Greg Bass, a veteran health benefits executive and consultant in Wisconsin, predicts that the health insurance industry will be gutted when ObamaCare kicks in full bore in 2014.
“It’s designed to undermine the industry,” he said.
Bas, who has cut health care deals on all sides of the indusry over a long career, believes the combination of guaranteed issue and no pre-existing conditions will cause premiums to soar.
His scenario goes like this: healthy people will go uninsured, sick people will buy insurance at generic rates, and the healthy people will jump into pools when they get sick or injured. That “adverse selection” will drive rates up 30% to 40% in his estimation.
“That will destroy the insurance system,” he said because its essential foundation of adjusting rates to risk will be gone.
Then, he added, the government and president will step in to bail out the industry like they did when misguided government policy led to the bailout of Freddie Mae and Freddy Mac in the housing mortgage industry.
The Bass scenario is highly plausible, if the law isn’t amended or repealed before 2014 and if private sector reforms don’t take firm root and spread before then.
Republicans favor repeal, but have no comprehensive alternative to corralling runaway health costs and improving access. Ergo, real reform will be up to the private sector.
The superficiality of the Republican position on health care reform can be seen in the politics of the budget crisis in Wisconsin. The GOP controlled legislature and Gov. Scott Walker pushed through an increase in the contribution of the public employees for health insurance to 11.8%, about half the national average.
That will help fill the hole in the state’s budget, but it will do nothing to change the underlying pattern of hyperinflation in medical costs. Increased premiums won’t fix the busted business model.
Their inaction is especially sad, because large employers in the private sector are reinventing the model. They are improving health and controlling costs.
It’s also puzzling, because some of the greatest innovators on the economic side of medicine are doing their work in Wisconsin.
Where does that leave real reform? The race is on to see if market-driven reforms that are now roaring ahead in the private sector can out-run the top-down reforms of the Obama Administration.
