Dutch lessons for Obamacare

 It looks like the Obamacare exchanges are running into some trouble, which is disappointing for anyone who would like to see all Americans have access to affordable health care. The problem, as noted elsewhere, is that not enough healthy people are buying insurance via the exchanges. That is leading to adverse selection, which increases the cost and decreases the amount of available plans. 

Back in 2008, the Obama campaign claimed that you did not really need a mandate to make health care reform work. Enough healthy people would buy insurance if it was properly subsidized. The Clinton campaign said, no, that’s wrong, you need a mandate. When the Affordable Care Act was actually written, however, the authors soon realized that you did, in fact, need a mandate. The problem now seems to be that the mandate is not strong enough; too many healthy people are not buying insurance. 

The Dutch experience is worth noting. The Health Insurance Act of 2006 required all Netherlands residents to purchase subsidized health insurance. Their mandate was pretty weak, though: a penalty of 130% of the premium over the period of being uninsured. Note that this is different from the U.S., where the penalty is less than the premium.

But nonetheless Dutch enforcement was American-style lax. As a result, by 2010 about 1% of the population failed to buy insurance and another 2% made no premium payments on the insurance they did buy. (It is not clear how these figures compare to Obamacare, since the Dutch system is universal, whereas most Americans still get insurance via their employer.) Costs increased markedly, which is what you would worry about with an ineffective mandate.

So in 2011, the government started deducting premiums directly from people’s paychecks if they failed to pay. (See page 7 for the details.) Interestingly, the change did not go through Parliament: rather, it was a regulatory reform issued under the provisions of the 2006 act. And the Netherlands is still having some trouble. 

The problems with Obamacare are fixable, but they are real.