Obamacare in a Nutshell

Kevin Drum has a very nice summary today of how Obamacare works. It is clear, simple, and reveals just how based in common sense the health care law is. Here are the main points.

1. Obamacare requires insurance companies to sell coverage to all comers, even those with preexisting conditions. This is called "guaranteed issue."
2. For this to be workable, the price of insurance has to be about the same for everyone. Otherwise insurance companies will simply set prices high enough to exclude anyone with a preexisting condition. This is called "community rating."
3. If you do this, the sickest people will all queue up for insurance. Healthy people won't bother. They'll just wait until they get sick and then sign up.
4. But insurance companies depend on the law of averages: they need a large pool of customers, figuring that only a certain percentage will get sick each year. If their customer base is made up almost entirely of sick people, they'll quickly go out of business. This is the death spiral.
5. The answer is to make sure that insurance companies continue to have a broad pool of customers, some of whom are healthy and some fraction of whom will get sick.
6. The only way to do this effectively is to require that everyone buy health insurance. This is the "individual mandate."
7. Poor people can't afford this, so you have to provide tax credits to help them out. These are the "subsidies."

It is really hard to see how anyone who understands this would oppose it; unless, of course, they did so purely for political reasons. But who would do that. . . . ?