In their Idea of the Day, the Center for American Progress is warning Congress about the financial losses involved in repealing the Affordable Care Act--billions, in fact. According to CAP, our $2.6 trillion health care system spends $160 billion in administrative costs.
If they succeed, they would essentially reinstate the individual insurance market as the primary coverage option for those who don’t receive health insurance through their employer. This market has continually failed to provide Americans with affordable, quality health care coverage.
Among its many limitations, the individual insurance market is extremely inefficient. This is largely because individuals seeking coverage on their own have no market strength and are not able to purchase coverage that spreads risk across a diverse group of enrollees, which also makes these policies more expensive. Insurers sell individual policies one at a time, which increases the marketing and paperwork costs for each policy. In contrast, large employers purchasing group policies buy in bulk, have negotiating power with insurance companies, and are able to spread the risk of expensive health care needs across a large population of workers.
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The Affordable Care Act will reduce these administrative costs by establishing state-based health insurance exchanges by 2014 and creating new rules for health insurance plans. The Center for American Progress estimates that when fully implemented, the Affordable Care Act will result in more than $1.3 billion of annual savings in administrative spending and up to $7.2 billion of savings from 2014-2019 for the 5 million individuals who will likely transition from buying coverage on the individual market to buying it in exchanges, according to the Congressional Budget Office.
Read the full brief, "Repealing Health Reform Would Mean Billions More in Administrative Costs," by Sonia Sekhar.
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