Health Care Reform, Because Why Shouldn't I Comment Too?

[whirlwindmonk]

Yeah, everybody wants to have a say. Fortunately, this is America, so we get one, whether anyone listens or not. But anyway, I'm not going to try to analyze that 1000 page monstrosity of legal mumbo-jumbo or anything insane like that. Really, what spawned this is I was reading stuff on the reform and found an editorial on cnn.com. Health bill

Comments

[whirlwindmonk]

"'You must buy this' is law for auto insurance in many states. Of course, that is conditional on having a driver's license or car. So, it's not quite the same."

It's also different in that it's a State law, rather than a Federal one. Is it still ok? I dunno. I do feel like given the way the Constitution grants power between the Federal and the State governments, it'd be difficult to use a state power to argue precedent for a federal power.

"Also, the bill places strong restrictions on variations in premiums - so health insurance companies won't be able to charge a higher premium to people with preexisting conditions (like diabetes). That's why they have to force healthy people in. Since most medical conditions cover a period of time, it makes sense for me to wait until I get diagnosed with cancer to get health insurance. Under the bill, once I get health insurance, the insurance company has to pay for my treatment. So, I wait until I get a nasty diagnosis, and then get health insurance. It very well might work the same way for broken bones... So, the statement you make is true of the way the health insurance market was pre-bill, but it's not post-bill."

Sorry, could you clarify which statement you're talking about?

As a point, I'd have to find the article again (don't have time at the moment), but I read somewhere that eventually the fines for not having health insurance would roughly equal the average premiums of middle class America, or something like that. If that is true, there would be no gain for the anyone to put off buying insurance under the new thing, since they'd be paying an equal amount in fines with no coverage.

That is an interesting fact about pre-existing conditions not being able to affect premiums, either. That takes my extreme example of Progeria and makes it perfectly applicable to people who are obese or have diabetes. And if, say, old age counts as a pre-existing condition? Well crap are costs going to skyrocket.

"As far as the commerce clause goes, if I'm right, the courts (back in the late 1930s) have interpreted the clause to include any activity (or inactivity) that impacts interstate commerce. So, while not buying health insurance isn't commerce, the decision has an impact on the health insurance market where commerce does take place. (There's actually a part of the bill that runs through a line of reasoning to place the bill under the commerce clause.) Yes, that does mean that the commerce clause lets Congress do just about anything."

I feel like the article on that home-grown Marijuana case may have referenced that vaguely and briefly, I'll have to read more into it later. I do have a side question, which I'll try to look into later. It does say that they have ruled to be able to apply the Necessary and Proper clause (or something like that) that allows them to enact laws to allow them to maintain their authority over interstate commerce, I don't know if that's at all related to what you're talking about.

I've been seeing a lot of people saying that one thing that would help would be to allow health insurances to compete across state lines, or something like that. What's that referencing, and if it is true that they can't compete across state lines, that seems like it brings it even further from an average person's reading of the commerce clause.

If it is true that it extends to all economic activity...I have to wonder how that ever got through. Seems like a heck of a lot of power being interpreted as granted by a single sentence in a document that by and large seems to push for a smaller, more limited federal government...

[engelhardtlm1]

Agreed. Assuming that federalism means anything, it would mean that state law shouldn't provide a precedent for federal law.

The point about variations in premiums was a response to: "If I develop diabetes and then call them up they'll say 'Sure, but you'll pay a much higher premium due to your greatly increased chances of complications in the future.'" Under the new law, insurance companies can't charge people with diabetes more than people without it, despite the fact that people with diabetes will obviously be more expensive for the company to cover. There is some allowance for differences based purely on age (up to a ratio of 3 to 1 for the biggest difference, the current difference is a little over 4 to 1), and on whether the person is a smoker (ratio of 1.5 to 1 max).

From what I've read, the fines go up to $750 a year, indexed for inflation. I'm pretty sure that's below what most people pay if they go to the individual market. (According to AHIP - the health insurance companies' lobby - the average single person pays about $3,000 a year.) After a quick search (http://www.health--savings--accounts.com/), I found that Anthem would provide my wife and I with a high deductible HSA-qualified health insurance plan for $73 a month. So, it looks like the $750 is pretty close to what some people would/do pay for a high deductible plan.

As for how the extremely broad interpretation of the Commerce clause got through... I blame the New Deal. Much of it was unconstitutional, and the Supreme Court said so. In 1937, FDR threatened the Supreme Court with his "court packing" plan. One of the justices resigned so FDR could replace him, and that was enough to get much New Deal legislation through - including the Agricultural Adjustment Act, which put restrictions on how much wheat a farmer can grow even if they grow it on their own land for their own consumption. (Wikipedia's article on the Commerce Clause is very good, I think. http://en.wikipedia.org/wiki/Commerce_Clause) The court said "even if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce and this irrespective of whether such effect is what might at some earlier time have been defined as 'direct' or 'indirect.'" Since Congress is allowed to aggregate actions, they don't have to prove that Joe Schmoe not buying health insurance has an impact. They just have to prove that if everyone acted like Joe Schmoe and didn't buy it that it would have an impact - which is pretty obvious. Put differently: FDR's Supreme Court established that Congress can basically do whatever it wants.

