You may have heard a lot about Obamacare, but you might not know the many reasons that it is a great law. PHOTO: Reuters
You have probably heard a lot about Obamacare recently, but the discussion has largely been the right saying Obamacare is awful, the left saying shutting down the government over Obamacare is awful, and the mainstream media saying that the two sides will never agree on anything. What few are bothering to point out: Obamacare is great. It’s not without its flaws, complications and potential issues, but on the whole it is a massive improvement to the American healthcare system. Here are seven reasons why:
1. The 80/20 rule
The most consequential, least talked-about provision in Obamacare is the 80/20 rule. You have encountered the 80/20 rule if you received an unexpected check in the mail from your insurance provider. Under Obamacare, insurers must spend at least 80% of their revenue on providing healthcare. Overhead, marketing, lobbying and all other expenses have to fit into the remaining 20%. Americans spend more for our healthcare than any country in the world, and a big reason are the enormous profits insurance companies draw out of the system. There’s nothing wrong with having a profitable business, but insurance companies have a monopoly on being the healthcare middle man, and they have used that as effectively as a casino uses a rake. Obamacare’s 80/20 rule counteracts that.
2. No co-pays on preventative care
Under Obamacare, there are no co-pays for preventative services (except under certain plans which our grandfathered in). That means there are no co-pays for regular check-ups, vaccinations, blood pressure screenings, STD screenings, mammograms, even depression screenings, and more. Is this just a handout to please the masses? Hardly. Like so many things (cars, relationships, etc.) preventative healthcare pays dividends in saved costs down the road. People aren’t as inclined to go to the doctor when everything is basically fine, so preventative care is often not done. Obamacare tips the incentives toward doing more preventative work, which could be an enormous cost (and health) saver.
3. Parents can keep children on their insurance through age 26
Our insurance system is one of patches. Around World War II, employer-based health insurance became popular, but that left a number of groups uninsured, namely the young, the old and the unemployed. Today, many graduates struggle to find work, and when they do, are unlikely to get health benefits from their jobs for a number of years. Obamacare covers this patch by bringing a group that is often uninsured (22-26 year-olds) under the wing of a group that is much more likely to be (their parents).
4. Expanded Medicaid (with caveat)
Another patch: the Medicaid program is a staple of the American health system. It’s essentially government healthcare for the poor. Under Obamacare, Medicaid expands to individuals and families making under 138% of the poverty line. Both this patch and the last one alleviate many of the potential issues with Obamacare’s individual mandate, which says that everyone has to have health insurance or pay a fine. The caveat is that many Republican-controlled states refused to accept the Medicaid expansion as a protest to Obamacare (it doesn’t have much to do with balancing their budgets—the federal government pays for 90% of the expansion).
5. The health exchanges
If you have been hearing a lot of talk about October 1st and Obamacare, it’s because that’s when the health exchanges created under Obamacare come into effect. These are essentially marketplaces where insurers may offer their plans. Obamacare categorizes plans as “bronze,” “silver” and “gold,” and plans have to meet certain requirements to qualify for a given level. The exchanges create a more clear-cut marketplace where consumers can actually get a handle on what each plan costs and offers. Speaking of which, Obamacare requires that insurers explain the costs and coverage of their plans in plain English, so we lay people might actually understand what we’re signing up for.
6. No denial for pre-existing conditions
Under Obamacare, an insurer cannot deny someone coverage due to a preexisting condition. For a long time, people with preexisting conditions were kind of screwed: insurance companies only wanted them if they would be likely to make a profit off having them as a client (as is true with any client), but to make that deal worthwhile, premiums and deductibles would have to be enormous. That meant that anyone with a preexisting condition was faced with a choice to pay a lot now to an insurance provider, or pay a lot later when they have to go to the hospital without insurance. Obamacare opens the door for these people.
What’s in it for insurance companies? The individual mandate. The deal under Obamacare is that insurers get millions of new clients, some of whom they will likely lose money on (because they have preexisting conditions) and some of whom are young and healthy, and are a good bet for the insurers. The latter group is incentivized by Obamacare to get insurance because they will need to pay a fine if they don’t get it (on top of any health costs they happen to take on).
7. A potentially ground-breaking mix of public and private healthcare
Many wonder if Obamacare sets us inexorably on the path to universal government healthcare (which is the case in Canada and much of Europe). That may be the case, but if so, it will be a long time. In the meantime, Obamacare creates a unique experiment that combines government regulations with a private marketplace. To survive under Obamacare, insurers will have to find ways to save money, both for themselves and their clients, and to make healthcare itself cheaper. Will the engine of the free market drive new improvements in healthcare while providing insurance to almost everyone? Could this work better than the universal healthcare enjoyed by Canada and much of Europe? Under Obamacare, we may just find out.