The Climate Change in Insurance Exchanges

A different kind of climate change was in the news this week, as Gallup reported that the percentage of people who are uninsured declined rapidly from 17.1 percent to 15.9 percent in just three months.

That is a pretty substantial drop, and one that began when people started signing up for Obamacare.

According to Gallup and others, it translates into an additional 3 million people who now have health insurance, consistent with the numbers of people signing up for Affordable Care Act coverage.

That’s good news for Obamacare – perhaps. 

One of the more interesting – and sometimes frustrating – things about health policy is that like climate change it unfolds slowly over time, and so it is often difficult to see the change in climate while it is happening.

For one thing, there are always other variables.  For example, the unemployment rate has also gone down during this period, from 7.2 percent last October to 6.7 percent today. It is possible that some of these 3 million newly-insured people obtained insurance through employment, and would have gotten it anyway.

And there’s always the glass-half-empty view to consider.  Both the unemployment rate and the uninsured rate are just about back to where they were in 2008, right around the time that the economy was collapsing.  So most of the progress we’ve made so far amounts to dragging ourselves out of a deep hole.  We’re still just back to where we were before we fell in.

But if we look too closely at this, we miss the bigger picture.

In spite of all of the initial problems with Obamacare exchanges, and despite the unpopularity of the Act itself (54 percent still disapprove of the law, according to the Real Clear Politics average of recent polls), and despite those who believe that they may have lost their insurance because of Obamacare, the trend today is clearly in one direction.

More people are becoming insured.  And that means something in the long run. 

For one thing, it means that health and mental health providers who have been holding out from participating in insurance plans until they are sure that there will be patients there will need to start signing up.  There will be patients there, and they will be looking for providers who accept their insurance.

For another, it means that individuals who can afford insurance but have been choosing not to buy it – betting that the law will go away before they ever have to pay a penalty – are probably not going to win that bet.  As more people pay up to become insured, there will be increasing pressure on everyone else to pay their fair share, too.  Insurance is becoming more of an individual's responsibility.

People may not like their health insurance very much, but once they have it, they never want to lose it again.

So in all probability the fates of the Affordable Care Act and private health insurance are intertwined now and for the foreseeable future.  The structure of our health insurance system is changing before our eyes because of the Affordable Care Act.  But it isn’t going to undermine the idea of insurance – just the way we pay for it. 

Here is a parallel example to explain what I mean.  When IRAs were created, they were like today’s exchanges.  They were a small thing.  Defined benefit plans – or pensions – were the norm for employees (as employer-based insurance is still the norm today).  But IRAs, 401(k)s, and other tax-deferred savings offered a retirement savings option that took a savings burden off of employers and transferred it to workers.   This changed – in a single generation – the nature of how we will pay for our retirement years. 

The same thing could be happening now with health insurance.  The exchanges may seem like a small and controversial thing today – perhaps 5 million or so will be insured through them at the end of the 2014 sign-up period.  But this number is growing every day, and will grow a great deal more in the future. 

And as a result new small employers – the creators of so many new jobs in our society – may increasingly decide not to offer health insurance as workers find deals that are just as good on the open exchange markets. 

Shifting from employer-based insurance to individual insurance does reflect a change in climate.  As we argue over the details, who really knows how significant this change will be?

Five Fake "Facts" About Obamacare

Last week, I was talking with a new acquaintance about health and mental health policy.

He was a successful businessperson, smart, very well educated, and well-informed about public policy.  Like most of us, he follows the news about Obamacare closely.  And he has strong opinions about it. 

But I realized as we talked that there were things he thought he knew about Obamacare that were not actually true.  But we both had heard them many times before.

So here are five often-repeated “facts” about Obamacare that you, too, have probably heard, and happen to be wrong.

1.  The Affordable Care Act was supposed to reduce health care costs significantly. 

Untrue – when the Affordable Care Act was passed, the Congressional Budget Office projected that it would cost more than $1.2 trillion over ten years.  After the Supreme Court decision in 2012, CBO lowered its projection to under $1.2 trillion.  (When these numbers were updated in 2013, they did not change dramatically.)

The cost of doing nothing was greater – but not by much.  Repealing the Act would cost around $10 billion a year, or less than ten percent more.  So the Affordable Care Act “savings” were always pretty small.

But even those savings were optimistic.  They were based on an assumption that Medicare would cut doctors’ fees by 30 percent – something no one thought would happen.

So the truth is that while some healthcare system costs may be less under the Affordable Care Act, overall the law was intended to be cost neutral.

2.  The Affordable Care Act has failed because it has not lowered large employer-based group health insurance premiums this year.

Untrue – the Affordable Care Act was never intended to lower the sticker price of any insurance premium.  It was only intended to lower the net cost for individual and small group plans by giving tax credits to individuals who (1) earn between 100 percent and 400 percent of poverty and (2) buy their own insurance. 

What ACA did for everyone else was to make sure that they got more for their money by introducing a new set of consumer protections (including minimum loss ratios, coverage for pre-existing conditions, and no cancellations when people get sick) that were not previously guaranteed by federal law or all state regulators.

3.  Under the Affordable Care Act, many working middle-class individuals are still faced with unaffordable health insurance premiums.

