Obamacare, In Perspective

Obamacare, In Perspective

Meet Daniel. Daniel turned twenty-six this year and was dropped from his parent’s health insurance plan. His employer doesn’t provide health insurance so he went on healthcare.gov, compared rates, deductibles, coverage, co-pays, and picked the plan that works best for him.

A year later, he’s been informed that the plan he chose is changing: the premiums will be going up by $1,200, the deductible has doubled, and he’s no longer eligible for premium support. For the unmarried and childless Daniel, the decision is easy: faced with high premiums and exorbitant deductibles, the “shared responsibility fee” of $695 or 2.5% of income, whichever is higher, is the more attractive option - $1,392 for peace of mind or $695 for nothing? He figures the IRS will just siphon the money out of his tax return and he’ll be able to keep doing what he’s been doing. He wasn’t planning on visiting a doctor anytime soon anyway. 

But Daniel is not alone. The Congressional Budget Office (CBO) projected that twenty-one million people would sign up for exchange-suitable health insurance by 2016. In reality, twelve million opted for the comprehensive coverage. The individual mandate is not incentivizing healthy people to purchase health insurance. 

Now let’s meet Debbie. Debbie is single, childless, and working as a waitress. She makes $29,000 a year and didn’t have health insurance before obtaining it through her state exchange. She’s needed it, though. The coverage she purchased provides for her prescription resulting from a bad car accident and she regularly goes to the obstetrician/gynecologist to maintain her sexual health. Debbie couldn’t opt to just pay a fine and she isn’t eligible for Medicaid. In fact, she thinks she’s one of the very few Americans that could finally be covered regardless of a preexisting condition. She pays $1,245 a year in premiums and hits her deductible of $600 around March each year. Still, she can’t help but feel anxious every October as she opens a letter from her insurer explaining that her premiums and deductible will be increasing yet again. Whatever is causing this, she knows it’s only a matter of time before the struggle won’t be worth it to her anymore.

Finally, we meet Danielle. Danielle is married with three children. She’s not the primary breadwinner, though, and her family is covered through her husband’s employer. But insurance markets aren’t a vacuum. The Affordable Care Act has had unavoidable ripple effect across every insurance provider. President Obama promised Obamacare would lower premiums for the typical family by $2,500. Instead average premiums in job-based coverage has increased by $3,775 to $17,500. She needs health insurance too, for herself, for her family. She doesn’t know what she’ll do if her husband’s employer is forced to drop their coverage, reduce his hours, or, God forbid, let him go. They’re avoiding the exchanges but the sticker price would make Daniel and Debbie faint. There’s no peace of mind in her household. 

There’s no peace of mind at all. On Monday, October 24th, the Obama administration admitted that HHS was approving an average rate increase of 25% for exchange plans. That is the average. According to data from ratereview.healthcare.gov and state insurance departments some unlucky enrollees (in New Mexico) could be facing a rate increase as high as 93% next year. Is there anything you have purchased in the last five years that has increased in cost as much as $2,300 in a year? Nothing but Obamacare. It’s no wonder the exchanges are shedding customers and shocking others out of the system. 

Insurers are leaving too. Those that can’t turn a profit are dropping out and demanding taxpayer bailoutsto stay in the exchanges. Failing that, they’re turning to high premiums and deductibles to pick up their losses. On the one hand, they’ve been forced to provide more coverage. On the other, they’ve been promised a revenue stream that just hasn’t materialized. In the upper echelons of health care policy and politics, this is known as the “death spiral” and it is spinning now at hurricane-force speeds.

Hillary Clinton’s answer to these “glitches” is to provide even more subsidies to help with the cost of coverage. The law already provides for premium assistance to increase as premiums increase but our hypothetical waitress would be eligible for additional assistance of up to $2,500 to cover her expenses under the deductible. All this really amounts to is shifting assistance from premiums alone to everything else. Not only will that raise the overall price tag, it won’t work. 

Low enrollment isn’t entirely responsible for increasing premiums. Regulations are playing a role. Twelve million is lower enrollment than the CBO predicted, but if their assumptions were correct, it would still have an effect on exchange-eligible health insurance. It hasn’t. Insurers responded to the regulations - age-rating restrictions, benefit mandates, and minimum actuarial value requirements -  by recalibrating coverage first, forcing some doctors to refuse exchange-suitable health insurance. Then, they responded by raising deductibles and, since those two measures don’t increase revenue, they had to raise premiums. A high deductible with low premiums is a defensible purchase for peace of mind. A high deductible with high premiums is not. If premium assistance didn’t incentivize the purchase of health insurance before, what makes them think even more assistance is going to make a difference?

