Inside today’s Daily Journal…

Obama should have driven a Trabant.

You might not recognize the car brand. The Trabant had a two-cylinder, two-stroke engine that made 26 horsepower – the exact motor you would normally find in a chainsaw. To make it lighter, its body panels were not steel but Duroplast – a plastic pressed out of recycled cotton waste and phenol resin. There were no working gauges. You checked the fuel tank with a dipstick. And because you mixed the oil into the gasoline by hand at every fill-up, the engine belched roughly nine times the hydrocarbons of an ordinary Western car. The design didn’t evolve for 30 years. And in East Germany, where the car was made, it cost more than a full year’s wages for the average worker.

It was automotive abortion… and yet people waited a third of their working lives to buy one.

The Trabant was a car built by politics. It was not designed to move people efficiently or safely. It was built to empower the ruling class. But because there was no other car available, people still waited more than a decade to buy a chainsaw on wheels.

The same is true about Obamacare. President Barack Obama’s Affordable Care Act isn’t a healthcare system. It is a redistribution scheme designed to empower the State.

It forced insurers to accept every applicant regardless of health (known as “guaranteed issue”) and to charge the sick roughly the same price as the healthy (known as “community rating”).

When the architects of Obamacare bolted the same two rules onto the entire nation, they knew what would happen. Insurance only works when it can be intelligently underwritten. If the very sick are allowed to buy insurance at the same price as the very healthy, then the price of insurance will soar. The healthy will stop buying it. And premiums climb.

Actuaries have a name for this. It’s called the premium death spiral.

The politicians’ fix was the individual mandate: a tax to force the healthy to pay and subsidize the sick. Because it was a broad-based, flat tax (it wasn’t only the rich who had to pay) it didn’t last long. Congress eliminated it in 2017. And so… now what must happen?

The people who left Obamacare were disproportionately young and healthy – of course. This is a premium death spiral. The 2027 rate filings – a 28% request in Washington on top of last year’s 35% – are simply insurers pricing the sicker pool as the healthy leave.

None of this is a surprise.

In the mid-1990s, eight states imposed guaranteed issue and community rating on their individual markets: Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington. Every one of them saw premiums surge and healthy buyers flee.

Kentucky repealed its law. New Hampshire repealed its law. Washington let insurers turn away the sickest applicants just to keep the market breathing.

But New York? There is no reforming the most corrupt state government in the country. New York mandated guaranteed issue and pure community rating in 1993 and proceeded to hold the title of the most expensive individual market in America for two decades. Its individual market did not shrink. It vanished – falling 96%. The Supreme Court itself, in King v. Burwell, cited this history. New York’s reforms had “effectively eliminated the commercial individual indemnity market.”

This isn’t a bug – it’s a feature to the political class. Obamacare was never engineered to deliver cheap medicine. It was engineered to deliver a fully dependent political constituency. On that measure, it has worked flawlessly.