Just over 30 years ago, 36 insurance companies stopped writing policies in Washington, D.C. The issue was AIDS and the D.C. City Council voted to prohibit HIV testing of insurance applicants. At the time, insurance companies testing for the AIDS virus were deemed discriminatory to homosexuals. The three-dozen insurance companies argued that to not screen for the disease was not only bad business practice but defeated the whole idea of the insurance market.
Insurance is all about managing risk. Actuaries are paid a lot of money to determine risk and decide whether or not an applicant should be covered. The insured pay premiums to the insurance company based on their health status. For every negative health factor premiums are increased. If you smoke, you’ll pay higher insurance premiums than a non-smoker. This is why those insurance companies quit writing policies in Washington, D.C. 30 years ago when they were prohibited from testing for HIV. When an insurance company cannot manage its risk, it quits being an insurance company.
When Obamacare was passed into law the insurance market became extremely complicated. Requiring insurance companies to accept patients with pre-existing conditions damaged the ability of insurance companies to manage risk. If I have no health insurance and then develop cancer, apply for insurance and the insurance company is mandated to assume this pre-existing risk, it will lose money, all things being equal. Mandates negate management. When you have no choice in the matter, you have no control in the matter.
Of course, the way around the Obamacare mandates was to reimburse insurance companies – or, rather, subsidize higher premiums to help pay insurance companies for their inevitable loses. Several large insurance companies still could not keep up with the losses incurred from Obamacare. And, so, a Republican Congress and a new Republican president have insisted that they will repeal Obamacare. But don’t hold your breath.
President Trump – the man who has long supported single-payer health insurance (meaning government health insurance for everyone) – changed his tune on repeal of Obamacare to “repeal and replace,” a more reasonable sound bite he adopted from the RNC once it was clear he was the Republican nominee. Since his election victory, Trump added that he’ll keep the more popular parts of Obamacare – meaning he will keep pre-existing conditions and the 26-year-old dependent rider. Presumably, that meant Trump was going to get rid of the unpopular part of Obamacare: the individual mandate. Now, Trump tells Americans “we’re going to have insurance for everybody.” He recently said, “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.” Everyone “can expect to have great health care. It will be in a much-simplified form. Much less expensive and much better…they’ll be beautifully covered. I don’t want single-payer. What I do want is to be able to take care of people.”
Here is my prediction: Obamacare will not be repealed. It might be amended but there is no way Congress will undo the popular pre-existing conditions and the dependent rider. In other words, Obamacare will not be repealed or replaced. In fact, failure of this Republican Congress and president to repeal it will lead to two things. First, Republicans will lose big time in the mid-term election and, second, their failure will lead to a single-payer system. Republicans will try to nuance it and message away their failure but to repeal and replace must include getting rid of two of the most popular aspects of Obamacare and that is a bridge too far for the mid-term election.