeper debt that is hard to pay off.
Like credit cards, ObamaCare will start out low for many people but the insurance companies will have to increase the co-pays and deductibles because medical costs will surpass the revenues collected. Premiums will remain low because insurance companies need to be competitive; however, ObamaCare is too complex with too many restrictions and too many taxes to make it a solvent enterprise. People will be caught in a system of rising costs over time and what was deemed affordable will become unaffordable. This is why Democratic Senator Baucus called it a “train wreck.” His remark is interesting because he was one of the architects of ObamaCare.
There is also history. NO entitlement program has ever paid for itself in the history of the United States and anybody who thinks this will be the exception is delusional. Despite history people will needed to experience the financial costs of ObamaCare before they see how ill-conceived this law is. Only out-of-pocket expenses will demonstrate how Obama’s promise of affordable care is a sham.