THCB

To Buy Or Not to Buy

Now that consumers can generally make an efficient health insurance purchase at HealthCare.gov and most of the state-run exchanges, we can finally get to the real question.

Are the healthy uninsured going to buy it?

The big health insurance changes Obamacare made to the individual and small group market were arguably done in order to get everyone, sick and healthy, covered in a more equitable system.

To be clear, no one I know of wants to go back to the prior health insurance market that excluded people from being covered because of pre-existing conditions.

But what if most of the uninsured literally don’t buy Obamacare?

Then people will question whether or not all of this change was worth it: Why did those who were in the old individual and small group market have to accept all of the expensive changes, narrower networks, higher deductibles, and fewer choices if the uninsured largely don’t want it?

Are we moving away from a system where only the healthy could buy health insurance to a system where only the sick want to buy it?

As I have reported on this blog before, many working class and middle class subsidy eligible people will find health insurance premiums on the exchanges, after federal subsidies, at about 10% of their after-tax income. The average standard Silver plan deductible is almost $2,600 and the average Bronze deductible is $4,300 according to Avalere Health.

More than two-thirds of Silver plans sharply reduce the number of hospitals in their provider networks over typical employer plans according to a McKinsey study. That means most of the second lowest cost Silver plans––the plan the subsidy is tied to––will be a narrow network plan.

It therefore becomes a difficult decision deciding whether to buy or not buy a health insurance policy.

A recent Washington Post article, “Health Law Provides a Comfort to Those at Risk” told one side of the story. It recounted the relief a number of people had to finally be able to buy a health plan because they could not any longer be excluded.

One fellow intended to have gall bladder surgery as soon as his coverage was effective this month. Another needs surgery for endometriosis. Another women, with high blood pressure and a congenital heart defect, signed up as soon as she could. Another lady making $11,000 a year, with a health history that put her into debt, was able to get into Medicaid and be covered for the first time in eleven years.

About the same time, there was an article at Kaiser Health News, “One Texan Weighs Obamacare Options: High Deductible Vs. ‘Huge Fear.” It describes a 43 year-old women who is healthy and spent only about $1,500 for minor health care services last year. The best deal she found on the federal health insurance exchange would cost her $178 a month and would have a $5,000 deductible.

She hasn’t bought a policy yet.

She was quoted as saying, “I don’t smoke, I’m relatively healthy, so I was pretty insulted when I saw this [the price]. I was extremely angry actually. I felt hoodwinked by the insurance companies: ‘Oh, here’s this wonderful insurance plan but by the way you need to come up with $6,000 out-of-pocket first before we pay anything.”

Listening to people defend Obamacare I get the sense that they think this was the only way we could have done health insurance reform.

I will suggest that the Obamacare architects put most of their emphasis on deciding for consumers that they should have a mandate rich health plan. That in turn drove the cost up, which in turn drove the deductibles up and narrowed the provider networks.

An entrepreneur might have taken a different approach.

In business, this is often referred to as a market driven approach rather than a product driven approach.

A product driven approach is one where the developer tells you what is good for you because they know better. It generally does not lead to a successful business venture.

The market driven approach starts by asking what people really want and then figuring out how to deliver it.

In this case, the entrepreneur might have gone to the woman in Texas––really lots of people in her category–– and asked what she wanted. Then the entrepreneur would have recognized that the federal government was willing to pay something toward the premium in the form of the subsidy.

What kind of deductible would she consider reasonable? What kind of premium would she be willing to pay for a plan with her preferred deductible? What kind of first dollar benefits would she value? What kind of catastrophic benefit would make sense?

Then, with her premium, the federal premium, the deductible she considers reasonable, and the first dollar benefits she would value, what kind of plan could we build for her––and the many healthy people who think like her?

That plan would not have the long list of Obamacare mandates. It would not be “as good.” It might even be considered “substandard” by many. But she would value it, particularly because she could afford it, and she would likely buy it.

Would having these kinds of choices lead to anti-selection? They could. But the health insurance industry has a long track record of offering policies people have liked and clearly wanted to keep because they offered lots of choice and variety. After all, Medicare Advantage and Medicare Part D offer lots of attractive choices in a regulated market and they work.

Obamacare is in trouble. The person who needs gall bladder surgery this month bought it. The person who is healthy felt “hoodwinked.”

At its core, what’s wrong with Obamacare? It is a product driven not market driven enterprise.

Until the people who run Obamacare start listening to the people who aren’t buying it, Obamacare won’t work.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

Livongo’s Post Ad Banner 728*90

14
Leave a Reply

7 Comment threads
7 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
7 Comment authors
Porte Carte De CRougeit LongchampBarry CarolBobby GladdBob Hertzjbjones Recent comment authors
newest oldest most voted
Porte Carte De CRougeit Longchamp
Guest

It truly is extremely fascinating subject you’ve written here . The truth I’m not related to this, but I believe is a excellent opportunity to learn more about, And as effectively speak about a different subject to which I used to speak with others

Barry Carol
Guest
Barry Carol

“What we’re finding is there is no magic in actuarial insurance – the risk is the risk.” Peter1 — You’re correct. And in a single payer system like Medicare, the cost is the cost. No matter how many medical claims come in and no matter how much they cost in total, taxpayers are expected to just pay them. But hey, it’s all one pool. As Canada and the UK show us, the only way to control healthcare costs below natural demand is to control supply especially if you have a system where no cash is exchanged at the point of… Read more »

