President Obama passed the health care reform over two years ago. The law has been debated for just as long and will continue to be. The Supreme Court ruled to upheld the law and kept most of it intact. The biggest part being debated was the individual mandate. After all was said and done, everyone will be required to have health insurance starting in 2014. Only with a few exceptions, most will have to purchase health insurance by that date or they will face a fine. More importantly, there is no pre-existing clause. Meaning, no one can be denied health insurance because of their current health status. So, if someone has terminal cancer, they will still be able to get health insurance to help pay for medical bills. Now, there are two ways to think about this. Of course, it is a great thing that those that are sick will not be denied health insurance. One of the leading causes of bankruptcy is unpaid health insurance bills. However, this benefit does not come without its consequences.
So, if no one can be denied health insurance; then what will stop the problem of adverse selection. Meaning, carriers will draw more sick people than anticipated and this will drive up the cost of insurance…..for the healthy people as well. Here is an example, someone just found out that they have cancer and they do not have health insurance. Once they hear the news, they go and purchase the gaurenteed insurance and start to use it. One year later, the cancer is gone and now the individual cancels their insurance policy because they would rather pay the fine on a yearly basis then the high monthly premium costs. This example shows that the cost of the medical services to treat the cancer (surgery, radiation, etc.) was probably in the millions, and the premium collected by the carrier was probably in the low thousands. So the math does not add up. Who will make up the difference? The answer is the healthy people. This is the problem we will face in 2014, and why health insurance premiums will continue to rise in the coming future.