The Big Mistake in Obamacare Replacement Plan

When Democrats were peddling ObamaCare to an unsuspecting America, they told us that the price of health insurance would go down by thousands of dollars. But the opposite happened, and it continues to happen. The way that real insurance works is that policyholders get lower premiums if they are less likely to file claims and thereby cost their insurance companies money; that is, if they pose less risk. Insurance companies set premiums by using actuarial science to calculate risk.

But ObamaCare policies don’t price for risk, everyone pays the same regardless of risk due to the ACA’s “community rating” policy. However, there’s another way to keep the price of premiums down and that’s for policyholders to agree to pay some of the costs of the medical treatment incurred in their claims, i.e. deductibles and copayments -- the lower the premium, the higher the deductible.

So, ObamaCare tried to make premiums affordable by having much, much higher deductibles. But some folks who file claims with ObamaCare can’t pay their deductibles. ObamaCare took care of those folks through CSRs, cost sharing reductions, where government pays the policyholder’s deductible.

Unlike its premiums, the ACA did not provide automatic funding of the CSRs. Instead, Congress must regularly approve the funds for the CSRs, and Congress hasn’t been doing that. This back-loaded little aspect of the ACA has been driven home recently by President Trump’s executive order to stop payment of CSRs. Democrats and their stooges in the media are wailing that the president’s order is “arson” and “sabotage.” They caterwaul that without the CSR payments the price of ACA premiums will, surprise, surprise, shoot up even higher. They seem to think that the ACA should be exempt from the “Laws of Insurance.”

On May 12, 2016 in House v. Burwell, a federal judge found that the payments of CSRs are unconstitutional because Congress hasn’t been appropriating the funds. Law Professor Timothy Jost has written much on the case (archive); here’s what he wrote on the day of the decision. Though Article I, Section 9, Clause 7 is quite clear in requiring that money cannot be “drawn from the Treasury” without an appropriation from Congress, Democrats seem to think that the president should just keep on lawlessly spending money, just as Obama did.

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