Obamacare: Just Another Social Welfare Program?

When The Patient Protection and Affordable Care Act was signed into law in 2010, the President heralded it as the dawn of a new era in healthcare.  Not only would people with preexisting conditions not be denied coverage but it would also lower insurance premiums, not deny Americans with health insurance access to the doctors they wanted to see and provide millions of uninsured Americans with coverage.

If you are one of the millions of Americans with employer provided health insurance (like this author) you have not been that significantly impacted.  Indeed, the law really only targets overly generous Cadillac Insurance plans for many employees.  But for the rest of Americans, Obamacare is turning into something ominously familiar; just another anti-poverty program for the poor.

How did this occur you might be asking?  Well, it started back in 2008 during the Democratic Primary when Barack Obama and Hillary Clinton debated the merits of the Public Option vs. working with the insurance industry to provide universal coverage (Individual Mandate).  Clinton, impacted by her 1993-1994 efforts to provide universal coverage, argued for the latter while Obama wanted the former.

Obama’s election allowed him to chart the healthcare reform course.  Initially, Obamacare was meant to include the Public Option but it never was politically feasible.  Despite being inserted into the original Senate bill the plan never garnered 60 votes and the IM replaced the Public Option.

But, politics had already intruded into the process.  In order to get the insurance companies to buy into providing coverage for the sickest Americans the administration had to promise them millions of new customers.  But, after the law was signed and political blowback grew, it became clear the administration needed to do something.  The result was delaying the IM until 2013 and watering down the fines for individuals who did not purchase health insurance.

By far, the two largest components of the law in providing insurance to millions of Americans were the exchanges and Medicaid Expansion.  Medicaid Expansion was dealt a blow in 2012 when the Supreme Court ruled it unconstitutional for the Fed to force states to expand coverage or lose funding.  But the exchanges were already being established in many states by that time.  And while many states, including many Republican controlled states, have been expanding Medicaid via waivers from HHS to enact their own requirements, the exchanges are struggling.

A mere three years ago it was not uncommon to hear many experts predict the exchanges would replace America’s complex, fractured employee-based healthcare system.  But, politics and businesses seeking to keep and recruit talent never shifted their best, full-time workers to the exchanges.  Many of these workers, young and healthy, were supposed to form the lifeblood of the exchanges and cover the cost of the sicker uninsured population.  It has not panned out.  As a result major insurers like Aetna and United Health have soured on the law.

Today, according to Michael Adelberg, 85 percent of the exchange population qualifies for federal assistance.  Adelberg was the former head of the administration’s exchange policy.  This makes the exchange population look very, very similar to the Medicaid population.

This is a far cry from what the administration and health policy wonks envisioned when the law was crafted.  They expected the law to drive employers to drop their employees into the exchanges.  They also expected the Cadillac Tax to drive down the cost of insurance and thus lower premiums.

While it is true the number of uninsured has dropped every year since 2010 and premiums have slowly been increasing (no, they have not decreased) and millions of Americans have gained access to needed medical services it is also true this has come with some serious caveats.  The exchanges are offering people narrower and narrower networks and insurance companies are hemorrhaging money to maintain them.  Additionally, if not for the subsidies the government offers on the exchanges the premium hikes of the last few years would render many plans unaffordable (as a former user of the exchange I can personally attest to this).

The Failure of Choice

The ACA’s insurance marketplaces were sold on one common theme, more choice.  If the American insurance marketplace was better organized then millions would flock to buy coverage.  Hence, the simplicity of providing a centralized source to shop and purchase coverage.  The President echoed such theme when the marketplaces launched that Americans will find “more choices, more competition, and in many cases, lower prices.” As the marketplaces launched, he predicted that consumers would shop for coverage the “same way you’d shop for a plane ticket on Kayak or a TV on Amazon.”

There are some places where the marketplace works like this. In California, for example, no less than four insurers provide plans on the exchange.  In Dallas, Houston and San Antonio, shoppers can pick from a half-dozen plans in 2017.  These urban, dense areas, have ready-made customer bases for insurance companies with their young, higher-income and diverse populations.  But elsewhere, the picture is much different.

In areas that have struggled to attract competition little has changed.  A full five states, Alaska, Alabama, North Carolina, Oklahoma, and Wyoming will have only one insurance plan to be sold for 2017.  In 2016, Wyoming was the only state in such a situation.

