Why Obamacare WILL Fail

One of the biggest reasons Obamacare WILL fail is the lack of insurance underwriting. For those who don't know what underwriting is, allow me to explain.

Underwriting is one of the aspects of insurance that makes most everyone's eyes glaze over. Underwriters deal with statistics - they’re number crunchers. Most people who have an insurance policy don’t even know that at some point their application passed through an underwriter’s hands.

An underwriter’s job is to make sure that the insurance company charges just the right amount for the coverage it provides. They figure out how much risk you represent, how much coverage the company can offer you, and how much that coverage should cost.

Insurance is based on risk. When you get an insurance policy, the insurance company is taking on some of your risk. For example, if you drive a car, you have a risk that your car will be damaged in an accident. Having auto insurance means that if the car does get damaged, the insurance company will pay for the repairs. By having a policy, your risk is lower.

The insurance company makes up for the risk it takes on by charging premiums and setting deductibles. If a company charges too little, it could go bankrupt when large claims are filed. But if a company charges too much, it will lose business to its competition.

Insurance companies, like any other business, want to stay competitive, not to mention open for business AND make a profit, so it's understandable why underwriting is important to them, as well as their customers. Keeping claim payouts to a minimum is a very important factor determining profitability. The role of underwriting in an insurance company's profitability cannot be understated. Underwriters assess the potential for future risk by analyzing various consumer reports, attempting to determine the likelihood of a policyholder or applicant making a claim.

In the People's Paradise of New Jersey, where I live (yay), health insurance underwriting isn't really underwriting anymore. Your individual risk to the company no longer factors into the process, and the result is ridiculously high premiums.

Without the ability to price health insurance plans based on your medical history, insurance carriers can't anticipate how much money they might have to spend. For people with serious health needs, this is an advantage because in states where medical underwriting is permitted, their premiums may be higher. Because insurance companies in New Jersey are not allowed, however, to adjust prices on most products for age, gender, smoking habits, and health status, prices tend to be very expensive even for the young and healthy. Consequently, health insurance rates in New Jersey are some of the highest in the country.

Since health insurance companies in New Jersey can't adjust rates based on past medical treatment, they have been authorized to price certain plans based on "Modified Community" data. For all plans except "Basic and Essential" policies, your age is the only factor that effects policy premiums. However, New Jersey health insurance companies also offer cheaper, limited-benefit policies called Basic and Essential plans that cover only the most major incidents and contain significant limitations on covered services. If the carrier's analysis of treatment and claims reveals patterns of increased use and risk in certain geographic regions or within demographic populations, Basic and Essential policy prices for an entire age group, a gender, or consumers living in certain areas may be increased.

This lesson was learned by Massachusetts, after it adopted its own skinny version of Obamacare. To meet the law’s costs, insurers hiked premiums. Massachusetts’ regulators blocked the increases. All the plans reported losses the very next quarter.

Massachusetts regulators went after the underlying source of spending – peoples’ use of medical services. First and foremost, that meant taking on the providers. Massachusetts moved to regulate the prices that doctors and hospitals could charge and the kind of services that they could offer. Rates are rising nationally because, like Massachusetts, Obamacare guarantees more free medical services while doing nothing to make the market for these things more efficient, or competitive. Again, like Massachusetts, some form of price controls is the next political chapter.

What happens when government sets price controls? Setting a maximum price generally will lead to lower supply. There will also be a shortage, demand will exceed supply; this causes consumers to want more of the product than producers have available. When the federal government restricted gas price increases in the 1970s, long lines formed at gas stations and only those motorists who waited long hours in line received the scarce gasoline. Price controls distort the working of the market and lead to over-supply (by setting a minimum price) or shortage. It's simple supply and demand; when you distort either, you have problems.

And guess what else has the same restrictions on underwriting as New Jersey and Massachusetts AND has the “Modified Community” risk assessment? If you answered Obamcare, you'd be entirely correct. Sounds great, doesn't it?

I honestly believe, without a doubt in my mind, that had King DingleBarry REALLY wanted to fix the healthcare industry's rising prices, removing the restrictions on the interstate sale of insurance, and allowing honest competition in the free-market, would have done wonders the likes of which government can only DREAM. And since we all know he just LOVES his Imperial Decrees (that's Executive Orders for the liberals out there), he could have done that with the stroke of his pen – no law needed.

This wanton destruction of 1/6 – 1/5 (depending on who you listen to) of the American economy isn't accidental or an unintended consequence of well-meaning incompetence. This is deliberate. What I want to know is when people are going to WAKE UP!!! ~ Hunter