Obamacare Will Not Work, Regardless of Supreme Court Ruling

Monday marks the start of the Supreme Court’s three-day review of the controversial Affordable Care Act. If the Court deems the Act constitutional, it is likely that the Act is here to stay, in spite of the lamentations of Republican presidential candidates. However, constitutionality and effectiveness are not one and the same. The question still lingers: Will Obamacare work?

The ambitiousness of the Act inherently creates multiple areas that can succeed or fail independently. This article will analyze just one: the provision of health insurance for individuals with preexisting conditions. 

If the goal of Obamacare was to simply provide such individuals with health insurance, then it would obviously achieve this goal. However, I believe the goal was to provide such people with “reliable” health insurance. If this is the case, then it is less certain that Obamacare can achieve it. In fact, under the system of regulations installed by Obamacare, people with preexisting conditions will receive intentionally undermined and misleading health insurance that is far from what President Obama envisioned.

Under the Obamacare regulations, insurance companies are required to offer health insurance to everyone regardless of preexisting conditions. In response to this, some who oppose Obamacare will cry foul and say that enacting such regulation would destroy competition. I disagree. This regulation actually creates competition, but it’s not the kind of competition that anyone would want.

Everyone understands that insurance companies are likely to loose money on people with preexisting conditions and that the extra income due to the individual mandate is meant to counteract this cost. That being said, companies will still try to lower their costs as far as possible, and because of the Obamacare regulations, the easiest way they can do so is by reducing quality. Companies will effectively compete to offer the worst insurance coverage to people with preexisting conditions, because doing so will save them the most money.

Imagine an insurance company operating under Obamacare. It is run by ethical people with strong morals and offers standard insurance coverage to people with preexisting conditions. Now imagine a competing company that acts as all businesses do. Even though they cannot refuse to offer insurance to people with preexisting conditions, they can reduce the quality of the insurance they receive by limiting the providers patients can see to those that offer cheap, low quality service -- a process they already use.

People with preexisting conditions will obviously prefer the first company, resulting in a disproportionate distribution of the added costs. The first company is now forced to decide between lowering the quality of the insurance they offer to people with preexisting conditions, which in turn will lower their costs, or succumb to overload of costs and exit the market. Either way, people with preexisting conditions are left with misleading, unreliable, low quality insurance.

Assuming my illustration holds true in reality, it would seem that Obamacare fails to achieve its goal to provide reliable insurance to people with preexisting conditions. With the Supreme Court’s ruling right around the corner, we will soon know if Obamacare will be a part of reality at all.

Thanks to the Cato Institute event: Obamacare in the Supreme Court. (A video of the event will be uploaded to the link soon.)

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Ian Yamamoto

Ian is a Public Policy major with a minor in Law, Science, and Technology from the Georgia Institute of Technology. He has studied at Oxford in the UK and has interned for the trade and immigration department of a think tank in Washington, DC. He has two years of research experience with open source software and economic freedom. His current focus is on using technology that enhances voluntary exchange, such as the internet, to advance political interests and economic knowledge.

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