Who knew that eventually even Democrats would turn on Obamacare? All of the top tier contenders for the Democratic nomination for President want to see major changes to the American health care system as if 2014 did not represent a major overhaul. Most of them want some version of Bernie Sander's "Medicare for All" proposal which promises the elimination of all private insurance. Those that have not signed onto "Medicare for All" want to make major changes to Obamacare. None of these proposals sound particularly appealing to me, but I doubt the candidates care what I think.
Maybe instead we should take a look at what is and is not working in the health insurance marketplace right now. We are five years into the full implementation of the Affordable Care Act. Should we start over? How is it going?
Recall, that a fundamental promise of the ACA was to make health insurance more affordable? Did the ACA reduce the cost of health insurance? Another promise of the ACA was that it would bring more people into the insurance marketplace and reduce the number of uninsured. Did it? You would think these are questions that should be fairly easy to answer. They are not.
This is partly because it all depends on where you are sitting. The relative impact of the ACA greatly depended on how you purchase your health insurance. There are three distinct categories.
- Individuals purchasing insurance on their own;
- Employers with less than 50 employees; and
- Employers with more than 50 employees.
Individuals purchasing their own insurance outside of an employer-subsidized group plan. The ACA had an enormous impact on your price and ability to purchase insurance, both positively and negatively. Prior to the ACA, individuals with relatively good health could purchase highly customized individual policies for affordable premiums. Individuals with poor health and/or "preexisting conditions" were not so fortunate. There was a very limited market for them offered in most states (aka "high risk pools"). The ACA was a sea change for the people in this category. Even though the ones with insurance may have liked their plan and their doctor, the ACA essentially eliminated their plans. Customization was no longer an option. It was replaced by the "essential health benefits." Underwriting for individual policies was also eliminated. The insurance carriers now had to take you regardless of your health. Individuals with health conditions were given a big win with more options than they had in years. This does not even contemplate the premium subsidies offered for lower income individuals (up to 400% of federal poverty level--roughly $44K per year). Your attitude about this change was determined by whether you were among the winners or the losers.
This group has seen rates increase by more than 150% over the last 4 to 5 years. Access to providers has been greatly reduced by the carriers remaining in the marketplace. "Name brand" providers such as M.D. Andersen Cancer Center or Texas Children's Hospital are not available under any of the individual policy options available in this marketplace. Was it worth it to give more options to folks who before 2014 might have been uninsurable? It seems like we could have found a better way.
Employers with less than 50 employees. This group was also greatly affected by the ACA's changes. Employers in this class were forced to move to community-rated plans that were no longer underwritten based on their claims and that complied with the ACA regulations. As with the individual marketplace, the groups level of happiness with this change was determined by how healthy or sick they were as a group. A small accounting group with employees in their 50s and 60s might have lost out if they had good claims experience. In the alternative, they might have welcomed the change if they were afflicted with chronic and expensive diseases.
Five years on, costs in this group are much higher than they were in 2014. So, the the supposed savings from the ACA is illusory. Access to top quality providers is still better than the individual market but trending in that direction. The marketplace has created so-called "level funded" plans to meet the desires of consumers in this space that want to be medically underwritten to take advantage of the relative health of their groups. This has expanded the options for this group, but may only be a short term solution for these small groups.
Because these employers were not impacted by the mandate, you saw very few firms start offering benefits unless they were already doing so. Conversely, the employer mandate is keeping many employers focused on the 50 employee count and making sure they do not reach that threshold. This is an under-reported curb on economic growth to be sure.
Where will this group be in another five years? Certainly, a repeat of the cost increases of the last five years would be unsustainable. Is there any hope? The Trump Administration's relaxation of the health association rules may offer additional marketplaces for these groups should those rules foster an expansion in the marketplace. The recent rule changes on HRAs (allowing the premium payments) might also offer more options to these employers. It is too soon to tell whether either rule change will change the marketplace.
Employers with greater than 50 employees. This group had two subgroups: Employers offering benefits and employers not offering benefits. If they were NOT offering benefits before the ACA, these employers had the biggest hurdle to surpass. The sudden implementation of a major medical plan is an enormous expense. It is not one that most businesses can incur without major disruptions. Thus, many of these employers looked for options in MEC plans, minimal value plans, or simply decided to pay the penalty.
Employers with more than 50 employees already offering benefits saw the fewest changes of any of the major three categories. Employers with fully insured plans had to comply with all of the new ACA regulations. However, employers with large scale self-funded plans were the least touched by the ACA's requirements. These are the plans managed by large employers with employee counts in the thousands. These employers still have health plans with costs primarily determined by their plan usage and claims. To be sure, they are affected by overall health cost trends, rising pharmaceutical prices, and the aging workforce, but as a group, these employers were the least disrupted by the ACA.
Across these three groups, you will find reactions to the ACA that run the gamut from object hatred and disgust, to indifference, and finally to unqualified support. All of them are potentially correct in that they are focusing on their own individual circumstances and outcomes. The ACA impacts these groups and the individuals within these groups very differently.
But, in the aggregate, the ACA has not lowered the cost of health insurance as was promised because it did nothing to address its true cost drivers - the cost of health care. Spending on drugs alone has risen from $250 million in 2010 to $360 million in 2019. Should we surprised that the ACA did not lower costs? Um, . . . no.
What about health insurance coverage? In 2018, the percentage of Americans without insurance was 13.7%. In 2008, it was 14.6% million people did not have health insurance. So, was the .9% reductiion worth the costs? Advocates say that Trump has caused the percentage to increase again with the repeal of the individual mandate.
Fair enough, was a 2% reduction worth the cost? No wonder Democrats now want to repeal and replace Obamacare with "something else." That something else is almost always some form of single-payer government run system. Whether it is adding a "public option" to the Obamacare exchanges or "medicare for all," government is always the answer.
So, here we sit and await the next Presidential contest in 2020. There will be no change in the short term given the present make-up of Congress and the President. Post 2020 there may be a mandate for huge changes or none at all. Meanwhile, cost will continue to hurtle upwards as we decide to spend more and more of other people's money on our health care. Can you