The Affordable Care Act is having (another) existential moment. This one will be supercharged by a presidential election, which is a shame, because improving America’s health care insurance system is a really complicated project — sloganeering has no place. But the atmosphere around the topic so poisoned that it’s hard to have productive conversation about it. Let’s try anyway. If you feel yourself ready to yell “socialism” or “conservatives only care about rich people,” or even, “repeal Obamacare and I don’t care what we replace it with,” then please click elsewhere.
What I want, instead, is to hear first-person accounts of how the Affordable Care Act has helped or hurt you directly. Did you apply? Did you get a subsidy? Did your premiums go up or down? Did your coverage get better or worse? The reality for Obamacare is that is has helped some people and hurt others, and the real issue is: Is it doing more good than harm? I’d like to try to push that ball forward a bit. (So please, no third-party ‘I heard this’ stories or plain old rants).
Today’s existential moment involves large health insurance companies pulling out of the exchanges, saying they are losing too much money to offer Obamacare plans. UnitedHealth, for example, has said it will pull out of 31 states. Things are so bad that a recent study released by consultancy Avalere claims many Americans looking to buy on a state exchange will be left with a single health plan option by next year. (See chart and link above.) People whimsically (fatalistically) have compared the situation to cable monopolies. That’s not funny; it’s deadly serious.
The Avalere report, as almost anything you read about Obamacare, tells only one part of the story, and I’ll get to that in a minute. But first, it’s hard to deny this problem with the system:
Americans are now required to buy health insurance, but no one is required to sell it to them. And right as insurers say they are taking their ball and going home, the fine for failing to obtain insurance is about to soar — from $325 in the 2015 tax year to $695, or 2.5 percent of income, in 2016, whichever is higher. (We knew that last year, but most people won’t ‘feel’ the fee until they pay their 2016 taxes).
Washington, we have a problem.
But here’s some things to know. First, Avalere claims that after all the retreats are announced, one-third of the U.S. will have only one plan option. That’s probably an exaggeration. The report fails to account for insurers moving into exchanges, and there are some. It also claims that one third of ‘ratings areas’ will have only one offering; that’s very different that one-third of Americans, which is how some news organizations have framed this. Ratings areas are like area codes or zip codes. It’s likely exchanges in less populous areas will be the ones with the problems generating competition, meaning quite a few less than one-third of Americans will have only one Obamacare option. (Here’s a solid Bloomberg story about this.)
Also, it’s really important to know that — of course — insurance companies wield immense power over how this shakes out. How much? Aenta threatened to pull out of exchanges if the Justice Department moved to block its mega-merger with Humana. Justice did, so Aetna did. So are they gaming Obamacare? Wouldn’t they be neglecting shareholders if they didn’t?
Health insurance companies do have a real problem here. Sick people are signing up and healthy people are paying the fines. So, it’s believable that the firms are losing money. Why would they want to keep offering money-losing plans? Here’s a balanced look at the problem. But basically, the mechanism put in place to balance out losses (the ‘Risk Adjustment Program”) isn’t working very well.
So here’s something else I’m worried about.
The oldest trick in the insurance business is to lowball a premium offer to acquire customers and simply raise prices and take coverage away over time. Consumers are bad at changing providers. They hate searching around, they hate change, they are naturally lazy. (Economists call this “switching costs.”). For example: You really should get price quotes from auto insurance firms every year, or at minimum every two years, to make sure you aren’t getting ripped off. How many of you do that? Now, when you may or may not lose your family doctor, how much less likely are you to shop around and put real price pressure on your health insurance company?
While everyone is concerned about insurance companies dropping out, I’m more concerned with that issue providing cover for insurers to dramatically raise prices on their millions of new, green customers. This fear goes beyond the exchanges, of course. Plenty of folks who buy their own insurance directly from the providers rather than off the exchanges (which you should do unless you qualify for a subsidy).
There is a conspiracy theory that this is all by design, that the failure of the exchanges as insurance companies pull out will inevitably be “fixed” by the public option all the reformers wanted in the first place. Might be more than a theory. If insurance companies don’t want to offer a plan in an area, the government will. And then, once there’s a government plan…well, it will ultimately be available everywhere.
First things first. I’ll be very interested to see what happens when insurance companies start sending out renewal notices this fall…right around election day. Rate increases are going to make people really mad. The question is: Who will they be mad at?
Now, your turn. What has been your direct experience with the Affordable Care Act? Are you better off, or worse off?
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