Shaky System

Without healthy, willing participants, Obamacare doomed to failure

Back in 1935, President Franklin D. Roosevelt signed the Social Security Act into law. The idea was that those working would contribute a portion of their pay toward an old-age retirement trust fund. From the start, the idea was payroll deductions from current workers would cover payments to those already retired.

And it worked, as long as there were plenty of workers to keep paying in. But as people started living longer, the number of retirees grew larger in relation to the workforce. That’s a major reason we are seeing problems with Social Security today.

Which brings us to President Barack Obama’s signature health care law—The Patient Protection and Affordable Health Care Act, commonly called Obamacare.

We are starting to see more about what’s in store as state insurance exchanges prepare to open on Oct. 1. The plans range from the most basic, called a bronze plan, to the most comprehensive, called a platinum plan. Two other plans, silver and gold, make up the mid-range.

Actual prices for insurance will vary with age and region, but according to the Arkansas Insurance Department, the base price for a bronze plan for a single 30-year-old individual in the state will be $284.74 per month.

Of course, thanks to a wage-based tax credit, many won’t pay the full amount.

Should that person make $22,980 a year, he or she would pay $120.65 a month for a basic health insurance policy. A monthly tax credit of $164.10 would cover the rest of the premium.

Should the same individual make $28,725 per year, the monthly payment would be $192.70 and the monthly tax credit would pay the remaining $92.04.

Sounds like a pretty good deal. But is it?

We won’t know all the details of the various insurance plans until Oct.1, but you can count on a high deductible and high out-of-pocket expense on the most basic plan levels. So what does the individual get for the money?

For the most part, it looks like a backup in case of catastrophic health conditions. And what young, healthy person thinks that is ever going to happen?

Working folks—especially single with no kids—pay their share of income taxes, both state and federal. And they pay utilities. They likely have a car payment. They may pay property taxes. And they might have a hefty student loan obligation as well.

Affordable is a relative term. A couple of hundred bucks a month might sound affordable to some folks, but to others already struggling to make ends meet, it can be a life-changing expense.

Obamacare is built pretty much on the same idea as Social Security—premiums from younger, healthier Americans will subsidize those with pre-exisiting conditions and chronic health problems.

But there is a big difference. Social Security is not a choice. The money comes off the top of the paycheck, just like income taxes.

Obamacare offers an escape plan—a one-time fine the Obama administration and the U.S. Supreme Court have now decided is really a tax to make it legal. The fine is about equal to one month’s insurance premium.

We wonder how many younger, healthier Americans will decide its cheaper to just pay a one-time fine than shell out cash each month?

If too many decide that’s the way to go, then the whole house of cards will fall.

From what we can see, Obamacare looks pretty good for those with preexisting conditions such as cancer, heart disease, diabetes and the like. Those Americans have a hard time finding heath insurance and pay very, very high premiums when they can find a company willing to take them.

But those folks can’t sustain Obamacare. It will take healthy people willing to pay into the system. And there is no guarantee they will be there.