What Is Health Insurance Legislation Going Cost You?

The media’s focus in the health insurance reform has shifted from one issue to another—the public option, Medicare buy-in, abortion funding, and the impact on the deficit. Some news outlets picked up on the point I have been making here about the long-term consequences of mandating health insurance policies that violate the basic tenets of actuarial science.

As the Senate proceeds toward passage of a bill on Christmas Eve, the media and the Congress remain silent on the most important question of all: How much will health care insurance legislation cost each American?

How much will it cost you?

Premium amount is a crucial factor in choosing health insurance. The goal of health insurance is to protect a family from a financial catastrophe, not to create one. Premiums that are too high can break a family’s budget. Debt is debt, whether you get there premium by premium or all at once in a sudden medical disaster. That is why I always seek the “sweet spot” in a health insurance policy that provides essential benefits tailored to a family’s needs while fitting comfortably within a its budget.

Forcing, coercing, or even allowing a family to buy a policy beyond its means is not sustainable.

Yet that is what Congress appears to be doing. Through its mandates, Congress is requiring every person too young for Medicare and too well off for Medicaid to buy a health insurance, without anyone knowing what it will cost them.

It’s as if I were to ask my new clients to hand me a blank check, promising to fill in the premium amount once I know what it is.

There can only be one reason for the secrecy: Premiums will go up.

Costs are bound to rise, because of the mandates in the legislation, such as requiring health insurance companies to insure those with advanced diseases and limiting the amount older people can pay to just three times the amount younger people pay, even though older people consume five times the benefits.

To accommodate these government mandates, health insurance providers will raise premiums on everyone—not just on those with high-end policies. As I have written here, younger workers will bear the brunt of the premium hikes.

How much premiums will rise is anyone’s guess. Even after the Senate’s health reform bill passes, congressional leaders will have to reconcile it with the bill passed by the House of Representatives. Amazingly, no one will know the cost of the health insurance legislation until it becomes law.

We might not know even then, because the first estimates will be based on assumptions about behavior—assumptions that might prove false. The earliest forecasts of individual costs will assume that the vast majority of the uninsured will sign up for health insurance rather than risk fines or jail, which the legislation mandates. But will they?

I doubt it. We don’t know how much the fines will be, but right now they are about $750 a year—far less than premiums will be. With unemployment at 10 percent nationwide and 12 percent in California, millions of families will opt to pay a fine than assume the new premiums.

This is especially true since the legislation simultaneously takes away one of the biggest motivators for getting insurance: fear of uninsurability. By guaranteeing that even those with the most serious illnesses can get health insurance, the new law assures scofflaws that they will have insurance when they really need it.

Lack of participation in the program create an enormous shortfall in insurance receipts. Congress will have no choice but to increase the penalties. To stay solvent, the insurance companies will have to increase premiums as well.

I will keep an eye out for estimates on what the legislation will actually cost an individual. I urge you to do the same—and share that information here in form of a comment.