Obamacare: Rising Prices for Subpar Insurance?


I have avoided writing a blog entry on this subject lately, despite all of the news, both positive and negative. I have avoided it because of the mass ignorance on both sides. Talking to my Conservative friends, I hear horror stories of premiums rising 300%. Talking to my Liberal friends, I hear how the rising prices are due to getting off subpar insurance and how much better off people are.

My opting in on writing something came from an article posted by James Shore (@jamesshore on Twitter) that essentially blames the hysteria over rising prices on the Tea Party. There is no more balance in the newer article (blaming the Tea Party) than the original only stating what the letter stated and not examining other options. The question is which is closer to the truth:

  1. People are paying more for insurance
  2. People are getting better insurance

In reality, it is a bit of both.

Equivalent Insurance for the same/higher/lower price?

The first thing you have to understand about the ACA is there are no equivalent plans. When I see someone stating “people are paying less for equivalent insurance” or “people are paying more for equivalent insurance” I say “bullshit”. There are no equivalent insurance plans.

This is due to the new standards for policies. Example? Find a plan in 2009-2013 that had a deductible or out of pocket max of $6350. You can’t. Why? Because the insurance  companies uses rounded numbers. You can find a plan with a $1000 out of pocket max. You can also find $2500, $5000, $7500 or even $10,000 or more. But you will not find one ending with $350. There was no good reason to do it.

I am personally under the view the government purposefully chose off numbers for minimum standards so you could not compare. It is not in any party’s best interest to be able to compare, and politicians are human. Human beings like to work out the rules to benefit themselves. So this is not a big conspiracy, just an “it is what it is”

The end result is it is hard to compare like plans. Now, part of this is the insurance companies. They may have had a $6000 out of pocket max plan that is now $6350. So the plan is actually worse than before and if the price went up, it is true you are getting less for more.

That leads us to the topic of subpar insurance.

Subpar Insurance?

Here is an nice little clip of Nancy Pelosi stating essentially “the prices are not going up; people are, instead, getting proper insurance”. In other words, the government came in and saved us from “subpar”. You can see the mantra in the video below.

And, Pelosi is correct … according to the government. According to the government, having a policy with higher than a $6350 out of pocket max or deductible is bad. This was not the ACA directly, but the HHS, who got to determine the minimum standards of care. Do you agree with the minimum standards? Just understand, it is not an individual choice what minimum coverage looks like any more. And, from that perspective (government should decide what is par), Nancy Pelosi is right that everyone whose coverage is cancelled had “subpar” insurance. If a $6350 out of pocket max or deductible are subpar, then high deductible plans are all subpar.

If we wanted to lower healthcare costs, a stated goal of the ACA, we should have more people on high deductible plans, paying their day to day care. This would foster more competition. The government’s role should have been to ensure pricing was transparent to level the field, not ensure everyone an insurance card. Take care of those who cannot afford care? Fine. But translate that to insure everyone? This goes contrary to the stated objectives of the law that was passed.

So, high deductible plans are bad insurance for individuals buying  their own insurance, according to the government. But who is the government to decide what is acceptable for individuals? What if the government told you the minimum acceptable size of a television was 44”. You can no longer buy a $100 7” television, as it is subpar. You now have to spend $400 to get acceptable minimum television. But the law also states you have to have a minimum of 90 Hz refresh rate and 1000p. Now it is $500.

And since there are currently no 44” televisions, you have to get a 45”. Since there is no 90 Hz refresh rate, you have to get 120 Hz and there is no 1000p,so you need to get 1080p. Now, the television manufacturers turn around and create 44”,1000p, 90 Hz television and call them bronze televisions.

The Conservatives bitch that the price went up for equivalent televisions and the Liberals bitch the televisions were subpar. But if people were happy with a 7” television, who is the government to state they can’t have it?

I realize healthcare and televisions are completely different in execution, but the concept is similar. And it is more the individual that determines what is good for them. If the ACA had created bronze through platinum plans, but also allowed individuals to determine if some plan fit the, even if it did not fit the minimums,then the bitching would be less justified, as there would be a choice for those who felt they should be able to decide what works for them. But that would not have been financially viable.

Some Americans truly did have insurance that was subpar. Ignoring this fact does not allow for an honest debate. They were given few choices due to their health or wealth, or lack thereof, and the new law has given them better choices. But the choices are more expensive and some Americans did not need the new “par” standards, or want them.

