MNSure, Minnesota’s health insurance exchange, is up and running as of October 1st. It is hard to believe that it only took 1029 days since the Affordable Care Act was signed into law for the exchanges in the act to be up and running. Although this law has been the most ferociously opposed piece of legislation in recent history, it is still on track to be fully implemented as originally designed. Besides the questionably unconstitutional delay of the employer mandate, Obama’s signature law is going full steam ahead.
For those curious as to what MNsure has been designed to do, it is meant to provide a “marketplace” for individuals to apply for and purchase health insurance. There is no need to fret about being denied coverage due to preexisting conditions as it is illegal for the insurance companies in the exchange to do so.
The most obvious problem with the exchange’s design is likely to be its fatal flaw. Because the insurance issued must cover preexisting conditions, the pool of applicants will contain many more high cost individuals. In order to compensate for this without discriminating, the cost of the insurance must be higher across the board. The net effect is that healthy individuals subsidize individuals that are at much higher risk. In order to contain these costs, MNSure has been tasked to convince healthy individuals to sign up on the exchanges despite the fact that the healthy individuals will be effectively subsidizing the individuals with preexisting conditions. Taxpayers end up on the hook paying to convince taxpayers to purchase health insurance through the exchange.
A penalty for not having insurance is meant to goad healthy individuals to sign up for the plan, but as the penalty currently stands, it is still cheaper for healthy individuals to forgo health insurance altogether. These individuals tend to be younger people whose most likely health care costs are from external factors such as car accidents.
Even if this system worked exactly as intended, it will never be efficient. By mandating coverage of preexisting conditions in health insurance plans, the definition of insurance is defunct. The proper use of insurance is to protect against insurmountable losses. The system set up through the Affordable Care Act perpetuates the longstanding flaw in the American Healthcare system. While people act as if they are paying for health insurance, all they are buying is prepaid healthcare. The only true insurance on the market for healthcare are policies with very high deductibles. Until Americans start demanding real insurance, it is unlikely this problem will ever be solved adequately.