EDITORIAL: CBO’s rosy insurance projections

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According to the Congressional Budget Office, the Senate Finance Committee’s health care bill will reduce the number of uninsured in 2019 “by about 29 million.” That’s grandly overoptimistic for one simple reason - CBO assumes no one will respond to large economic incentives to game the system that are built into the legislation. If so, it would be a first in economic history.

It’s a mystery how the CBO can make its evaluation without once mentioning that individuals easily will be able to go without insurance while they are healthy and then buy insurance after they get sick.

Here’s how it would work: The plan promises that insurance companies “would be prohibited from excluding coverage for pre-existing health conditions.” If people don’t buy insurance, they must pay a fine “of $750 per adult in the household. This penalty would be phased in: For 2013, $0; $200 for 2014; $400 for 2015; $600 in 2016; and $750 in 2017.” But $750 is small compared to the thousands it costs to buy health insurance. It’s unlikely that all the people would spend thousands if they were allowed to wait until they get sick to sign up for insurance.

In 2008, the average price for an individual’s insurance was $4,704, and for a family of four it was $12,682. Millions of people could save thousands of dollars every year by waiting to buy insurance until they get sick. Not everyone may immediately feel comfortable dropping insurance, especially those with continuing problems, but many will.

The problems such “free riding” will cause won’t just hit bean counters and budget writers in Washington; ordinary people who play by the rules and buy their insurance will end up paying extra. The more people take advantage of the new rules, the higher the price of insurance will have to be. Higher premiums would discourage still more healthy people from buying insurance. The system would unravel from there.

The Senate already has indicated that there’s no political desire to impose higher fines on people who don’t buy insurance. Even if it did, the elimination of pre-existing conditions as a bar to coverage would encourage people to pick the lower-quality insurance when they’re healthy and switch to higher-quality plans once they are sick. The better health insurance plans would be the first to go out of business.

These provisions of the health care proposal won’t hit until 2013 - after the next presidential election. This conveniently lets Democrats avoid electoral accountability over the urgent health care needs of the people they say they’re trying to help but won’t. It also happens to be plenty of time for CBO to dodge responsibility for those fanciful projections.

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