Dissecting the President’s Health Plan
September 10, 2009
Tonight President Obama laid out what he wants to see in health insurance plan. Here are the details.
If you have insurance you will be able to keep it
I am skeptical of this due to some of the other points of his plan. One thing that people need to understand is that in order for an insurance company to survive they must make a profit. This contrasts with the government who can keep running deficits and printing money.
Mandates on Insurance Companies
Under the President’s plan insurance companies must:
- cover those with pre-existing conditions
- cannot drop coverage
- cannot have caps on their coverage
- would limit the amount a person would have to spend out of pocket
- Must cover an increased number of preventative and diagnostic procedures
- Would tax insurance companies who did not offer affordable coverage
If we have established the notion that an insurance company must make a profit in order to exist I am not sure how they will be able to contain their costs with these mandates. So if we can conclude that the insurance companies cost would rise we can be certain that they would have to raise their fees in order to survive. The trouble is that if their fees go up too much they will not be able to compete with a public option. As more people move to the public option it will become even harder for the insurance companies to compete as they will still be forced to contend with a higher cost structure with diminished revenues.
A Public Exchange on Insurance
This would be a new term for the public option. The public option would cover those who did not currently have insurance. This option would be funded with taxes levied on businesses who did not offer their employees insurance and a tax on persons who did not purchase health insurance. The current proposal calls for an 8% payroll tax on employers. The 8% tax is curious as most employers who offer insurance pay around 10% or more of their employee’s wages for health insurance. I believe the rate has initially been set low in order to entice businesses to drop insurance and begin the movement of people to the public option.
New Taxes and How Much Will This Cost
The President was not specific here, but the bill that passed committee imposed an excise tax of up to 5.4% on persons earning more than $300,000. In order to pay for this plan it is hard to imagine that taxes will not go up despite the President’s claim that the plan will not add a dime to the deficit. The non-partisan Congressional Budget Office believe that the implementation of this plan will baloon the deficit to $10 trillion dollars.
I think healthcare can be reformed, but there are better ways to do it which I will suggest in my next post.