Worse, Pinal County, Arizona will not have a single plan offered on the exchange after Aenta, echoing a broader trend, declined to provide coverage after being denied a massive rate hike.

There are many reasons why this is happening.  Among the insurance industry there is a feeling the IM has been too watered down.  Many insurance companies expected the exchange population to be about 38 percent young.  Instead, it sits at 28 percent. In political circles, electoral prospects outweighed the practical need to continue to improve the law.  The result has been a law that has increasingly limited choice in all but the most urban and populous cities and states.

The Swiss Model for Success

The closest counterpart to the American healthcare system in the industrialized world might be Switzerland’s.  While many European nations plans are centered around single payer systems the Swiss provide universal coverage via private plans.  Germany has a similar system with some differences.

Unlike the majority of their European counterparts, Switzerland built its coverage on private plans.  They did this via a combination of much tighter regulations including mandating what services and benefits plans must cover and ensuring all individuals have coverage.  For example, every individual who moves to the country must purchase coverage within 3 months.  If they do not, they face steep fines and possible jail time.

Obamacare is a much more watered down version of this idea.  Sure, the law mandates some services be covered (free contraception) and caps out of pocket costs (usually around $7,000 for an individual) but its fine for not purchasing coverage ($695) is pretty weak.  But this is much cheaper than even the cheapest exchange plan.  Most young individuals opt to pay the fine than thousands in insurance premiums.

Legislators made policy choices with the law to preserve choice and freedom.  The side-effect of this choice is that many Americans, particularly the young and healthy, are choosing not to participate in the exchanges and purchase insurance in general.

Obamacare’s Future: Medicaid-ization

The future of Obamacare is not looking like the brand new type of healthcare we were promised.  Instead, it is looking much more like a plan many Americans are intimately familiar with, Medicaid.

For those who need a quick refresher, Medicaid has been providing low-income Americans with care since the 1960’s.  The program provides reimbursement to providers, usually lower than private networks, which means many major hospitals and networks do not accept Medicaid patients.  In 2011, before the Doc Fix mind you, one-third of doctors said they did not accept Medicaid patients.

The population of the exchanges looks eerily similar to Medicaid.  Almost 81 percent earn less than 250 percent of the poverty line ($29,000 for an individual or about $60,000 for a family of 4).  Additionally, like Medicaid enrollees, they report being happy with their limited coverage.

It is interesting to note the companies that have done the best on the exchanges are those that have always provided plans to low-income Americans.  Take Centene, which provides plans to many low-income individuals in St. Louis.  Centene has participated in Medicaid before and has tailored its plans to provide narrow networks, narrow benefits and kept its premiums and costs low.  This has granted the company success in the exchange.

Obamacare Promises Coverage-Not Choice

Nobody who crafted Obamacare envisioned the exchanges resembling Medicaid.  But that is where they are headed.  Nationally, major providers like Aetna and United Healthcare have announced they are pulling out of several markets and rate hikes are expected to hit consumers pocketbooks (subsidies or no subsidies).  In 2017, 687 counties will have only one Obamacare insurer.

Whether Obamacare is considered successful depends on many factors; the metrics you use, your personal political preferences and whether choice/competition or coverage is more important to you.

Obamacare is not Medicaid for sure.  Only a third of exchange enrollees kept the same plan in 2016 that they had in 2015.  There is no data on what these plans included but it does suggest there is choice, even if limited, in the exchanges.

If Obamacare becomes Medicaid-ized the story of choice will be lost.  Medicaid is not about choice.  It is about coverage.  Medicaid enrollees do not get to pick their doctors or hospitals.  They do not decide what services are and are not covered.  Most glaringly, their coverage is not prone to political coverage due to their lack of political power (unlike individual or employee-based individuals).

As mentioned before, surveys show many exchange and Medicaid enrollees are happy with their plans.  To these individuals, choice is less important than coverage.  The marketplace can be a confusing place for individuals. As can selecting a plan, choosing a network, picking a doctor and so on.

But, there are millions more exchange enrollees who do shop for coverage and look for plans and networks that fit their needs.  As insurance companies pull back or out of the exchanges, costs continue to soar and networks narrow or disappear these individuals will suffer the most.  These are the losers in a Medicaid-ized exchange as the law increasingly turns away from what health policy experts envisioned and towards what insurance companies are willing to build.

 

 

 

 

 

 

 

 

 

 

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