I’m taking a break from the ordinary focus on this blog to chime in on the momentous Supreme Court decision UPHOLDING President Obama’s landmark health care reform law in its entirety.
First, is this a “Dewey Defeats Truman” moment for CNN?
Second, on a more serious note, here’s the clearest explanation you will read for why the decision is important.
It’s important because if the Supreme Court had struck down the individual mandate, we may well have seen a complete collapse in the health insurance market. Here’s why:
The health care law prohibited health insurance companies from denying coverage to people with pre-existing conditions, and also bans the practice of “recission”, whereby an insurance company cancels your health care coverage as soon as you get sick and actually need it. Almost everyone, conservatives and liberals, agree that these practices are wrong.
But what most people DON’T realize is that in ordinary circumstances, these unsavory practices are in fact critical to the very existence of a private insurance market. The whole point of insurance is to combine sick and healthy people in the same risk pool, with the healthy people effectively subsidizing treatment for the small percentage of those who get sick.
So if someone who is ALREADY SICK applies for insurance, it would make no sense for an insurance company to give them a policy because it would be guaranteed to lose money: the sick person is 100% guaranteed to need more money to pay for coverage than they will pay in premiums.
So now, imagine that insurance companies are REQUIRED to cover people with pre-existing conditions. Why would anyone choose to buy insurance before they got sick? You know you can just take your chances and save your money, because if you never get catastrophically sick, why spend money on premiums? And if you DO get sick, the insurance company HAS to cover you if anything bad happens.
In this world, insurance companies would lose their healthy customers, and be stuck with only the sick customers who actually need insurance – and cost the most to insure. Premiums would skyrocket to cover their costs, and eventually insurance companies would go bankrupt.
That’s why the Individual Mandate requiring everyone to buy health insurance was so critical. It’s sort of a grand bargain: people with pre-existing conditions are protected, but in exchange you have to buy insurance to preserve the market.
So if the Mandate had been struck down, we would have probably seen one of two outcomes: (1) a collapse in the insurance market, leading to the federal government taking it over and establishing a single-payer system, or (2) the states would have stepped in and created their own individual mandates to preserve health insurance for their citizens, meaning 50 different regulations to comply with: a costly administrative nightmare for insurance companies.
Hence, why conservatives should rejoice: the Individual Mandate is better for business, and prevents a government takeover of health care!
Finally, on a PERSONAL note, I wish to express my personal gratitude to Chief Justice John Roberts for casting the deciding vote. See, I have been in Africa working for startups for the last year. Right now I am insured by International Medical Group, paying about $54 a month out of pocket. But if I were to get cancer or injured in a motorcycle accident, requiring long-term treatment, it could be tricky upon returning to the US to get coverage (and most personal bankruptcies in the USA are caused by medical problems).
Thanks to the Supreme Court decision, I now know I will always be able to get good health insurance when I return to the States – even if I am not working for a big company or decided to start my own. So Chief Justice Roberts, webale nyo ssebo!