It’s a shame that “glitches” and “repeal” is all that politics has made of this most glaring issue. If you look at Obamacare from the perspectives of our hypothetical Americans, there’s a clear demand for something more workable. 

First, most Americans still get their insurance from employers, like Danielle and her husband. This system works. These were the people that were supportive of providing health insurance for the truly needy and assured, “if you like your plan, you’ll get to keep your plan.” Twenty-five million people obtained health insurance through the law, with twelve million going through the exchanges and the rest becoming eligible for an expansion of Medicaid if their state decided to opt-in. Obama and the Democrats promised to grandfather in plans people already had but the Affordable Care Act had other provisions that would sunset non-suitable plans and no company offers a plan that is no longer industry-suitable so it is only a matter of time before all non-exchange plans are changed dramatically or dropped altogether. This process has begun.

But, as the first victim of politics, nuance needs some resurrection here. They will be paying more but gaining access to more comprehensive plans. And still others will be getting health insurance for the first time altogether, like Debbie and Daniel. 

The Danielles of America are probably the most amenable to conservative health care proposals. For them, we cannot offer a return to the old system with new features. Instead, it’s time for a total overhaul - a national health insurance market wherein insurers compete across state lines to offer the most affordable and expansive coverage for the most people. States would retain their power to regulate insurers as they have done for over one hundred years. Businesses would have the incentive to search for the best rate for their employees or to offer them a tax-free option to open an individual health savings account (HSA), increasing accessibility to HSAs and health reimbursement accounts (HRAs) as they favored before Obamacare. Such payment arrangements amount to true portability so that losing your job doesn’t mean losing your health insurance.

But don’t think we can forget about Daniel, Debbie, and everyone else. Individuals would be eligible for a universal, means-tested, refundable tax credit to help with their health care costs. And if they select a health insurance plan that is less than the credit, the rest would be deposited in an HSA account to help cover out-of-pocket costs and help individuals and families save in the event that something happens to them. Across the board, conservatives agree that the federal government should prohibit discrimination against patients with preexisting conditions and disallow recisions, especially if someone in a plan gets sick. Moreover, building on HIPAA, individuals should be afforded the same protections for continuous coverage as those getting covered through employer-sponsored plans. 

Federally-subsidized risk pools would be the best approach for subsidizing the health care needs of the truly needy including people with preexisting conditions and loved ones with complex health problems. In fact, some of us would be far more amenable to paying a fine for forgoing health insurance if it were guaranteed to subsidize health insurance for these customers. $695 is a steep fine and only meant to encourage more people to buy into the exchanges. It didn’t work. A smaller fine, or tax, meant only to pay for the cost of covering preexisting conditions would serve a better, more narrow, government focus. Still, establishing age-rating baselines at five-to-one, as opposed to three-to-one, is a better way to incentivize young, healthy people to purchase health insurance rather than imposing a fine on them for resisting. 

There’s plenty more work to do bringing down healthcare costs for individuals, families, and governments but it’s imperative that we address the biggest issues immediately. After all,  Obamacare is not “old news” to the Americans opening up cancellation notices or facing on average a $1,400 in premium increase in 2017. And a deductible rising by $500 to $1,000 a year is not a mere “glitch” that can be addressed with some new subsidy. Obamacare certainly isn’t “mostly working” for the service industry worker forced to take a second job since the regulations on part-time work forced their employer to reduce hours. It isn’t working at all.

Ultimately, we all want the same thing - affordable, portable health insurance that meets our needs. Affordable health insurance, access to high-quality health care, good schools, plentiful job opportunities, affordable housing, and secure communities will always be worthwhile endeavors. But the government can't provide it all. And government-sponsored reprieve fuels long-term dependency. To get away from that, we need more small businesses offering full and part-time work, and Obamacare ensures less. To get there, we need more insurers expanding coverage and turning a profit - Obamacare ensures against it. To get there, we need principled leaders to ask what actually works for the vast majority of Americans and work without concern for what their parties want. To get there, we need to elect principled leaders in both parties that recognize the law is faulty in totality, failing, and circling the drain. Relief starts with repeal. We need market-based reforms that put patients and customers in control, not bureaucrats and insurers. 

As Bill Clinton said, “it’s the craziest thing in the world,” but what’s even crazier is what he said next: “It doesn’t work.” 

You can follow the author on Twitter @CACoreyU

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