Monkey-wrenching Obamacare

In 1975, Edward Abbey wrote his most famous literary work, “The Monkey Wrench Gang.”  It postulated a vision of environmental activism that eventually manifested worldwide.

Within two decades, environmental activists had gone on the offense to defend owls and prevent bulldozers from building logging roads. Environmental terrorists burned ski chalets and true-believers climbed trees to prevent redwoods from being cut.

Last month’s recent elections threaten to monkey-wrench Obamacare, aka, the Affordable Care Act.

Stalwart defenders of the law believe the bait has been swallowed into the gut of the fish and cannot be retrieved. Taking away the subsidies, mandates and doing a Control-Alt-Delete to reset the system to its pre-2013 status now seems impossible. Most supporters believe the law will remain intact and only minor changes will occur at the margins.

I see it differently.

The ACA was crafted by the insurance industry, not legislators. If you actually read the law and the rules entirely, you will understand. There isn’t a congressman smart enough to write such a complex law.

The ACA has many moving parts that were intended to precipitate a vast sea change in the group health insurance market. It’s covert long-term intention was to do battle against the federal ERISA law of 1974, which has, over the past 35 years, eroded the market share of companies such as Blue Cross/Blue Shield. The ACA’s goal was also to cement the oligopoly power of the seven largest insurance companies who now arbitrage nearly 20 percent of the U.S. GDP.

Our citizenry was thrown under the bus when Obamacare was enacted. It gave a franchised oligopoly to hospitals and insurance companies that were on the verge of being challenged the way IBM was challenged by upstarts like Apple and Microsoft back in the 1970s. It was not just Democrats who participated in this scheme. It was also Republicans and a host of executive branch regulators who owe their very existence to the lobbyists.

The public has not been served by loyal agents.

The current railing against Obamacare would normally be a campaign issue whose energy would dissipate soon after an election. The problem this time  is that too many politicians created a form of political currency by promising to repeal the law. If they fail to deliver, the 2016 election will punish them severely.

How can Obamacare be monkey-wrenched? In my mind there are at least four ways, two short term and two long term:

  1. Harpoon the subsidies,
  2. Destroy the exchanges,
  3. Deregulate health insurance markets, and
  4. Innovate the hedging of risk.

Harpooning the subsidies can come from multiple directions. The subsidies for cost share reduction health plans were never appropriated and are now being litigated. Another way to throw sand in the gears is to force subsidies to be given to lower-income workers who are on groups and being forced to buy platinum plans for their dependents.

The entire subsidy scheme is highly inflationary and it is being applied unequally to taxpayers. Monkey-wrenchers can press to eliminate the mandates and allow those who receive subsidies to obtain them by virtue of tax refunds rather than through the exchanges.

The exchanges themselves are fragile and vulnerable organizations that lack a funding formula beyond 2015. They have used grants to acquire complex technology developed by outside contractors. This, along with their call centers, have high maintenance costs. If people who are mandated to buy insurance and who receive subsidies through the exchanges were allowed to buy insurance from other sources and still receive the subsidy, the exchanges would fall like dominoes. They are being kept alive right now by insurance companies that have agreed to allow individual policies to be taxed and sold by unlicensed agents. Should this support be withdrawn by the federal government or at the state level, the exchanges will wither and die. Many of them already are dead men walking.

The health insurance markets are now where Telecom was in 1996 before it was deregulated. It is a cartel of oligopoly interests. Every aspect of the provisioning of health care has been co-opted by health insurance oligopolies at the state level. They work feverishly to keep the current medieval system in place.

For example, take insurance reserve requirements. They are designed not to insure solvency but to prevent new players from entering the market. The regulation of health insurance premiums along with mandated essential benefits prevent innovation from being effected. Insurance is no longer a device to lay off risk for similarly situated individuals in a group. It has been socialized and is now a public financing and taxing methodology to get the young to pay for the old and the healthy to pay for the sick.

Health insurance needs to be deregulated by allowing individuals and small business to form smaller cooperative and association risk pools on the same basis as larger self-insured corporations and government.

Finally, the hedging of health risks has been corrupted by an age-old contracting process. These contracts extend from the networks that include physicians up to the for-profit conglomerate hospital chains and then on to the reinsurance companies that absorb risk. It is an antiquated form of managing risk that has been displaced and innovated in most other markets.

Commodity exchanges such as the Chicago Board of Trade use futures contracts to lay off risk in everything from currency fluctuations to derivatives. Congress can further this effort the same way it funds the National Renewable Energy Laboratory for alternative energies.

The current set of problems with Obamacare does not stem from giving subsidies to uninsured people. It is because the true sponsors of the ACA, the insurance companies and the hospitals, have overreached and produced legislation whose intended consequences is to disrupt the self-insurance market and effect a migration toward the group and individual markets where certain insurers are dominant. They have enlisted the hospitals as their allies.

This is about to provoke a civil war between the parties in the market.

Like zombies, the monkey-wrenchers are sure to come out at night and do their mischief.

Leave a Reply

Your email address will not be published. Required fields are marked *