Business Excellence Awards
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The revelation that many plans in the Patient Protection and Affordable Care Act’s health-insurance exchanges have high deductibles has put many of the law’s conservative opponents into a corner: Once in favor of high deductibles, these critics of Obamacare are suddenly worried about the risk to consumers. The data show why their new position makes more sense.
In economics, the principle of moral hazard holds that people who have insurance that is too comprehensive tend to spend more than they should, because they’re protected from the cost of their actions. Many people, especially conservatives, believe that reversing the moral hazard can reduce health spending, because increased exposure to cost will make consumers more discriminating.
There’s some evidence for this belief. From 1971 to 1982, the Rand Corp. conducted the largest-ever randomized, controlled trial of cost-sharing. It showed that people who have plans with high out-of-pocket costs spend significantly less on health care.
This idea led conservatives to support high-deductible health care plans, along with health-savings accounts and increased copays and deductibles. Until the exchanges opened, one of the biggest complaints from conservatives was that such plans were under attack by Obamacare.
Just last month, the Wall Street Journal’s editorial page argued that left to their own devices, insurers would rush out “cheap, high-deductible policies, allaying some of the resentment that the ObamaCare mandate provokes among the young, healthy and footloose affluent.” The editorial suggested that such people would opt for less coverage, because they didn’t want to buy more-comprehensive policies.
Now, conservatives are worried that Obamacare is becoming a “nightmare of higher premiums and deductibles,” and that higher out-of-pocket costs will “force some to finance the costs of their care, a financially risky choice.”