Obamacare Courts

The question in the news about Obama care is what happens if the court rules it unconstitutional. The administration admits they have no plan B but they claim the Republicans don’t have plan either. If this happens we will be back where we were before Obama care where most people had coveage Polls show that 85% of Americans have insurance and most of these are through their employer. Polls also show that most are satisfied with their plan except for the rising cost. The problem we face is two-fold. First, is how to cover the 15% who are not insured and second, how to keep the cost from rising at twice the inflation rate. Let’s look at the 15% or the 50 million who are uninsured. One fourth of these are young people who work and could afford health insurance but choose not to buy it. One fourth are people who are eligible for Medicaid but do not sign up even though its free because they can sign up after they get sick as it has no preexisting conditions clause. These are not included in the 50 million people who are currently on Medicaid. One fourth are illegal aliens and finally one fourth are people who need coverage but cannot afford it. The solution is now in two parts. First is getting money to the 12 million who cannot afford insurance and second bringing the cost under control for the 85% who have insurance. I will cover the second problem first as it leads to the solution to the first problem. In three words the reason health care cost increase at twice the cost of living are “third party payer”. To explain what that means consider having a food insurance policy. You buy a food insurance policy and you pay a stipulated monthly premium just as you would for health insurance. You go to the super market and pick out your food and at the checkout counter you present your food insurance card and the store sends a bill to the insurance company. As time passed you would become more and more concerned about the quality of the food and the location of the store and less and less concerned with the price. This is just what has happened with health cost. I know people who actually joke about the 4 dollar aspirin and the 2 dollar cotton ball on their hospital bill. They don’t care about the cost since there is a third party that pays the bill. In order to present the solution to this problem I will use a typical large private company as an example. This company pays about $15,000 per year per family for health care. It is a typical plan with a small deductible, a co-pay and a stop loss. Putting in numbers the employee pays an annual family deductible of $200 and 10% co-pay and when the out of pocket expenses reach $1000 the co-pay stops. This means the maximum any family will pay in a given year is $1,200. The company sets up a new plan. The employees will now be responsible for the first $5,000 of health care expenses each year. Everything over $5,000 is paid by the insurance company. The company will put $5,000 into a tax deferred savings account for each employee, the money to be used to pay for medical expenses. This is called a Health Savings Account. The company saves the other $5,000 and that is their incentive to set up the plan.