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The Conundrum of Preexisting Conditions

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What do insurance companies do about preexisting conditions? The problem is not that insurance companies suddenly have decided not to cover this or that medical condition for people who have maintained continuous insurance coverage. As the editors of NRO note, the real problem is what to do about uninsured people with medical conditions who now are seeking insurance.

The basic architecture of the Affordable Care Act mandates that insurance companies essentially ignore preexisting conditions when writing new policies, obliging them to insure against events that already have happened — essentially requiring them to bet big on the Falcons in Super Bowl LI. This turns insurance on its head: Insurance is a risk-mitigation tool that does not work well when the event already has happened. It creates a perverse incentive: If there is no cost for the coverage of preexisting conditions, then people have no incentive to buy insurance at all until they are sick and need the benefits. In order to mitigate that problem, the Affordable Care Act mandates that every American buy insurance and maintain coverage, a mandate that has not been robustly enforced. That means insurance pools composed of sicker and older populations — which is why we have skyrocketing health-insurance premiums and insurance companies pulling out of markets left and right.

The Affordable Care Act is a poorly designed piece of legislation. It is easy to point to charismatic beneficiaries and conclude that it has been worth the trouble, but everything looks like a winning proposition when you count only the benefits and ignore the costs. In reality, the ACA led to millions of Americans experiencing the anguishing disruption of insurance arrangements with which they are perfectly content. President Barack Obama and his Democratic allies in Congress promised substantial savings from the ACA, but in fact the opposite has been the case. Insurance today is less affordable than it was when the ACA was passed, and it is in some ways less accessible, too: Many Americans have fewer choices today than they did before the ACA — or, in many cases, have no choice in providers at all.

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Debbie Young

Debbie, editor-in-chief of Richardcyoung.com, has been associate editor of Dick Young’s investment strategy reports for over three decades. When not in Key West, Debbie spends her free time researching and writing in and about Paris and Burgundy, France, cooking on her AGA Cooker, driving her Porsche Boxter S through Vermont and Maine, and practicing yoga.