On the other side, others had good or even great insurance, but it missed one or more items of what is now considered par. When I examined 2013 plans, I found some insurance plans that were actually better for some segments of society that are now subpar. For example, under the ACA exchange plans, you can get a plan that has $65 copays for the first three visits, with no copay once you meet deductible. But if you are relatively healthy, the plan that had 20% coinsurance and no copay might have been less expensive. In fact, with standard doctor’s visit costs, it would have been cheaper than the new ACA plan for most Americans. Not allowed anymore.

But weren’t some plans grandfathered in? Sure, but very, very few. Why? The HHS set rules that substantive changes voided the grandfathered plans and then called a rise in premium substantive at a very low threshold. Since the cost of healthcare went up 15% in 2010, largely due to the new fees charged the medical manufacturers, health insurers and big pharma. Back to this shortly.

The points that are important are

  1. The HHS rules were adopted after the law passed, and voided insurance plans that might have been fine if the standards were decided differently. These are the plans we can firmly blame on the ACA.
  2. The minimum standards included standards in pricing and healthcare, so we are not just talking minimums for healthcare.
  3. The minimum standards are an “all or nothing” proposition. It does not matter if you have better insurance on all points but 1, you still have a cancelled policy.
  4. The government is deciding for you what minimum coverage looks like. This may be fine with you and may not.

Rising Prices

The prices are rising, at least in most states. Since you cannot compare ACA plans to 2013 plans directly, as , it is difficult, if not nearly impossible, to determine exactly how much. Are they rising 2-3 times the amount? Yes, in some cases keeping the same insurance with change provisions is 2-3 times the amount. But, to be fair, people can find less expensive options on the exchanges.

But the promise of Obamacare does not really come in unless you make somewhere between 138% and 400%of the poverty rate, as you get all, or a portion, of your premiums paid for you. And if you are at the lower end up the range, you might get your deductible and out of pocket max lowered for you, as well. In fact, if you are low enough, you can get plans with no deductibles and an extremely low Out of Pocket max.

The sad part here is 400% of the poverty level is well into the middle class, making the middle class a new entitlement class. I don’t think most of the middle class wants to be on programs like welfare, but they are now on the dole if they get the subsidies. But the exchanges are set up to make this less obvious, as you never see the full price of the insurance and may not even see the subsidy amount.

NOTE: Connecticut’s site shows “you are eligible for a subsidy up to $X” but does not show the subsidy amount on the page where you pick policies. I use this site, as you could shop, from the beginning, without putting in any of your information until you checked out.

The media currently heralds 2013, through October, as a banner year for healthcare, with the lowest rise in the cost of healthcare in decades. They also state 2012 was on track with other years, down from 2010 and 2011. This is stated to be proof the ACA works. But does it? In 2010 premium prices went up in the double digits and in 2011 it was up almost 10%, the highest rises in decades. Is 2013 proof the ACA works, or an overly pessimistic market responding. When the new ACA fees went into effect, perhaps the insurance industry panicked?

I predicted the fees would drive up the cost of healthcare when I read the bill(unlike some of our Congress Critters?). The fees, in the billions, had to have an impact. I now see a big rise in 2014, as well. Why? Because we have pushed so much of the law into 2015.

Here is something to consider. Insurers set 2014 prices in 2013, with the idea 7 million would sign up on the rolls by the end of March. But the provision they sign up or be fined has been pushed to 2015. And the provision the insurance companies must fit the framework is also pushed to 2015. The insurance industry has a lot of leeway in 2014 and you may even see mid-year hikes in premiums, ala this year.

Better Insurance?

We then come to the question of whether moving up to par gives you better insurance. If you truly had subpar insurance, as determined by you, not the government, then you may have a better written policy. But it may not truly be a better policy.

One of the unintended consequences of this law was the lengths both the medical providers and insurance companies would go to make money. Many medical providers have opted out of ACA exchange plans, deciding to only take employer plans (and other group plans) at this time. They are willing to forgo less than 5% of the populace as their plans pay less for medical services.

What this means to exchange plan holders is they may not be able to see their doctor, as he is not taking the plans. This does not sound too bad until you look at places where the best hospital for their type of care has opted out of exchange plans. Or worse, as in the case of Seattle Children’s Hospital, which was dropped from exchange plans, they have to travel hundreds of miles to get cancer care for their children, or choose care in an adult hospital, which is not skilled in pediatric cancer, thus lessening care. This is not critical in all areas, of course.

Since I mentioned Seattle Children’s Hospital, I should note that not all limitations in choice are being made by the provider choosing non-exchange plans. In the case of Seattle Children’s Hospital it was the insurance company. This means some of us may get our care lessened even if we are still covered by group plans, as a  reaction to the exchange plans.

Either way, the policy is better on paper, but not necessarily better in the real world. And tightening networks is not the only way the insurance might have gotten worse.

