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Affordable Care Act: Good or Bad

Crowds form as deadline looms
Crowds form as deadline looms
Photo by Joe Raedle/Getty Images

Affordable Care Act changes from 2013 are taking effect this month and while some are heralding the problems that the rollout has faced, many people are silently embracing the opportunity to have insurance for the first time in their lives. Clearly there are some issues with the legislation but what piece of legislation has ever been perfect?

Our tax law encounters hundreds of changes each year and is constantly changing and consistently becoming more efficient. Unfortunately when drafting legislation, it is impossible to foresee all issues a law might face in the future. For this reason laws are constantly being amended, repealed, or revised. Furthermore some parts are allowed to expire while others are added into the law at a later date. There were at least 4 revisions to the ACA last year and you can expect that there will be no less than four changes this year.

One of the loudest arguments is that you as taxpayers are being to asked to carry a high burden for credits that some people are getting for purchasing health insurance. Consider the fact that we are paying less in taxes than we did in the 1950s, the small amount that you are paying to cover this law is easier to understand when you consider the alternatives.

Here's a question for you, what would you do if the insurance industry totally dissolved? How would your life be affected if you had no access to insurance at all? Could you survive on your own resources? How then would you pay for a $40,000 procedure? What about a transplant where the cost is in the upper six figures? What about a relative that was placed in a coma or had a long stint on life support? What motivation would the hospital, physician, or specialist have for helping you if you couldn't prove that you could afford to pay for the coverage yourself. Why would they want to take you on as a client if you didn't have the means to even pay for the office visit? Truly, no professional would put your best interest forward if they knew that the probability of them getting paid was little to none.

Consider the other side of the coin where everyone is given free healthcare in the country. While you may consider it a win for you and your family, how motivated would a healthcare provider be to offer the best care if they knew that they would only be paid like a government employee. Why would she want to try harder to solve your health issue if they knew that 100s of more people were waiting to obtain care?

Have you ever eaten at a fast food restaurant? Have you ever found your lettuce on the outside of your burger? The employees and managers don't always care about the appearance of the food because it is "fast food." When their number are based on ticket times and they know that they just have to serve you, quality usually suffers. While it is true that you paid your hard earned money for the food, the restaurant charged you for the convenience of fast food and not for the quality of the food.

Let's return to the scenario where everyone is given free healthcare but now let's add one specialist, who offers you high quality healthcare but charges you a mere $20 for the upgraded level of care. At first, this specialist may find it hard to attract clients but as word gets around that there is a specialist who has shorter lines and offers a higher level of care for a small fee, his practice will begin to grow. Furthermore, as his practice grows he can begin to raise his price to $50. Once his peers learn of his successes, they can begin to do the same and then free market competition ensues in the healthcare market putting us back where we are today. Those with plenty of money would have access to the best care and the rest of the population would have to deal with those who choose to work within the framework dictated by the government.

Insurance is simply a way to transfer risk from one party to another and for that right to transfer your risk, you must pay a premium. The amount of premium is dictated by the amount of risk that the insurance company will be asked to bear. For a large portion of the population, access to such a transfer mechanism has never been an option. For a large part of the population, even those with the resources to compensate an insurance company well to take over their risk, they were turned away. Some medical conditions were considered uninsurable prior to the Affordable Care Act.

Type 1 Diabetics, for example, were considered by many carriers to be uninsurable. This part of the population has been denied coverage because they were born with diabetes. However those with Type 2 Diabetes, were simply charged a higher premium even though many of them became diabetic by their own actions. Additionally, those who were expecting children whether male or female, married or single, are considered uninsurable as well until after the child has been born. Many of these rules don't apply in the employer/group marketplace but does greatly in the individual and family plan market. The way around such an issue was to have these individuals get a job where they were offered insurance and therefore they could have insurance coverage no matter what the cost. This is one of the main reasons why the janitor at your child's school may be a former CEO or another former executive just hanging around mopping floors for access to the insurance coverage.

These type stories are plentiful and while the Affordable Care Act is not perfect, it does offer some benefits to the population. For the foreseeable future, you can estimate that the tax credits will be greatest during these first three years but may decline as the insurance carriers gain greater claims paying experience based off of the large influx of new policyholders. You can expect some normalization and of course a lot of amendments in the upcoming years. Consider the tax credits to be a softener to help both the population and insurance industry overcome the shock of new legislative mandates. Long-term they will eventually go away.

Finally, it would not be a surprise to have the next President pledge to try and repeal the law yet again during the upcoming Presidential Campaign. For the next 2 years however, we must play the cards we are dealt and embrace what is. One thing is clear about this country and it's resolve, change comes and eventually we get it right. So is the Affordable Care Act good or bad, let's just reserve judgement for a time in the future when we have a better understanding of it's costs, it's benefits, it's successes and it's failures.

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