Preparing for 2014: Questions for ObamaCare’s Opponents

As a confident critic of ObamaCare from its genesis, I’m impressed that the law remains unpopular and that the American people appear ready to scrap it and start again. Last March, a senior bureaucrat in charge of rolling out ObamaCare fretted about a “third-world experience“.

ObamaCare’s opponents have managed to keep Republican politicians unified against the law. The only tactical question is whether the GOP can credibly threaten to “shut down the government” during the forthcoming debate over the Continuing Resolution (the legislation that funds the government in the absence of a budget).

It’s been a good three and a half years for ObamaCare’s opponents. Nevertheless, outside the political realm, businesses and investors are behaving as if ObamaCare is hardened concrete. Although ObamaCare’s opponents have overwhelmingly succeeded in convincing society of the law’s drawbacks, it is not at all clear that society is ready to accept a more free-market alternative reform.

Indeed, some of the approaches used against ObamaCare might have unintended consequences that will appear in 2014, the law’s first fully operational year, which would make repealing and replacing ObamaCare extremely difficult.

Here are a few friendly questions for ObamaCare’s opponents:

First: We’ve spend a lot of effort convincing people that state-based health-insurance exchanges will be a disaster, and succeeded in blocking their establishment in many states. To be sure, they are an unnecessary bureaucracy, but do we really believe that enrolling in the New York Health Benefits Exchange or Cover California will be the worst thing since unsliced bread? It won’t be like shopping on, but I’ll bet it will be easier than doing business with the DMV. The New York Times recently reported on exchange outreach efforts in Colorado (a pro-ObamaCare state) and Missouri (an anti-ObamaCare state). The take-away: In Colorado, it’s almost impossible for people to avoid learning how to enroll in the exchange, while in Missouri it’s been extremely difficult to get information. Most people will not be interested in how much it cost taxpayers to set up and operate the exchanges. Do we really believe that when ordinary Missourians learn from their Coloradan friends that their state government has helped them get federal tax credits for health insurance, that they will reward Show-Me state politicians for trying to block them?

Second: We’ve believed that if a state declined to establish an exchange, the U.S. Department of Health and Human Services would not be ready to operate one in 2014. That might have been credible until recently, when it became clear that the federal exchanges will be run by for-profit businesses, including eHealth, Inc.’s stock jumped 28 percent on announcement of the federal contract. eHealth, Inc. has operated for 13 years, was listed on NASDAQ in 2006, and is consistently profitable with an operating margin around 9 percent. Do we really believe that companies like will fail to enroll as many exchange beneficiaries as possible? Do we really believe that if state politicians try to hinder residents from applying for federal tax credits through’s portal, they will be rewarded at the next election?

Third: We’ve consistently emphasized that the young will suffer dramatically higher premiums under ObamaCare, because premiums cannot vary much by age. According to an analysis by actuaries at Milliman, premiums for twenty-somethings will increase by 9 percent. However, premiums for every other age group will drop. Forty-somethings will enjoy a 17 percent reduction in premiums. Do we really think that the politicians who passed this law did not anticipate this? In the 2010 election, 17 percent of eligible voters aged 21 through 24 voted. 41 percent of those aged 25 through 34 voted. But 81 percent of those aged 45 through 64 voted. Can we not see that the limits on age-adjustment, which will cause “rate shock” for young people, actually benefit the politicians who imposed them?

Fourth: We’ve consistently exposed the Administration’s inaccurate claim that “if you like the plan you have, you can keep it”. We’ve anticipated that many businesses will drop coverage and throw their employees into the exchanges. In doing so, we’ve inferred that employer-based coverage is a good thing. Haven’t we struggled for years to persuade people to understand that their employers do not actually pay for coverage, but just control and limit our choices? Haven’t we struggled for politicians to take up tax reform that allows individuals to choose our own health insurance? How will we pivot back to this position after four years of attacking ObamaCare for achieving exactly that goal (for some of the people)? How will we convince risk-averse politicians to embrace a policy of individual tax credits, when we’ve been telling people that they should cling to their employer-based benefits?

ObamaCare is a bad law, and I recognize the tremendous efforts of so many to repeal and replace it. Nevertheless, our tactics have introduced risks that we will have to manage carefully as ObamaCare rolls out in 2014.

