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What Social Animals Owe to Each Other

Monday, September 10, 2012

Incoherent Romney

Mitt Romney says he wouldn't repeal all of Obamacare. He'll keep the rule forbidding exclusion for preexisting conditions, i.e., he'll maintain guaranteed issue. But he is going to find that he can't do just that. If all that's mandated is guaranteed issue, what's to stop insurers from charging premiums to already-sick clients that amount simply to prepayment for the medical expenses they are certain to incur (plus administrative overhead)? At that point the coverage is no longer insurance. Also, that won't fly politically, which is why guaranteed issue is always coupled with community rating--the requirement that insurers charge people in the same area the same premiums regardless of their health. That requirement raises premiums for younger healthy people so they will cross-subsidize older and sicker people.

But that leads to a new problem. (See Mises's Critique of Interventionism.) Younger and healthier people will leave the insurance market: Why pay inflated premiums when you can put off buying coverage until you are sick?

There's only one solution to this problem if the other interventions are to be maintained: an individual insurance mandate, the centerpiece of Obamacare, which Republicans and conservatives say they hate. Except that they don't really. Romney enacted a mandate in Massachusetts, and the conservative Heritage Foundation proposed one in the 1990s after the Clintons proposed their health care overhaul.

Is this Romney capitulation to Obamacare enough to keep the GOP base home and assure Obama the election?

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