Under the ACA the playing field is leveled quite a bit. On the positive side, it means those unable to get insurance now can get insurance. But the price has to go up for the healthy to pay for the sick adding to the rolls, sometimes significantly. There is a push to get young people on the rolls, as they are healthy and paying a large portion of the bill. In fact, a 40 year old will have better rates than a 26 year old. Don’t believe me? Run the same plan for two males, one 26 and one 40, both with zero dependents. Nice, huh?

Affordable Insurance?

The ACA has made insurance more affordable for some.Those, for example, who have their entire premiums paid and deductibles and out of pocket max lowered, have more affordable insurance. If they also have a pre-exsiting condition, they have a major win.

But since the average American, even with our horrible diet, does not fit these cases, are we not setting the rules for the exception rather than the rule?

I know a great many cancer moms (see note) that saw the ACA as a godsend. Many are now seeing it is going to bankrupt them more unless they lower their income significantly. Under the ACA, unless you have a good portion of your insurance paid, you are going to pay more per year in 2014 for your serious illness than in 2013. I am not stating this is true for all, just a large number of people. With the minimum standards, it is easy to see why.

NOTE: My youngest daughter is a 5, almost 6, year cancer survivor.

The Bottom Line

Some of the people that are getting notices truly had what all of us would agree was subpar insurance. But some did not. Some just had insurance that missed one of the provisions the government states makes insurance par. They  actually had better, more affordable insurance.

The picture is not all doom and gloom, but there were other ways to solve this. And here are a few facts that may shock some of you, as you may be hearing things to the contrary. First, the Republicans did have alternatives to parts of the plan. You may wish to debate on whether or not they were good alternatives, but to say there were none is patently false. It takes a bit of a Google search to find other voices, but they are there if you search hard enough. Second, the Republicans are not balking against the ACA now that it is being put into action, as not one voted for it. You can look at the rollcall and find this out (and please don’t comment back with the action in the house to suspend debate, which some Republicans voted for, as that was not a vote for the bill – in fact, the original house bill had NOTHING to do with healthcare – the Senate stripped 100% of the wording from the bill and started over, something that, by the spirit of the law, is illegal, but apparently not by the letter of the law).

The ACA was voted in as soon as the Democrats had a filibuster proof majority between them and Independents. This would not matter today as Reid changed the rules of the Senate so a filibuster can be broken by a simple majority. It was not a compromised bill; it was one that fit one parties view of what is good and bad, without debate from the contrary side.This does not mean the law is wrong, only that there is a greater chance at least some of the provisions are flawed, if not downright bad, as no ideology is right 100% of the time. There is both good and bad in the law, and, from my reading of the law and HHS provisions, a lot of it is bad, as it does not meet its objectives and serves to drive up prices.

The author of the article, Maggie Mahar, is almost assuredly right that the woman could have gotten cheaper insurance than the $1000 she was quoted on the cancellation notice option(s). But the case is anecdotal. What is factual, from a scientific standpoint, is insurance rates are going up rather significantly in most states for individual policy holders.  Not significantly, as in 300%, but at a rate much higher than rates went up prior to the ACA passing.

But Greg,you might say,I see plenty of examples where the rates are much lower. Do you? Or do you see the total amount lowered? The total amount, in case I have seen that are lowered, is after subsidies. If the American taxpayer is paying a large portion of your premiums,of course the total cost, for you, is lower. But the actual costs, which the rate is based on, is higher. There are only a couple of states where this is currently not true.

To put this in perspective, let me consider my daughters.Suppose one wanted a new toy that costs $200 and I decided to buy it for her, so her out of pocket costs were $0. Did the price go down from $200 to $0? No. The cost remained the same. Let’s say the toy went up in price to$250 and I still decided to pay all of it. In that case, the price did not even remain the same, but from her perspective, the cost was$0, despite a $250 price. Much of the talk I see on the Internet about lower premiums is not lower premiums at all. It is lower out of pocket costs for premiums due the American taxpayer footing part of the bill. What gets me is some people are paying more even with subsidies.

My point here is this:

  1. Naming the Tea Party boogie man is a red herring
  2. While stories out there may be exaggerated (300% increase in premiums), it does not mean higher than average increases are not happening. And, by looking at facts, you can easily find the rates in many states are going up far more than the average.
  3. Insurance under the ACA is not necessarily cheaper. Even if we have cheaper premiums and better policies, cost of deductibles and out of pocket maxes may bankrupt families. Add on shrinking networks and it could be worse.
  4. Anything is less costly to you when someone else is footing the bill.

Peace and Grace,
Greg

Twitter: @gbworld

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