The Administration has snatched victory from the jaws of defeat and enrolled 7 million people (give or take a million who may not have paid their premiums) into health plans under the ACA, and more into Medicaid. The Affordable Care Act (ACA) isn’t as big a change as some of us would have liked, But in this moment of modest celebration let’s remember what some of the sensible old men said all along.
Sensible old men said reform couldn’t pass without bring in the Republicans. Sen. Baucus tried hard to do that, and it’s beyond clear that no Republican would have ever supported it–even a moderate like Snowe who was quitting. It passed anyway.
They said that we’d see massive rate shock. Instead plans tightened networks and rates were in general lower than they had been before.
They said that the web site debacle meant no-one would sign up and we’d go into an insurance death spiral. The web site launch was a cock up, but Medicaid expansion (where allowed) has more or less been OK, and the exchange web site(s) now more or less work(s)–outside Oregon & Maryland. By the way this backs my argument for having one Federal exchange, which you may remember was in the House bill before we ended up being forced to take the Senate version due to Ted Kennedy’s death.
One wise old man (Robert Laszewski) was still saying that the exchanges would be financial disaster for insurers the very week Wellpoint raised earnings expectations because they had more enrollees than expected.
Let’s also remember that because of the politics of the nation, the ACA is a ridiculous hodge-podge of a law requiring–you’ll recall:
a) an opt-in to what’s basically a social insurance program (hey, let’s opt-in to fire protection while we’re at it!)
b) arbitrary tax (and now subsidy) distinctions between those who get insurance via an employer and those who don’t, and
c) arbitrary access to insurance (well, Medicaid) for the poor depending on their income and which side of a randomly drawn line they live.
How many times have I talked about rate shock, the millions of people who would be getting cancellation letters from their current health plan, and the problem of people having to put up with more narrow networks?
And, how many times have those predictions been met by push back and spin: Today’s policies are just junk and people will be better off finding lower cost health insurance under Obamacare.
I have been in this business for 40 years. I know junk health insurance when I see it and I know “Cadillac” health insurance when I see it.
Right now I have “Cadillac” health insurance. I can access every provider in the national Blue Cross network––about every doc and hospital in America––without a referral and without higher deductibles and co-pays. I value that given my travels and my belief that who your provider is makes a big difference. Want to go to Mayo? No problem. Want to go to the Cleveland Clinic? No problem. Need to get to Queens in Honolulu? No problem.
So, I get this letter from my health plan. It says I can’t keep my current coverage because my plan isn’t good enough under Obamacare rules. It tells me to go to the exchange or their website and pick a new plan before January 1 or I will lose coverage.
First, the best I can get in a Blue Cross network plan are HMOs or HMO/Point-of-Service plans. In the core network those plans offer, I would have to go to fewer providers than I can go to now in the MD/DC/VA market. And, the core network has no providers beyond my area. I can go to the broader Blues network but only if I pay another big deductible for out-of-network coverage.
How did it go? Unavoidably, that will be the big question come Tuesday.
But there will be much more to it than that.
A 180-Day Open Enrollment––Not a One-Day Open Enrollment
What happens on the first day, for good or bad, will constitute only a tiny percentage of the open enrollment period. Consumers will likely visit the new websites many times before they make any decisions, and that is exactly as it should be.
Many of the health plans touted as being low-cost plans are going to be very limited access plans. It won’t be easy for consumers to compare one plan’s provider network to the other. In the best of circumstances, consumers will be confused by what is being offered for some time and will have to make a major effort to make sense of it for themselves.
Let’s not forget, they will be buying something that will cost thousands of dollars––their money or the government’s––and that kind of purchase will never be as simple as going to Amazon and buying a book.
I will suggest that if the local press wants to be helpful they will waste less time asking how things went the first day and more time doing stories on the quality of the various health plans in their local communities––particularly over provider access, which will be the only major product differentiator between health insurance companies.
Will There Be Administrative Problems With the Exchanges?
There already are. And, there will be lots more.
During the last 24-hours I have been told that the information technology testing between insurance companies and the federal government, particularly around the government telling insurance companies who they will be covering, continues to be a real mess.
But whatever obvious problems there are at launch, there will likely be more problems and more serious problems behind the scenes in the lead-up to January 1, the initial problems will be worked out in a few days or a few weeks. Operational expectations are now so low for Obamacare’s health insurance exchanges a small disaster will be considered a political victory.
Will we have rate shock?
It looks to me like consumers will have a choice when they get to look at the health plans available on the new “Obamacare” health insurance exchanges––rate shock or benefit shock. While there has been lots of focus on the issue of rate shock, I will suggest that just as big an issue may well be benefit shock—that consumers will look at what they will be getting for their premium payments and that they will be surprised at what their out-of-pocket costs will be and before they get anything.
The chart above was prepared by Covered California, the state-run California exchange. This chart does not include specific California plan premiums. What it does show is the net of subsidy cost a single person would pay at the various income points for the second lowest cost Silver plan, as well as the deductibles and co-pays they can expect to see from the standard Silver plan.
While the benefit plan structures may vary a bit from state to state, this gives us a pretty good idea of what consumers can expect in all of the states (click on chart to enlarge). A single person making $22,980 per year would face a premium, net of subsidies, of $121 per month. That’s pretty good.
I have to say I was surprised with the press reports last week that there wasn’t “rate shock” in California when the California exchange offered preliminary information about their new plans and rates.
At least one prominent health actuarial group had predicted a 30% baseline increase in costs for California’s new health insurance exchange plans under the Affordable Care Act (ObamaCare”).
As the director of the California exchange put it, “These rates are way below the worst-case gloom-and-doom scenarios we have heard.”
But a few days later there is lots more information coming out and it would appear we have a case of apples to oranges to grapefruit. And, we have a pretty good case of rate shock.
First, the exchange officials pointed out that we have to be careful to compare apples to apples when looking at 2013 rates and comparing them to the 2014 exchange rates because the 2014 exchange plans have far more generous benefits.
Yes we do, particularly when the California exchange forces us to give up our apple and buy a more expensive orange.
One of the reasons health insurance in the exchange will cost a lot more in most states is because the new health law outlaws many of the existing plans now being offered and requires only those much richer plans to be sold.
Are people going to get more coverage for their money? Yes. Do they want more coverage if the premium costs for those plans is a lot higher? Likely yes if taxpayers are paying for most of it. If not, clearly they didn’t want to pay for it before. Come January, lots of California consumers in the small group and individual market are going to get a letter from their existing insurer telling them their current plan is no longer available and the cost of the new required plans will be a lot more.
Simply, the new law is taking plan design choices away instead of letting the consumer decide what is good for them. Does that matter in California?