Obamacare’s Perverse Incentives

The Wall Street Journal reports that some businesses may be moving towards plans that meet Obamacare’s minimum requirements, and little else:

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.

Experts worried that plans lacking hospital or other major benefits could leave workers vulnerable to major accidents and illnesses. “A plan that just covers some doctor visits and preventive care, I wouldn’t say that’s real health-insurance protection,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation and former federal health official.

This, of course, is precisely the opposite of what we should be encouraging.  These plans pay for routine and predictable expenses, which means you’re paying for 100% of those costs, in addition to the administrative expenses for such plans.  As Ms. Pollitz notes, they leave you just as vulnerable to financial catastrophe.  In the meantime, the young and relatively healthy, who benefit most financially from catastrophic insurance, and the least physically from these base-bones plans, will be increasingly priced out of such coverage.

And while paying for as many expenses out of pocket as possible is the best way to control prices (assuming it’s accompanied by posted prices and performance comparisons), that manifestly isn’t true for ruinous expenses like emergency hospitalization, where the difference between 2X bankruptcy and 3X bankruptcy is meaningless.

In this case, Obamacare’s effects are useless on one hand, and worse-than-useless on the other.

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