Freedom Line Blog

Pay now or pay later.

That’s the choice facing millions of Americans required by Obamacare’s individual mandate to select a health insurance plan through a state or federal exchange.

Insurance companies like Aetna, Humana and Blue Cross and Blue Shield who are participating on various exchanges report that the most popular choices among consumers are middle-of-the-road “silver” plans that typically offer moderate premiums but high deductibles and coinsurance.

Deductibles require policyholders to pay all of the cost for medical care up to  a certain threshold before the insurance company assumes responsibility, while coinsurance commits the policyholder to paying a certain percentage for the cost of medication. (Co-pays, on the other hand, are capped at a flat amount.)

The increased costs are likely to reduce the number of doctor and hospital visits as consumers become choosier. “When deductibles and co-payments are high, patients tend to think twice about their health care purchases, making them more likely to shop around for the best deal,” says health policy expert Bruce Japsen.

Indeed, basic economic theory teaches that knowing the price of something impacts a person’s behavior significantly. But while this may help people who would otherwise overuse health care to scale back, it can – and most likely will – have the effect of convincing people to underuse necessary treatment options for fear of the cost. Thus, we could end up with more people covered by health insurance but a more unhealthful population.

One of the key policy battles on the horizon is how to harness this new transparency in health care prices. Liberals will likely want to subsidize health care until they can socialize the entire industry. Conservatives will be predisposed to favor a market-based solution. But simply repealing Obamacare and its disastrous tax on medical devices, among others, and saying “let the market figure it out” won’t be enough – especially in a campaign context.

Some conservatives may favor working within the system to incent both consumers and health care companies to better align need and cost. Others may prefer to explore deregulating parts of the industry, such as allowing physician assistants and qualified nurses to do more of the work of a doctor while still under supervision (perhaps remotely via technology). These and other ideas need to be deliberated on intensely now so that conservatives aren’t caught off-guard when the electorate is ready for an Obamacare alternative. If not, we’ll all pay dearly for lacking a consensus at the moment we need it most.