Thursday, February 14, 2013

Obamacare Supporters Feel the Fear

Well at least we've solved the coverage issue. 

Obamacare Supporters Feel the Fear

Obamacare supporters are unleashing a massive public relations campaign, turning to political networks and sports teams to help them sell the new law to a skeptical public. For the Affordable Care Act to succeed in expanding the ranks of the insured, many of the 30 million currently uninsured need to purchase an insurance plan in the new exchanges the law sets up. But advocates worry that it could be difficult to convince people to sign up for coverage. The WSJ reports:

According to backers of the law, enrollment faces big obstacles as polls and focus groups suggest a majority of uninsured people aren't aware of the new coverage options or the availability of subsidies toward the cost of health insurance premiums. Many respondents also say they have had bad experiences with finding health insurance or paying medical debts.

"This is a very skeptical audience," said Rachel Klein of Enroll America, a nonprofit group set up by the founding members of Families USA, a group that campaigned for the law's passage.

While Enroll America is relying on door-to-door grassroots political action to build support for enrollment, other states are using celebrity power to improve Obamacare's brand. But the law faces bigger problems than bad branding and a lack of awareness.

It might seem odd that the law's supporters should need to convince Americans to purchase a plan, given that those who don't will be taxed. But the tax will be less expensive than the cost of coverage. The minimum tax per person will be $695 per year. Higher earning individuals will have to pay more: a couple who makes $100,000 per year, for example, will be taxed around $2,025. That may sound like a lot, but the CBO estimates that the annual premiums for the least-expensive plan offered under the new law would reach about $12,000 for a family and about $5,000 for an individual (all figures can be found here).

This means that for a lot of people paying the tax will be cheaper than buying insurance. And since the new law prevents insurance companies from denying you coverage or charging you more if you have a pre-existing condition, you can always buy a plan later if you develop an expensive medical condition.

Over time, more and more people are going to figure this out. Many healthy people (especially the young and the single) will just pay the tax, knowing they can get it later if they need to. In the meantime, everybody with expensive health care problems will flood into the system, driving up costs and premiums. Then even more healthy people will choose the tax over the increasingly expensive insurance premiums, in turn forcing premiums up even higher.

Keeping this dynamic from undermining the new health care system is going to be one of the biggest tests Obamacare will face. There may be ways around it. As of 2010 Massachusetts's similar plan has successfully raised its insurance rate from about 90 percent up to 98.1 percent. But it will be a serious challenge. This glitzy "buy insurance now" marketing campaign is a sign that the government recognizes this vulnerability and fears it.

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