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What If They Gave a Health Care Plan and Nobody Paid?

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(Publisher’s note: As we in Virginia continue to debate whether to expand Medicaid coverage and rely on the federal government to pay 90% of the cost forever, it is important for us to understand that the entire health care program is still very unstable financially.)

Here’s the news you heard: More than 8 million Americans signed up for Obamacare through state market exchanges. Here’s the news you didn’t hear: One third of those 8 million did not pay their first month’s insurance premium. The Obama administration refused to release the payment information so the House Energy and Commerce Committee rounded up the figures itself. Read the press release here.

At last, we have concrete numbers documenting a long-suspected flaw of Obamacare: Not everyone who signs up for insurance will pay for it. What the Obamanauts failed to consider — d’oh! – is that millions of Americans don’t have bank accounts. Without bank accounts, they can’t write checks to pay their premiums!

The most recent numbers I have uncovered, based upon a 2011 Federal Deposit Insurance Corporation study, found that 17 million adult Americans are “unbanked,” which means they have no checking account, while 51 million are “under-banked,” which means they have bank accounts but they rely upon alternative financial services such as payday loans, rent-to-own services, pawn shops, or refund-anticipation loans. It is safe to say that people relying upon pawn shops and payday loans don’t carry big cash balances in their checking accounts.

It should come as no surprise that there is a significant overlap between those who are unbanked or under—banked and those who are unable or unwilling to purchase health care insurance. It seems the geniuses who designed Obamacare didn’t consider this — indeed, they still haven’t figured it out (or, if they have, they haven’t fessed up to it yet).
This is just one more example of the colossal incompetence of those who designed the insurance scam, I mean scheme, and of those who argued that we should pass the legislation to find out what’s in it.

Another bad sign: There is a direct correlation between age and the likelihood of having a bank account. The under-24 crowd is more than three times as likely as the 55- to 64-year-old cohort to not have a checking account. Thus, a disproportionate number of non-payers will be the coveted healthy young people whose payments into the exchanges subsidize the payments of older participants. This imbalance increases the likelihood of a demographic death spiral in which the average cost per insured is higher than the insurance companies projected, insurers raise rates, more healthy people drop out, and the cycle repeats itself.

The hubris of the do-gooders: There’s a special irony here. One reason that so many Americans are unbanked is that Obama-era economic policies — the super-low interest rates engineered by the Federal Reserve Board and consumer “protection” initiatives such as the crackdown on overdraft practices — make small checking accounts a drain on banks. Rather than sign up new accounts, banks are incented to weed them out. In other words, Obama-era banking policy works to undermine Obama-era health care policy. But the do-gooders never learn. They always know better than everyone else and their appetite for meddling never ceases.

(This article first ran in Bacon’s Rebellion on May 5, 2014)

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