Having killed insurance companies, ObamaCare threatens economic recovery

President Trump is obviously angered by inflation in health insurance, calling carriers “money sucking.”

Major benefit consultants including Aon and WTW are forecasting employer costs for providing coverage in 2026 will rise from 9.5% to 10.3%.

Economists worry working Americans suffer wage stagnation in a growing economy because higher premiums force employers to shift the costs of coverage to employees via higher deductibles and out-of-pocket payments.

This presents a smoldering political problem for the president as Zohran Mamdani’s win in New York City suggests “affordability” could become the watchword of a Democratic Socialist midterm success.

The recent government shutdown was all about the affordability of health insurance.

The 15-year effort to make ObamaCare America’s version of national health insurance, the left’s goal since FDR refused to put universal coverage in the 1935 Social Security Act, was exposed by its impact on the nation’s deficit.

President Joe Biden used COVID to supercharge ObamaCare enrollment and expand Medicaid so together they might overtake private insurance.

Using greatly enlarged subsidies and reduced eligibility requirements, 44 million more Americans signed up for government coverage.

The shutdown saw the Democrats argue that if these subsidies ended people would die.

The president rightly saw the demand as incompatible with deficit reduction.

This contest will play again in January when the continuing resolution ends.

It may be that one of history’s most important lost moments was President Trump’s failure to deliver on his promise of “Repeal and replace” in his first term.

The House voted to repeal the hated plan more than 100 times. Yet no replacement has emerged, and ObamaCare gets worse. 

The law’s mandated coverage of a long list of preventive services, meant to reduce demand for costly inpatient care, had the opposite effect.

Hospitals were adept at stimulating demand, driving up costs.

Many of the newly established local insurance exchanges meant to displace insurance companies went bankrupt.

Politically favored executives with no experience in health insurance were not up to the job of disciplining hospitals and doctors.

Hoping to save money by requiring digital patient records, ObamaCare paid for their installation. Government chose vendors that produced the unbelievable — software that lengthened outpatient visits and raised their costs.

Perhaps the most scandalous aspect of ObamaCare is it mandated specialized agents to help potential enrollees “navigate” the system.

Compensated on the number of eligibles they could enroll, agents signed up individuals they never met, who never knew they had insurance and never sought medical attention. 

This mess was predictable from the start.

To get ObamaCare passed, the insurance industry, consolidated two decades earlier into a handful of giant companies as a presumptive defense against HillaryCare’s promise to eliminate them, had to go along.

Enjoying monopoly power, carriers drove up prices in cahoots with hospitals and doctors happy to deliver more costly care. 

President Trump wants to disrupt the reign of these “big, fat, rich” companies.

The problem is ObamacCare succeeded all too well in eliminating hundreds of competitors.

President Barack Obama, despite his promise we could keep our insurance company, intended just this outcome. 

He believes efficiency comes with scale — a nonworking principle in health care. If it did, the resulting insurance monopolies and huge hospital systems would have made health care more affordable.

While the administration works on the complexities of replacing ObamaCare, it can take immediate steps to encourage the formation of many new health-insurance companies including for-profits, nonprofits resembling original Blue Cross community plans and mutual companies organized by employer associations, religious groups and community cooperatives.

The government could provide capital for these startups and support shared risk pools for individuals with severe illnesses. Private reinsurance arrangements would follow.

The government should also immediately require radical price transparency — making providers show patients the cash price and the amount actually paid by insurance and Medicare/Medicaid.

Patients could not only pressure providers for discounts but could be incentivized to search for fraud and billing abuse by participating in savings.

Third, improving labor productivity in health-care delivery is imperative.

Nearly 90% of all personnel working in health care, including in many instances unskilled kitchen and janitorial staff in hospitals, must be certified to work.

Less than 20% of the non-health workforce needs the equivalent of a license to work.

Using its payment authority, the federal government should eliminate publicly required licensing and guild-imposed certification requirements that do nothing to ensure quality of care or service.

Labor costs in doctors’ offices should also be a target.

The average doctor employs 3.5 staff in large part because insurance companies still require physicians to submit billing documents using fax machines!

How is it that government mandates digitized patient records but allows claims handling to continue on millions of pages of paper?

President Trump has said many times that the Affordable Care Act is anything but and must be replaced.

One step in that direction is to greatly expand the supply side of the health-insurance market, letting competition emerge.

Carl Schramm is University Professor at Syracuse. He has served as president of the Health Insurance Association of America, now America’s Health Insurance Plans, and as CEO of an insurance company specializing in small group and individual coverage. His most recent book is “Burn the Business Plan.”