The point that health insurance can't cross state lines is interesting. The issue seems to be that you can't sell a policy that is legal in one state to someone in a state where it's not. This isn't true for everything. (Example: credit cards dodge usury laws by locating in Delaware.) But, my guess is that health insurance reform still fits with interstate commerce since insurance companies can cover services across state lines. In the justification in the bill, it says "Since most health insurance is sold by national or regional health insurance companies, health insurance is sold in interstate commerce and claims payments flow through interstate commerce." So, the fact that my insurance money is going to a company based, ultimately, in New York (though its subsidiary is Ohioan), is enough to make it interstate commerce.

Yeah, I definitely don't believe that we live in a Constitutional Democratic Republic any more. The Constitution has become no more than a piece of paper, while the words in it have been so stretched by the courts that they can wrap constitutionality around just about anything.

Reference: AHIP's report on the individual insurance market is available here: http://www.ahipresearch.org/pdfs/2009IndividualMarketSurveyFinalReport.pdf

[whirlwindmonk]

So, in other words, it's probably actually cheaper for Joe Average to just eat the fines, and then get insurance if something happens. Is there a single stated goal of this plan that will actually work?

[engelhardtlm1]

It depends how we define "work", no? From what I've read, people won't be denied health insurance based on preexisting conditions (doing so is illegal), and people won't be dropped from insurance when they get ill. Of course, that doesn't mean that insurance will be cheap enough for people to afford it...

[whirlwindmonk]

Yeah. I mean, I can very easily imagine the cost of health insurance growing so that the cost to the average, reasonably healthy, person, will be nearly what rather sick people pay now. They come out even or lose just a bit from the sick people, and then make up for it from the healthy. Unless, you know, people see that they can save money by eating the fines, in which case, it'll have to go even higher, making the difference between insurance and the fines even more obvious, making more people drop insurance, etc, etc, etc.

This sounds like it'll be a great time.

[engelhardtlm1]

Wait... I just thought through things a bit more.

It actually makes sense to buy a high deductible health insurance plan rather than pay the fine. Here's why:

Fine = $750
Premium = $864

BUT, buying a high deductible health plan makes you eligible to contribute pre-tax dollars to a health savings account. So, if you're in the 25% bracket (like most American households), then putting just $1000 in your HSA will save you $250 in taxes. Families are allowed to contribute a bit over $6000 to an HSA each year, so you can save a bit over $1500 in taxes, making high deductible insurance better than "free". Makes you wonder why there are people that have no health insurance...

[whirlwindmonk]

So, you need to deposit roughly $3,600 each year to save enough on taxes to pay for your health insurance. However, this money must be spent on medical stuff. Spend it on anything else and you pay income tax + 10%. Ouch. So, really, you've lost a very significant chunk of money unless you happen to need to spend a very large portion of it on medical care. I don't know exact numbers, but somehow I doubt the average American spends over three grand a year on medical care. The best number I can find is from back in 2005 which gives a number at about $2,500 per 2.5 person household. Given those numbers, that's not enough spending to come out even, and in fact, loses them another $100 if they try to use the money they deposited for something else. And if you don't use it all, it carries over, so you build up more and more money that you can't access without eating a 10% fine. So, if you take those averages and assume they don't let that money build up, insurance ends up costing them ($1100 * .1) + ($864 - ($2500 * .25)) = $349. So, still an improvement, but hardly free. This is also assume that they have a job at all, let alone one that allows them to set aside $3,600 a year like that. This cuts out a lot of people from being able to benefit from that right now, though I suppose that'll be fixed by the government subsidies under the new system.

Though, now that I'm through all that, I have a question. That fine is per person, is that health insurance package per person, or per family? If that's per family, you have to double the fine to compare it, which makes the health insurance preferable right from that start. But if that's per individual, and individual can't even deposit enough to make up for the full cost of the health care, and may only spend $1000 a year on medical care (I doubt I spend even that much, despite taking prescription medication). So that's ($2000 * .1) + ($864 - ($1000 * .25)) = $814, making the fine preferable.

[engelhardtlm1]

Doing more research...

An individual can get high deductible plan for $450 a year. So, you only have to save a bit under $2000 in an HSA to get tax savings to pay for the plan, and individuals are allowed to put in $3000ish.

Also, the HSA doesn't have a penalty if you keep the money in until you're 65. (Actually, that's a reason the left doesn't like it. They suggest that it's just another way for the rich to save for retirement tax-free.)

Anyway, the $750 looks to be per person, up to $2250 max per family (basically). So, even without the tax benefits of an HSA, once the fine is in place, it makes more sense to have a high-deductible insurance plan than to take the fine.