Biden’s Healthcare Blunder

The Biden Administration’s latest healthcare policy is terrible.

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ACA Haunts Forever

I will admit that I spend a lot of my time criticizing Republicans. In fact, I spend significantly more time criticizing Republicans than I do Democrats. I don’t really do that intentionally, but when people who claim to be conservatives do things that I don’t find very conservative, it uniquely provokes the ire of The Burnett Breakdown.

Plus, I fundamentally disagree with progressives, so I’m not surprised or annoyed when the Democratic Party does progressive stuff. The difference is that many Democrats readily admit that they are progressive, so why would I get mad when progressives do progressive things? Well, I am going to do just that this week and get mad at this progressive administration enacting a progressive policy.

On Friday, the Biden administration announced a new regulation that impacts private, short-term health insurance plans. To fully understand the regulation though, some background information is required.

When the Affordable Care Act (ACA), also known as Obamacare, was passed, it required insurance policies to provide certain government-mandated benefits. For example, the government mandated all insurance plans to cover doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. At the same time, the ACA capped what insurance companies could charge consumers that bought insurance through an ACA exchange.

So, the government forced insurance companies to cover certain services, while limiting what they could charge consumers that used the government’s marketplace. This naturally led to an increase in premiums for people who already had insurance not through the marketplace because insurance companies had to offset the cost somehow.

Certain short-term private health insurance plans were the lone exception to this Obamacare mandate, but they were limited to three months in length. Under the Trump administration, the length of these plans was increased to three years. Now, the Biden administration is shortening that time period back down to three months with consumers having the ability to extend up to four months.

Bad Idea

Why is this a bad idea? According to the Biden administration (and some in the media), it is simply banning “junk” health insurance plans. Who wouldn’t want junk banned?

Well, apparently that “junk” is attracting to millions of Americans, so it’s important to consider why that may be the case. It turns out that because those insurance policies can avoid Obamacare regulations, they are cheaper and more flexible than insurance policies that have to abide by the federal regulations of Obamacare.

The insurance companies aren’t forced to cover 10 “essential” health benefits (essential as labeled by the Federal Government), so they are able to offer less coverage for a cheaper price. However, the Biden administration, along with other Democratic lawmakers, view the less coverage as sinister and leading to mere “junk” being sold to consumers.

Granted, there is a trade-off as there is with everything: namely, less coverage and higher deductible. But again, this also means lower premiums.

This is particularly attractive to younger people who don’t have a whole lot of monthly income but also are generally healthier and don’t need coverage for all that Obamacare-compliant plans offer. Not to mention, these short-term private healthcare plans offer more flexible coverage periods, can be obtained any time of the year (not just during the once-a-year open enrollment period for ACA), lets consumers cancel coverage without penalties, pick deductible amounts, and provide a wider variety of plans.

In other words, these short-term private healthcare plans give consumers more choice and variety to fit their individual needs.

Progressive Economic Nonsense

This policy strikes at the core of so many of my disagreements with progressives about economics. I believe that decentralization, which leads to more choice, innovation, and competition, leads to better outcomes for the greatest number of people. There is a lot there that I want to unpack.

Decentralization is what leads to more choice, innovation, and competition. Most progressives (who aren’t socialists) would argue that they believe more choice, innovation, and competition are good things. However, they would argue that there is a role for the government to play in increasing choice, innovation, and competition. The government, listening to the counsel of economic experts, can step in sometimes and maximize prosperity by increasing choice through regulation, innovation through subsidies, and competition through scrutinizing mergers and acquisitions.

I could not disagree more with this idea. I firmly believe that the law of unintended consequences and the knowledge problem that I have written extensively about (see here) prevent even the smartest of experts from being able to foresee all of the consequences of their decisions. As a result, it is exponentially better to outsource that decision-making process to billions of other minds aggregated over immense space and time with drastically different experiences.

This is exactly what decentralization in the form of free market economics does. It seems disorganized and chaotic to allow billions of individuals to make their own self-interested decision; however, it leads to better outcomes because it encourages choice, innovation, and competition.

In the case of Biden’s new healthcare regulation, the Federal Government is making the decision for consumers about what they need and don’t need. It is not allowing consumers to make this determination for themselves. Want to take the risk of having less coverage but pay less a month? Sorry, you can’t do that because the government knows what’s best for you instead.

The reality is that the Biden administration, and other Democrats, know that these plans are particularly attractive to younger, healthier people, which is a problem for the Obamacare-compliant plans. If only older, less healthy people sign up for the Obamacare-compliant plans, then the insurance companies are going to spend a lot of money covering those customers.

Since they can’t charge more than a certain limit, they will be forced to continue raising the premiums on their consumers who don’t have health insurance via the Obamacare exchanges. To prevent this, Democrats want to push younger, healthier people to Obamacare to basically subsidize the consumers that the insurance companies are losing money on.

Companies will be forced to only offer plans that cover the ten “essential” health benefits preventing those companies from innovating, leading to fewer choices for consumers, and ultimately preventing competition. As a result, consumers will experience worse quality and higher prices.

Classic progressive economics.

God Bless,

Hunter Burnett