Comments (21)

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  1. Cabaret says:

    All great points!

  2. Ashley says:

    Yeah! Young people need to get out and vote!

  3. Qwerty says:

    Do you think standing in the way of Obamacare (after passage) will benefit the people?

    • Tim says:

      Only time will tell the true effects of the law. I think some people will legitimately benefit from it while others won’t as much and while others will take advantage of it.

    • Boswell says:

      …yeah…saving people money and decreasing inflation of the dollar is pretty beneficial to the people.

  4. Studebaker says:

    If the problem were easy to solve, we probably wouldn’t be having this discussion. At some point we have to preach the unpopular gospel of individual responsibility. People need to begin saving when they are young so they have medical funds set aside for them they get old. This is the only solution to cross subsidies.

    Conservatives also need to admit the self-evident truth that people make decisions every day that are adverse to their health. The logic follows that it is acceptable then for people to make (bad) decisions to spend money on booze rather than on medical checkups. Thus, is it is not necessarily bad when people forgo care because they didn’t want insurance (i.e. it’s a revealed preference for another good or service).

    Free market people are fighting a losing battle because we’ve accepted the goals of socialized medicine as superior to consumer preferences.

    • Tim says:

      Your solution seems pretty easy to me. Probably reason why it’s not all realistic or doable or the best solution. All of it is beyond political economic theory.

  5. Sammy says:

    The Obama admin has been completely unable to convince the public of the necessity to implement obamacare.

  6. Greg Scandlen says:


    On the first and second points, yes eHelthinsurance is an excellent web site for comparing plans. It is far better than what the states are trying to do, so I would not be sanguine about how wonderful the Colorado experience will be. Related to that, the web-based comparisons are just a small portion of the Exchange responsibilities. How well do you suppose the federal data hub will work? Or the application process? Or the value of the insurance offerings themselves? Or how much the much-vaunted subsidies will actually reduce premiums? I will continue to insist this thing will be a disaster and state politicians will want to get as far away from it as possible.

    On your third point, you are looking at the Milliman chart much differently than I am. The 9% is for young (21-29) women only, for young men it is 56%. It is 49% for men of 30-39, and 16% for men of 40-49. The 17% drop for forty-somethings is for women ONLY. Now, keep in mind the currently uninsured are overwhelmingly young and male. These guys aren’t buying coverage NOW, why would they be more likely to buy it when it is 56% to 49% MORE expensive?

    On the fourth point, yes moving away from employer-based coverage is a good thing, but the way to do it is level the playing field so that employers and employees can make rational decisions about which way to go. That is not what this is. This not only incentivizes employers to drop coverage, but also to reduce hours and reduce payrolls.

    Your questions are not that hard to answer.

    • John R. Graham says:

      How will the federal data hub work? Probably by using an IT vendor similar to the one who managed to communicate to the California DMV in 2005 that I had an outstanding fine for a moving violation in Vermont in 1985. That was the year I immigrated to the U.S. and got my first U.S. driving license.

      eHealth Inc.s stock did not pop 28 percent because investors thought it would act like a government bureaucracy. They will fill out the application for you and all you’ll have to do is click once or twice.

      With respect to the young men, I don’t think they’ll enroll, but that is irrelevant. They could not care less about health insurance one way or another, so they will not get involved in the public-policy debate over the future of Obamcare. What happens to their premiums is not a significant factor in the future of Obamacare.

      • Greg Scandlen says:

        No, John. Fact is you misrepresented the Milliman data. You claimed it said one thing when in fact it said something very different. You can’t just dismiss young men as unimportant. THAT IS WHO IS UNINSURED! If they don’t participate, everyone’s premiums go up and the women will not get the better deal you portray. If they don’t participate, the numbers of uninsured will rise, not be lower.

        eHealthinsurance? When I got coverage through them, they did not fill out the application for me. And I was not called upon to share confidential financial information with them. It was strictly a comparison of plans. Will that change? Maybe. But then it will no longer be the friendly service it has been in the past. Sure their share prices skyrocketed. Not because it will work well, but because they will rake in oodles of federal money whether it works or not. It’s called rent seeking — something you used to know about.