Peter1
Guest
Peter1

“A friend’s late father-in-law lived in Montreal for most of his life. Late in life he developed a tumor on his groin but it wasn’t immediately life threatening. He was put on a waiting list for surgery. He kept getting bumped by people who needed treatment on an emergency or higher priority basis. Two years later, he died of something else and never did get the surgery. I don’t think Americans are willing to sign up for that. Even if his life wouldn’t have been extended had he gotten the surgery, he wouldn’t have had to live with the condition… Read more »

Barry Carol
Guest
Barry Carol

“Barry, I consider that story a wise use of resources and am not horrified by it – not knowing the “discomfort” level.” Peter1 – It may well be a wise use of resources but I don’t think most Americans would agree with you. In this particular instance, I don’t know the discomfort level either or whether medication could mitigate it without compromising alertness or becoming addictive. I believe he was in his early 80’s when he died. My own personal rule of thumb about whether care should be provided or not is this: If I’m not willing to spend my… Read more »

Barry Carol
Guest
Barry Carol

Peter1 – Most plans offered by large employers offer lower deductibles than the exchange plans you described. The thing is, though, that the employer plans are based on pure community rating which means that every employee contributes the same amount toward the cost of the premium whether he is 21 or 64 years old and whether he’s healthy or sick. So, it’s a good deal for the older workers but for the younger folks, not so much. Some employers do vary the contribution based on income and require higher paid workers to contribute more of the cost so lower paid… Read more »

Peter1
Guest
Peter1

“The thing is, though, that the employer plans are based on pure community rating which means that every employee contributes the same amount toward the cost of the premium whether he is 21 or 64 years old and whether he’s healthy or sick.” Whose community, the employer’s or the general community? All workers contribute the same, but all those “contributions” are subsidized by employer contributions so the younger workers also get a great deal. My wife’s contribution use to be zero, it’s now about $36. What’s an “exchange” supposed to mean, just a collection of individual policies? Certainly Obama sold… Read more »

Barry Carol
Guest
Barry Carol

Peter1 – The “community” in self-funded employer plans is the employees and their family members, not the community at large. My former employer’s community was older and sicker than the average for the general population and its benefits package was pretty comprehensive so its cost per covered life was also above average. Companies with a younger workforce like Whole Foods or Starbucks will spend less than average per covered life. As for the “subsidies” that employers provide, every reputable economist will tell you that the employee actually pays these costs, along with the costs of all other fringe benefits including… Read more »

Peter1
Guest
Peter1

Barry, the higher benefits/lower wages argument only goes so far. Those who work for non group insurance provided companies usually get paid a lot less – the wage market is the wage market. If employees are getting paid less they’re making up for it with non-taxed compensation on dollar one, while those having to pay their own premiums and costs get no tax help up to a certain amount. “The exchanges are intended mainly to facilitate competition…” How can that be of any value when insurance has always claimed they make a pittance on profit and mostly pay out claims… Read more »

Bob Hertz
Guest
Bob Hertz

Notes to Aurthor: Cancelling policies because the insured became ill has been illegal since about 1996. Not that it did not happen, but as you suggest, we did not the ACA for this reason. and The reason that insurers raised rates after an illness is that they had a very small risk pool. When one person out of 1,000 insureds has a $1 million claim, then rates will go up But in a huge pool like the Federal Employees Plan, people get transplants every year and there is no drastic increase in rates. My overall response to Mr Laczewski;’s post… Read more »

Bobby Gladd
Guest

“I am a closet European on this one.”
__

With you on that.

Aurthur
Guest
Aurthur

Mr. Hertz, a couple comments: 1,000 insureds is not a pool, very small or otherwise. A self funded employer with 1,000 members that did not have a reinsurance policy at a pooling point under $200,000 would likely be considered negligent. An insurance carrier with only 1000 insureds without a reinsurance arrangement may actually be criminal. http://www.managedcaremag.com/archives/0903/0903.catastrophic.html I suggest the reason the Federal Employees Plan hasn’t had drastic increases is because the rates are already pretty high. The fact that there are a lot of people in this plan helps especially when it is funded at $650 to $700 per government… Read more »

jbjones
Guest
jbjones

I agree with RL that the products offered on the exchanges may not attract enough customers. But I don’t think the problem is as deep as he suggests. The central issue in designing the Obamacare exchange is figuring out how much of the cost of insuring sick people is funded by premiums paid by healthy people and how much is funded by taxes and other “outside” sources. It may well be the case that the policies on the exchange, even post-subsidy, are too expensive to attract healthy consumers. In that case, just increase the subsidies and make up the difference… Read more »

Peter1
Guest
Peter1

Off Healthcare.gov my plans (no subsidy) are: Lowest price Bronze – $454/mth, $6300/yr deductible, $6300 OOP, No payment for any doctor until deductible has been met. Blue Value Bronze – $559/mth, $5000/yr deductible, $6350 OOP, payments to docs + co-insurance. Blue Advantage Silver – $666/mth, $3000 Deductible, $6350 OOP + 30% co-insurance after deductible. I’m healthy, always have been. Had a hip done last year in India for $10,000 including hotel/resort/hospital/doctor/device/air fare. Accredited hospital, world class surgeon, British trained. I would go back for other elective surgeries if need be. I won’t buy, at least this year. I could live… Read more »

Aurthur
Guest
Aurthur

“To be clear, no one I know of wants to go back to the prior health insurance market that excluded people from being covered because of pre-existing conditions.” Mr. Laszewski, while it is true you do not know me, I believe if you surveyed people you do know, you would find someone wanting to go back to the prior health insurance market that excluded people from being covered (that is no guaranteed issue with no prior coverage) because of pre-existing conditions. This is what used to be called insurance. What most people actually object to is the practice of insurance… Read more »