Conservative Health Reform Will Also Make People Lose Their Insurance Plans

Moneybox
A blog about business and economics.
Nov. 13 2013 11:56 AM

Conservative Health Reform Will Also Make People Lose Their Insurance Plans

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Laws are heavy.

Photo by Alex Wong/Getty Images

In the controversy over people finding themselves unable to keep their insurance plans, it's important to keep two issues separate. One is whether it's good for politicians to mislead people. The answer is no. Another is whether it's good for everyone to keep their insurance plans. My view is that no it isn't and that plan cancellation is a feature of Obamacare, not a bug.

And it's worth emphasizing in that regard that if you look at leading conservative ideas for reforming the health insurance system, they also will cause people to lose their existing insurance plans. Because that's what happens when you reform things. They change! One thing that Mitt Romney said on the campaign trail and that congressional Republicans repeatedly emphasized during the Affordable Care Act debate was that insurance companies should be allowed to sell policies across state lines.* That  would be a major change to the way the system works, and it would cause massive disruption to plans people are currently happy with. The rationale for the proposal is this: Different states regulate insurance differently, mandating that different things be covered. The more things you mandate, the more expensive insurance becomes. So if you let insurers sell plans across state lines, then plans from less expensive, less mandated states will begin to gobble up market share in more expensive, more mandated states.

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Step one, in other words, is that people with the pricier, more mandate-heavy plans switch out into cheaper plans with less coverage. What's step two? Well, it's that everyone for whom the pricier plans were a good deal loses his or her insurance as the risk pool unravels.

In other words, it's the Obamacare effect in reverse. Instead of transferring resources from the healthy to the sick and causing certain classes of bad plans to vanish, the conservative proposal would transfer resources from the sick to the healthy and cause certain classes of good plans to vanish. Paul Ryan's 2009 health care plan would rescind the tax subsidy for employer-provided insurance, which obviously would cause many of us with employer-provided insurance to lose our plans. And again, that's not a downside to Ryan's plan (John McCain ran on a similar health care proposal in 2008); it's the whole point—Republicans think the subsidy cause people to be overinsured and to overconsumer health care services.

The impact is different because the parties disagree about important questions of value and public policy. But both proposals disrupt the status quo because both reform proposals are proposals to reform health insurance. Now one absolutely fascinating aspect of American life is that while left-wing wonks and right-wing wonks both passionately want to reform the health care system, most indications are that the voters actually don't. The bulk of the electorate clings rather fiercely and rather perversely to a status quo that, objectively speaking, delivers average health care outcomes at spectacular cost. This is why you end up with both Republicans and Democrats talking about their proposals in ways that radically understate the amount of change that these proposals would actually entail.

Correction, Nov. 13, 2013: This post originally misspelled Mitt Romney's last name.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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