        The federal data hub? First, it has to merge data from the IRS, state Medicaid programs, Homeland Security, DoL, and several other agencies. Good luck with that. Second, it is foolish to just say they’ll use an IT vendor and all will be well. The UK just wasted $12 billion using that assumption for its HIT program for the National Health Service. The vendors were no more competent than the government agencies they served. They scrapped the whole thing and have nothing to show for it.

        • John R. Graham says:

          I regret and apologize for misreporting the Miliman estimates by not specifying women in the paragraph above.

          According to the Commonwealth Fund’s “Young, Uninsured, and in Debt” report (June 2012), 20 percent of men aged 19-29 were uninsured, versus only 13 percent of women aged 19-29. The survey was conducted in 2011, so the “slacker care” provision of PPACA, which obligated coverage of dependent children to age 26, had just taken effect. 9 percent of the young men had taken advantage of this, versus 19 percent of the young women.

          However, only 9 percent of the young men and 8 percent of the young women had individual coverage, versus 61 percent of young men and 60 percent of young women who had employer-based coverage (including through a spouse), military coverage, or a public program.

          I must continue to insist that the premium shock for young people will have little consequence to the politicians who imposed it.

  7. Ian Duncan says:

    Regarding your first point about unsliced bread and state health exchanges, what you miss is that a government-run exchange is exactly that. The heavy hand of government interference and the unequal bargaining that it entails will always be there. A private exchange with equal bargaining power on both sides does not suffer from this problem.

    • John R. Graham says:

      Yes, but that is also irrelevant to the future of Obamacare. How long has the DMV been a government-run disaster? And you have to go there in person! I don’t see anyone proposing reforms to the DMV.

      Actually, here’s one: Allow licensed auto insurers to issue licenses for both the cars and drivers. Not too crazy when you think about it, is it? If State Farm tested you and checked out your vehicle, don’t you think it would be an immeasurably better experience?

      But you’ll never hear a politician propose it, because once the state occupies territory, it almost never retreats.

      I’m just saying that emphasizing the administrative hassles of enrolling in an exchange is likely to result in a “ho-hum” from the median voter.

  8. Bill Hammett says:

    Very good article and all great points that we must deal with as we try to improve on the law. One thing I want to point out regarding rates is while the rates might night be as high as people think, the biggest change everyone will see is the doctor networks massive shrinkage. With rates and plans heavily regulated, the only place for insurers to adjust in order to be competitive is through doctor networks. Here in CA we have already heard from some of the major players that their PPO networks will resemble Medicaid networks. That will be the biggest shock to your average consumer.

  9. Patrick Pine says:

    Very good discussion John. I still think the alternative that should have been, but still could be, considered – whether by a ‘conservative’ or a ‘liberal’ was and is to have governmental, tax financed “catastrophic care” but leave much of the rest relatively untouched. John Kerry briefly mentioned this when he ran for President but little attention was paid to it.
    The reason virtually every insurer has to find a group of good actuaries (there really are not many of these in the entire country) is to figure out how to avoid being hit with the “catastrophic” costs – which is the real reason for preexisting condition limitations. This is the same reason self insurance is risky for smaller groups and the reason that stop loss insurance can be relatively costly. The reason Medicare is struggling is because such high proportion of its costs are for “catastrophic” care cases. If we could construct a governmental reinsurance or stop loss facility – many of the problems that proponents of ACA tried to attack with multiple individual components would be unnecessary. Then we could allow many of the “market” mechanisms you espouse to work.

  10. Greg,
    Did women’s premiums increase by so much less than men’s because they were higher before the ACA because they use more services? So when the ACA required gender-neutral premiums the net result was high increases for men and small increases for women?

  11. John R. Graham says:

    I would like to note that I spoke with an executive of eHealth, Inc. yesterday, and he confirmed that eHealth, Inc. will be paid commissions per enrolee by U.S. DHHS. The firm is not going to earn a flat fee like they did under their previous contract.

    (I did not quite see this in black and white in the 8-K filed at the end of July. Nevertheless, the executive told me that this is public information.)

    This supports my conclusion that EHTH and other web brokers have every incentive to sign up as many people as possible, and not just sit around twiddling their thumbs.