Obamacare: Adverse selection and arbitrary tyranny
In a post on his blog earlier today, Hugh Hewitt identifies one of the myriad unforeseen—but almost certainly inevitable—consequences of Obamacare: “Adverse selection.”
I spent the last two-plus years in the Reagan Administration as General Counsel and Deputy Director of the Office of Personnel Management trying to help figure out how to stop the bleeding in the federal government’s Federal Employee Health Benefits Program –the “FEHB.” FEHB was crippled by “adverse selection,” meaning that because federal employees could switch health plans every year, many thousands of them would pick very low cost/low benefit plans until they got sick or pregnant or had elective surgery scheduled. They they would select a new plan which adversely impacted costs to the health benefits provider. This practice was crippling to the benefit rich plans who sought to flee the program.
What’s a rational healthy and especially young and healthy individual to do under Obamacare? Pay the tax of a few hundred dollars and skip the insurance or the much larger premiums of either his employer’s plan or the government’s plan? Many will opt to pay the tax, and then opt in as soon as health issues loom. And depending on how easy it is to opt in, the practice will spread and spread, and since it defeats the rhetoric of the left to make opting-in more difficult –can’t have anyone living without benefits even if they gamed the system– the consequences of adverse selection will be enormous.
This is what happens with large government programs. People alter their behavior to take advantage in ways that the architects of the program never envisioned. People alter their behavior in order to insulate themselves from negative consequences of the program; the architects never envisioned the consequences, let alone the avoidance strategies. Even the simpler among such programs ends up having unforeseen consequences, and Obamacare is not simple.
But really, that understates the matter dramatically. Obamacare is not even a law at all, really. Rather, it is a license for agencies to create and enforce regulations:
The IRS, Health and Human Services and many other agencies will now write thousands of pages of regulations — an effort well under way:
“There’s already 13,000 pages of regulations, and they’re not even done yet,” Rehberg said.
“It’s a delegation of extensive authority from Congress to the Department of Health and Human Services and a lot of boards and commissions and bureaus throughout the bureaucracy,” Matt Spalding of the Heritage Foundation said. “We counted about 180 or so.”
If you the concept of adverse selection didn’t occur to you as a possible consequence of Obamacare, don’t kick yourself. There is no one alive who can think of everything that this monstrosity does. No one knows. It is not possible to know. Multiple people in multiple agencies are still writing the regulations. Congress won’t know what those regulations are. You won’t know. No one person will know, nor will any single group of people.
Almost two centuries ago, Alexis de Tocqueville warned of a form of despotism that rises out of a representative democracy. It is administrative despotism—the despotism of a massive bureaucratic state. And one of the biggest characteristics of this kind of state is arbitrariness.
The regulations for “laws” like this will shift and change over time, at the whim of those writing them and those enforcing them. They will seem to appear out of nowhere, and when they impact you, there will be 20 layers of bureaucracy between you and the people responsible. Different bureaucrats will come up with different answers to the same question at different times. There will be no controlling legal authority to stop the bureaucrats from doing what they please, when they please.
The “democratic despotism” we face is not is not simply a bureaucratic tyranny, where there are a lot of regulations, but the regulations are known. The regulations are not known and cannot be known or understood by a single controlling authority. Welcome to arbitrary tyranny.