The “mini-med” plans run afoul of the legislation for two reasons. First, insurance plans must spend at least 85% of their revenue on medical care (David Leonhardt, “Health Care’s Uneven Road to a New Era”). This is a big hurdle for insurance plans geared to young, healthy consumers. After all, a $200 medical bill for a simple checkup is likely to have much the same administrative cost as $200,000 bill for bypass surgery. Second, the new health care legislation requires that companies provide a minimum of $750,000 in coverage in 2011, increasing to $1.25 million in 2012, $2 million in 2013 and unlimited in 2014 (Drew Armstrong, “McDonald's, 29 other firms get health care coverage waivers”). That amounts to a huge salary increase for low skilled workers. The mandated increase in salary will result in less demand for low skilled workers and an increase in the price of goods and services that they produce. Leonhardt gives a good positive description of mini-med plans and their limitations mixed with his normative views in the article linked above. Three sentences exemplify many of my objections to healthcare reform.
…people will be required to buy insurance, to spread costs among the sick and the healthy. Second, insurers will be prohibited from cherry-picking only the healthiest customers, again to spread costs. Finally, the government will give subsidies to people, like McDonald’s workers, who can’t afford insurance on their own.Leonhardt puts much less value on freedom and trust in markets than I do. Words like “people will be required to buy” and “insurers will be prohibited from” make me cringe. Who is the government to tell me what I need to buy or designing products for private companies? Nor do I have a problem with cherry-picking of the healthiest consumers. That leaves a market segment for insuring the chronically ill, a group more deserving of subsidies than workers who are generally young and healthy. In fact, most analysis that I have read conclude that the young will subsidize the old and the ill. Finally, the government may “give subsidies to people” but they do so with taxpayer money.
In regards to the reform in general, it weakens market incentives that would lead consumers to watch medical costs and providers from producing low cost products because taxpayers will subsidize insurance plans with unlimited costs.
Taxpayers and healthcare consumers would have been better served by legislation that increased market incentives. See “More on Rationing Health Care” for a short explanation of how the tax code weakened market incentives for healthcare and a comparison of government rationing vs market rationing of healthcare.