My acquaintance talked about the huge burden faced by workers who are paid $35,000 per year – a decent wage, but not an easy one to live on.  He didn’t believe me when I told him that a family of three earning $35,000 could get a “silver” plan – probably comparable to what many large employers offer – for between $100 and $200 per month.

So here’s a link to prove it.  According to the Kaiser Family Foundation’s insurance subsidy calculator, a family of three earning $35,000 per year in my zip code will pay, on average, $156 per month (net) for a silver plan that costs $6641 on the open market.  And if they choose a bronze plan, it will cost them nothing. And in my county there are over one hundred approved plans from which to choose.

4.  The Affordable Care Act was supposed to prevent insurance companies from ever changing or dropping plans again.

Also untrue – but President Obama did famously declare that you could keep your plan if you liked it.  He apparently assumed that people understood that he was making two assumptions here – that the plan met the minimum standards set by the new law, and that the insurance company was still willing to offer it. 

And that leads to the fifth and final “fact” you’ve heard that isn’t true.

5. The Affordable Care Act is at least in part a government takeover of the health care financing and delivery system.

Untrue again – because if it had been, you probably would have been able to keep your existing plan, because the government could have forced your insurer to continue to offer it.

So what is the truth about the Affordable Care Act? 

It is simply this – Obamacare is a balanced approach to reducing the number of uninsured people through a combination of expanded public welfare programs, subsidies to lower and middle class individuals, and private insurance market regulatory reforms.

That’s all.  And that’s a fact.  And its success will be judged ultimately on how well it accomplishes this goal.

And if you want to know how that’s going, click herefor the January 2014 federal report or take a look at the chart accompanying this column.

Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/

Without Obamacare, We Would Have Even More School Crossing Guards

Adrian Dantley was a six-time NBA all-star who averaged over 24 points per game during his 15-year career.  He was inducted into the Naismith Hall of Fame in 2008.  He made good money and reportedly invested it well.

Today Adrian Dantley is 58 years old.  Like most 58 year-olds, he wants health insurance.  But the NBA does not offer health insurance to its retirees. 

So Dantley recently took a job as a school crossing guard – for the health insurance.  The story is all over the sports pages this week.  I’m sure that it is drawing more than its fair share of giggles and head shakes.

But I’ve known a lot of school crossing guards in my life.  And many do it for exactly the same reason.

As a summary of news reports recently digested by Kaiser Health News shows, it isn’t always easy for a 50-something retiree to get health insurance.

In just a few months, the Affordable Care Act will change this – and not just for 50-somethings.

But despite all of the attention to ACA in the three years since it was enacted, most of us still don’t really understand how it will affect us personally.

In recent weeks, some analysts and insurers have said to be prepared for sticker shock as 15-20 million currently uninsured people gain private insurance, and up to 17 million more move onto government-sponsored programs. 

So when a typical, middle income family has to buy insurance in this post-ACA world, what will it cost and what will they find?

The gross cost will indeed be high, but the net cost much lower.

You can plug your own numbers into the Kaiser Family Foundation’s excellent subsidy calculator and see for yourself. 

But this example will give you an idea.  The full premium cost of health insurance for a middle-class family of four making $46,850 per year will be $14,245 – almost one-third of that family’s total income.  They will then get back a tax credit worth $11,294.  So their net health insurance cost will be $246 per month.

And their ACA tax credit will be so big that they will end up paying virtually nothing in net taxes to the federal government. 

Instead, their entire tax burden – something that has historically supported spending on defense, highways, energy development, environmental protection, public health, education, social services, veterans’ services, childhood nutrition, and more – will essentially be returned to them to pay for their health insurance.

This will be true for many.  According to recent data from the Congressional Budget Office, the average ACA tax credit in 2014 will be worth $5,510. 

But, remember, you only get the credit if you personally pay the bill.

Where will we find our insurance, and what will it look like?

We will find insurance through new exchanges that seem as shrouded in mystery as the creation of the universe.

But when the exchanges come into existence in six months, they won’t be quite so exotic. 

We will just find a number of standard insurance plans from a variety of well-know insurers that we or our employers will be able to buy through premium payments and tax credits.  Nearly all will cover a standard set of health and mental health benefits.

Some plans will cover additional services, and be given a higher rating, “gold” versus “silver,” for example.  And co-pays and deductibles won’t disappear.  Premiums for insurance plans with lower deductibles will be higher; those with higher deductibles will cost less.

Health care procedures will still be covered, providers will still be paid, and insurers will still occasionally deny reimbursements for reasons that we can’t fathom.

Who will be left out?

If nothing else changes, in another three years thirty million people will remain uninsured. 

• Six million people who, for the privilege of avoiding the health insurance system in its entirety, choose to pay up to 2.5 percent of their income as a tax penalty to help pay for uncompensated care.
• Up to 12 million people with serious mental illnesses or addiction disorders who are currently not receiving care (except when they are in jail).
• Twelve million more who fall through the cracks, or are uninsured for short periods of time.

But at least Andrian Dantley and 68,520 others will have a choice.  They won’t have to work as crossing guards anymore just for the insurance.

To reach Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/