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Why Obamacare will End Health Insurance as We Know It

issue brief

Why Obamacare will End Health Insurance as We Know It

David A. Hyman, Richard A. Epstein March 25, 2012

President Barack Obama’s signature health-care legislation, the Patient Protection and Affordable Care Act (PPACA), was sold to the public with the explicit promise that “if you like your health plan, you can keep your health plan.” On June 15, 2009, President Obama assured the annual meeting of the American Medical Association: “No matter how we reform health care, we will keep this promise:…. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”[1] Similarly, at a press briefing on June 23, 2009, President Obama stated: “If you like your plan and you like your doctor, you won’t have to do a thing. You keep your plan; you keep your doctor. If your employer’s providing you good health insurance, terrific. We’re not going to mess with it.”[2] To this day, the White House website has a “Reality Check” page devoted to “debunk[ing] the myth that reform will force you out of your current insurance plan,” which flatly states that “you can keep your own insurance.”[3]

These promises were not made lightly. Their chief function was to defuse the public opposition that had sunk the previous attempt at comprehensive health reform during the Clinton administration. Instead of a wholesale restructuring, President Obama promised that the PPACA would not work major changes into the fabric of American health care for the large majority of the American people who feared disruption in their own coverage, even as those same Americans were willing to entertain targeted reforms to deal with the uninsured. But at no point was the proposed remedy on the same modest scale as this framing of the problem would suggest. Indeed, although President Obama’s promise suggested otherwise, private plans were necessarily threatened by the massive expansion of federal coverage.

Despite the president’s promise that “you can keep your own insurance,” key PPACA provisions are calculated to undermine the long-term viability of the private insurance market, by making existing coverage unaffordable or unavailable at any price. Indeed, while individuals may technically be allowed to keep their plans, that protection exists in name only. Plan serial numbers may temporarily remain the same, but the PPACA’s combination of high taxes, large subsidies, and extensive mandatory contractual terms seems likely to eventually drive most private insurance plans out of business.

The methodical hollowing out of the president’s promise is proceeding in three sequential stages. The first stage was completed with the enactment of the PPACA, which claimed to grandfather existing coverage but did not really do so. The second stage is currently taking place, during the long transition between the passage of the PPACA and the time that its major regulation of the private marketplace—most notably, the individual mandate and the exchanges—takes effect in 2014. Assuming that the Supreme Court upholds the constitutionality of the PPACA and that President Obama is reelected, the PPACA will be implemented more or less as written. Then, the third stage, necessarily more speculative than the first two, involves the likely effects once the PPACA is fully phased in, beginning in 2014.