#12. The Seed of a Solution to the Health Care Crisis

Thank you, President Obama, for Obamacare.  Because of the Affordable Care Act (ACA), I expect to save approximately $80,000 in health insurance premiums between 2015 and 2020.

healthcare-website

How can I say this?  How am I able to confirm that President Barak Obama kept his promise that I would realize lower my health insurance premiums and be able to keep my doctor?  It was not by using the ACA website, healthcare.gov.

Almost all the articles about the state of health care in America in 2016 report looming disaster among private insurance companies participating in Obamacare markets.  Premiums are increasing annually at double digit rates, and insurance companies are pulling out of certain states because they have experienced financial losses in the hundreds of millions of dollars.

President Obama signed the ACA into law on March 23, 2010 without the support of a single Republican representative or senator.  Since then, Republicans have vowed to repeal and replace it, even though the Supreme Court has upheld the constitutionality of the law twice.  Donald Trump has his 7 point plan to accomplish this goal.  At the same time, Hillary Clinton is campaigning to defend and expand the ACA.  Between 2016 and 2025, the Congressional Budget Office is projecting that Obamacare will cost $1.7 trillion, while it brings in $0.5 trillion in revenue.  The net cost of $1.2 trillion over 10 years equates to an average of $375 per US citizen per year.  Therefore, if Donald Trump wins the election, we the people should expect that we can avoid adding $1.2 trillion to the national debt due to Obamacare.  If Hillary Clinton wins, however, we should expect that she will add even more to the national debt as she pursues expansion of the ACA.

Neither candidate acknowledges on their campaign websites the golden nugget in the ACA (although Trump comes closer than Clinton) that has enabled me to realize substantial savings in my healthcare premiums.  Price discrimination.

What?  How?  Price discrimination is an economic concept that says that a business can provide the identical product or service at the same time to different customers for different prices.  A good example of price discrimination is the way Southwest Airlines sets airfares.  There is no coach or business class on a Southwest plane, yet the company is able to charge different prices for the same seat by recognizing that passengers have different preferences, as illustrated in the chart of services available to Business Select, Anytime and Wanna Get Away customers.

sw-airlines

Another example of price discrimination is student and senior discounts.  With just a little thought, I’m sure you can think of many other examples of price discrimination which is commonly found and accepted in everyday life.

But how does the ACA enable price discrimination?  The actual statutory language is right here, and I have bolded the relevant words.

Subpart B—Eligibility Determinations

42 USC 18081.  SEC. 1411. PROCEDURES FOR DETERMINING ELIGIBILITY FOR EXCHANGE PARTICIPATION, PREMIUM TAX CREDITS AND REDUCED COST-SHARING, AND INDIVIDUAL RESPONSIBILITY EXEMPTIONS.

(5) EXEMPTIONS FROM INDIVIDUAL RESPONSIBILITY REQUIREMENTS.—In the case of an individual who is seeking an exemption certificate under section 1311(d)(4)(H) from any requirement or penalty imposed by section 5000A, the following information: (A) In the case of an individual seeking exemption based on the individual’s status as a member of an exempt religious sect or division, as a member of a health care sharing ministry, as an Indian, or as an individual eligible for a hardship exemption, such information as the Secretary shall prescribe.

This little section exempts “members of a health sharing ministry” from the penalties imposed by the law on those that do not comply with the ACA’s mandate to buy health insurance.  A health sharing ministry is a non-profit organization consisting of a group of people who voluntarily agree to help pay the medical expenses of all the members of the group.  In 2015, instead of paying a major health insurance company approximately $1900 per month in premiums to cover my wife and myself, both older than 55 years, we pay a monthly contribution of $520 per month to our health sharing ministry.  We know that the ministry will use this money each month to pay the verified claims of the group members, and pay administrative expenses.  In the same way, when we have a verified medical claim that exceeds our annual household portion (i.e. deductible), other members will help us pay our bills.  It’s not insurance, but works effectively just like insurance in many ways.  The monthly contribution corresponds to an insurance premium.  The annual household portion corresponds to the insurance deductible.  My health sharing ministry comes with a network of doctors and hospitals, and negotiates favorable discounts on services to the members.

What does this have to do with price discrimination?  The ACA has three important mandates.  First, everyone has to get insurance, or pay a penalty, unless they have a waiver.  Second, insurance companies must accept all applicants, regardless of medical history.  Third, the insurance plan must include a long list of health care benefits, including mental health and abortion services.

By contrast, a health sharing ministry is able to select its members based on a set of criteria which are consistent with its core principals.  In addition, the ministry is able to exclude certain medical benefits which are inconsistent with its core values.

For example, a health sharing ministry with more than 20 years of operating experience welcomed my wife and me based on our compliance with the following criteria:

  1. We are Christians who accept the Bible as the word of God.
  2. We do not smoke, or abuse alcohol or illegal drugs.
  3. We participate in a weekly worship service.
  4. We are in a monogamous relationship.

Also, this ministry does not provide benefits for abortion services, birth control, STD’s, medical services related to smoking, drug or alcohol abuse, or other services related to other lifestyle choices which are not consistent with the Christian life.

