Chief Justice Roberts' flawed reasoning

On June 25, 2015, the Supreme Court once again saved the Affordable Care Act by upholding subsidies for citizens in the 34 states where the federal government operates the insurance exchange.

Speaking for the majority, Chief Justice Roberts wrote, "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter."

Roberts' comments imply that he believes Obamacare will create more efficient, well- functioning health insurance markets.  The opposite is true.  When you examine basic characteristics of well-functioning markets, the law does more to impede market forces than improve them.  Roberts' basic reasoning is naïve, demonstrating a lack of business knowledge.  Consider these characteristics of well-functioning markets:

Many buyers and sellers with few barriers to entry

Obamacare was built on the premise that states' would be administering their own health insurance exchanges.  State insurance commissioners retain the discretion to determine which health insurance plans are sold on or excluded from their state's exchange. This has served to maintain the dominance of large, established insurance players who were there before the law went into effect. These incumbent insurance organizations drive undue influence and remain dominant under the law.

The law's Medical Loss Ratio rule (or 80/20 rule) requires insurers to pay out at least 80-85% of premium dollars on medical care. By capping administrative costs and profits the rule discourages new market entrants who cannot achieve these levels in early years.

Homogeneous products with buyers and sellers free to trade goods and services without restriction

Obamacare has moved us toward more homogenous products by establishing minimum standards for all health plans sold on and off the exchange. The law requires that every insurance plan sold in the marketplace includes ten essential health benefits (EHB).

However, these standards limit health insurers' ability to define their own products. Insurance companies must offer coverage inclusive of benefits people don't need, artificially increasing prices and creating cross subsidies. The law restricts buyers' freedom of choice by imposing the individual mandate, which requires all citizens to purchase "essential health coverage" or pay a tax.  Certain key provisions within the law also impede competition by prohibiting purchasing health insurance across states lines.

Transparent with all buyers and sellers having equal access to information upon which to base their decisions

Obamacare was supposed to revolutionize the way citizens were able to compare and shop for health insurance.  However, the federal and state exchanges are complicated and opaque. It is difficult to know the cost associated with any plan until the enrollment process is completed. Even then, it is difficult to determine the actual monthly premium when a buyer may be eligible to receive subsidies. Consumers generally do not understand their obligations related to deductibles and co-payments.

Limited government involvement

The appropriate government role in well-functioning markets is in setting parameters, guidelines and rules by which people and businesses can function.  However, Obamacare dramatically expanded the reach of government. It introduced mandates, subsidies, and government run insurance exchanges. It has asserted government control over who gets covered, what gets covered, and when and how coverage is purchased taking away any competitive advantage insurers might have with respect to products and pricing. It establishes new taxes and increases the amount the federal government pays of all healthcare costs.

Considering these stark differences between what we generally consider well-functioning markets and where we are with Obamacare, the Chief Justice's rationale for the Court's historic King v. Burwell decision, is, at best, invalid. Obamacare is driving healthcare more toward a utility or a single payer system.  For Roberts to support the ACA because it creates effective markets is absurd.

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