Paul Ryan Is Clueless About How Insurance Works

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Like many, I was very interested in hearing the GOP’s new health care plan to replace the ACA or Obamacare. After all, President Trump had promised healthcare for all Americans. I wondered exactly how he was going to accomplish this commitment. I watched Paul Ryan’s dog and pony show intently:

Suddenly, I was rendered speechless when he pointed out what he considered the biggest problem with Obamacare:

“We’re just going to make everybody buy our health insurance at the federal government level; young and healthy people are going to go into the market and pay for the older, sicker people. So the young healthy person is going to be made to buy health care, and they’re going to pay for the person, you know, who gets breast cancer in her 40s. Or who gets heart disease in his 50s….It’s not working, and that’s why it’s in a death spiral.”

This leader of the GOP in the House, thought to be a numbers wonk, just doesn’t get how insurance works. It is purely a risk distribution strategy. The insurers sell policies to a very large number of people, expecting a small number of them will have an event requiring the insurance company compensate for the loss. It doesn’t matter what type of insurance you are talking about, automobile, homeowners, fire, flood and yes, health insurance. The insurers need to sell enough of their product, collecting premiums, with minimal losses, to allow them to make a profit. Simple concept.

Illness is like death and taxes, inevitable and unavoidable. Sooner or later, everyone will get sick. Generally, younger people are healthier than older ones. In order for the health insurance scheme to work, the insurers need to have a large pool of healthy young people to offset the inevitable claims they must pay for older, or sicker people.

Why would young people, some who generally have no apparent fear of death and expect they will live forever, want to buy something they don’t think they will ever need? Most of them won’t, they will just roll the dice. This is where the mandate comes in. Where did that idea come from? From folks who understand how insurance works, the Heritage Foundation, a conservative think tank that supports the GOP agenda.

If you take away the mandate, of course the ACA will enter a death spiral and fail. It doesn’t take a rocket scientist to understand this. One fix to Obamacare is to strengthen the mandate, not eliminate it. Make the penalties more severe. This will increase the pool and will drive the premium prices down for all participants, including young people.

The GOP has been against the mandate from the get go. They claim it is the government forcing people to do something they don’t want to do. According to them, and their fellow travelers, it is an attack on personal freedom. Well, they need to wake up and recognize that in our country people are often forced to do things they don’t want to do. We call that public policy.

This same thinking led some to oppose Social Security and Medicare. Those two programs are similar to the ACA. We all begrudgingly paid into the system when we were young and working. Monthly deductions from our meager salaries hurt. Many asked why the government made us pay into this scheme. Now just ask someone over 65 if they would like to give up these benefits that many of them rely upon just to survive. So how has Social Security and Medicare worked out?

Everyday, Americans experience the impact of public policies limiting our choices and restricting our freedoms. You have to have automobile insurance to drive a car, use of seat belts is mandatory, no cell phone use while driving, motorcyclists have to wear helmets, children need to be vaccinated, we allow intrusive TSA inspections when we fly, and the list goes on Just think about how we comply, however reluctantly, with these and many, many more limitations to our freedoms. Why? Because it is in the public interest to do so, and like the ACA these public policies have been reduced to law by our legislators.

The vast majority of Americans have health insurance through their employers. Medicaid covers the poorest. The elderly have Medicare. It is mostly the middle class, small business owners, self-employed and the unemployed who are left to fend for themselves. The ACA allowed millions of those people, many for the first time, to purchase health insurance, This plan can only work if the pool of insureds is large and mostly made up of healthy people. Eliminate the mandate and the GOP has its self-fulfilling prophecy of the death spiral. That is where this train is headed. If you are one of the 14 million who will lose your coverage, this is not theoretical, it is a frightening reality. Just ask one of them.

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