By defining a class of customers which follows a Christian lifestyle, a low-risk pool of members, the health sharing ministry is able to offer a significantly lower price for the benefits it provides compared to a major health insurance company, which now must accept all applicants regardless of their medical history and lifestyle choices.  This is price discrimination, and it is no different than Southwest Airlines offering a lower price for a seat on its plane to certain customers who are willing to accept limitations of service.

I think that all the Democrats who voted for the ACA would be surprised to know that they supported, encouraged and even legalized price discrimination in the health care industry.  Likewise, the Republicans who voted against the ACA would probably deny that they rejected this effective method for lowering health costs.  The more likely interpretation of the vote is that neither side knew what it was doing.

In addition to the features of the health sharing plan already described, there are two more important features which are not available in the health insurance industry.  First, my plan crossed state lines.  It is offered by an organization based in Florida, while I live in Texas.  Under current insurance law, I cannot purchase a health insurance policy that is approved by Florida department of insurance, but not by the Texas department of insurance.

Second, there is no government involvement or regulation of the benefits offered by the plan or the selection of members.  As I interpret the ACA, this means that another health sharing ministry could offer benefits which target promiscuous female millennials who want medical services which include STD’s, birth control and abortions.  Still another health sharing ministry could target skydivers, rock climbers and BMX riders.  Of course, the monthly contributions would have to be consistent with the demand for services in order for the ministry to sustain operations.

The health sharing industry is also bringing a lot of innovation to health care which is noticeably absent from the health insurance industry.  For example, my health sharing program offers free consultations with a doctor by phone.  My wife used this service recently to get a prescription for sinusitis and never paid an office visit charge.  If I ever need scheduled surgery, my program offers a list of highly qualified surgical providers to help me learn about treatment options.  If I choose one of these specific surgical providers, for no additional contribution (premium) my plan will waive 3 months of contributions, provide transportation, lodging and meal allowances for me and my spouse for the duration of the trip, and waive the annual household portion (deductible) for the surgery.  This is the health sharing ministry to which we belong:  http://bit.ly/1nHIhNP.

Another health sharing ministry offers these eye-popping innovations to its members:

  1. Return of Contributions – after 10 years of contributions, the program will return all of your monthly contributions, less any claims you have made.
  2. Contribution Cap – after 3 continuous years of contributions, the monthly contribution will never increase as long as you stay in the program.
  3. Vanishing Personal Responsibility – the annual personal responsibility (deductible) decreases $100 every year.

Here is one chart which compares the different health sharing programs on the market as of 2016.  As of Feb, 2016, there are over 500,000 members participating in health sharing ministries in the United States.

In light of the regular news stories about the premium increases and financial losses experienced under Obamacare, the Republicans have tried to put forth a plan to replace Obamacare when and if it collapses, or when and if Republicans control both the executive and legislative branches of government.  Actually the seed of a solution is in the ACA itself.  Simply allow more health care ministries to provide health services to various market segments through price discrimination and keep the government out of the industry.

Certain people opposed to this type of thinking might respond by saying that affordable health care is a basic human right and price discrimination would not be just.  Let’s examine this statement in an unbiased way.

First, is affordable health care a human right?  The Bill of Rights of the U.S. Constitution gives us a list amendments to the constitution which limit the power of the federal government to infringe on the natural rights and liberties of the citizens – speech, religion, assembly, self-defense, etc.  Government can never  grant these God-given rights to individuals, but can only restrict these rights either lawfully or unlawfully.

Heath care is not in the Bill of Rights.  Thus, I would say that people with a certain political viewpoint are trying to define affordable health care as a new right, and position the federal government as the protector of this right through the delivery and administration of health care services.  Thus, such a “health care right” represents an enlargement of the power of government over the life of citizens, and is fundamentally different than the rights protected by the Bill of Rights.   The government’s ability to deliver additional health care is limited by its ability to tax and spend, whereas my ability to share ideas and worship my God is not.  With these clear distinctions, health care is not a fundamental right that is somehow missing from the Bill of Rights.  It is a man-made service enabled by science and modern technology, very much like air transportation.  Of course, affordable health care is very desirable for the health and welfare of the citizens, and we should always seek to maximize the access to health care.

Second, is price discrimination in health care just?  Let’s be clear that “discrimination” in this case does not imply a negative action of one person against another, as in the unjust discrimination against blacks who were not allowed to eat at the lunch counter in the deep South before 1965.  On the contrary, as a consumer of health services accessed through a health sharing ministry, I freely choose the positive action of joining the class of people limited to members who live a Christian lifestyle and receive a certain benefit.  Where is the injustice in exercising free choice?

In fact, would it not be a greater injustice if the government imposed a regulation on the Christian health sharing ministry to cover the medical costs of members who choose to smoke cigarettes, or abuse illegal drugs?  This is no different than if the government imposed uniform pricing of all airline seats.  This regulation would be disastrous for the airline industry as it would raise prices for consumers, reduce profits dramatically and likely cause competitors to leave the industry.  Does this sound similar to what is happening now in the health care industry under Obamacare?

The anecdotal and theoretical evidence is clear.  The best way to provide affordable health care and develop and sustainable health care industry is to support, encourage and further legalize price discrimination in the health care industry.

Soon, Obamacare will die.  Long live Obamacare, or at least the part that President Obama got right when the ACA exempted health sharing ministries.

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