With the Supreme Court decision to continue health insurance subsidies in and out of states that sponsor a health insurance exchange, a quote from Bob Laszewski, a well- regarded Washington consultant, commented that “the Court saved the Republican’s from themselves.” Republicans, in charge of both houses, and coming up with some kind of patch for those who would have lost subsidies, would do nothing but create significant problems for the Affordable Care Act and politically for the Republicans.
Even with the success of King V Burwell Supreme Court decision, there are several issues that, unless addressed, will create real problems for the ultimate success of the Affordable Care Act.
PARTICIPATION IN AFFORDABLE CARE ACT: Studies indicate that after two years of open enrollment, only 40% of individuals eligible for subsidies through the state exchange or federal exchange have elected to participate. Insurance companies know that they need 75% of any eligible employee population to achieve profitability. With only 40% election from individuals eligible for subsidies, the only route to profitability will be rate increases. A problem with rate increases with a voluntary pool, like the exchanges, is that the very increases they make, create, what the insurance industry calls, a “death spiral,” where the healthy participants leave the plan and the sick remain in the plan, until it all collapses. See below- Exchange participation by income.
“Why is Obamacare still so unpopular? Why aren’t the working class and middle-class signing up for it? Why is the Obamacare population sicker and causing so many big rate increases a year earlier than expected? Is Obamacare financially sustainable in its present form? Is it politically sustainable as it is?”
NARROW PHYSICIAN NETWORKS: In attempting to meet the Affordable Care Act’s objective of “affordability” the insurance carriers providing individual plans have negotiated and contracted lower fee schedules for physicians participating in individual plans. The contracted fee schedules through individual plans is substantially lower than the fee schedules offered to the same physicians through employer sponsored group plans, so many good physicians have simply decided not to participate in individual plans.
We just completed an analysis, for a client of ours, to determine if his five family physicians were in the insurance carrier’s networks for individual plans. For his five family physicians, NONE of the client’s family physicians were available through individual plans. Through group insurance plans, ALL of the client’s family physicians are available for full health insurance benefits. These narrow networks used in individual plans are a real restriction individuals seeking quality care.
AFFORDABILITY: In the past, prior to the Affordable Care Act, the health insurance industry solved affordability needs with HMO plans, plan design that gave discounts for using narrow networks, and general fine tuning to cut costs and create useful benefits.
With the coming of the Affordable Care Act, the new law mandates standardized benefits: Platinum for Cadillac plans, Gold for strong plans, Silver for less expensive plans, and Bronze for inexpensive plans, rather than all the variations to choose from before the Affordable Care Act.
The result is that for the individual seeking a really affordable premium, which he/she could have had prior to the Affordable Care Act with some variation of benefits with his/her HMO, now needs to go an Affordable Care Act Bronze plan with a $6,000 deductible.
Reading a recent article on the problems of the affordability of simply living in Southern California, really put health care affordability in perspective. The question raised in the article was “what would a poor Southern Californian do to pay a $400 bank charge they cannot afford when that charge comes due?” They raised this as a real affordability problem. What struck me was the question “What would that same person call their individual health insurance through the Affordable Care Act with a $6,000 deductible and, if they could not work out the $400 bank charge, where were they going come up with $6,000 for their deductible.” The affordability solutions of the Affordable Care Act are frankly unaffordable.
As much as the media has given the Affordable Care Act a rather complimentary review, the above problems participation, narrow networks, and affordability really need to be addressed for the Act to survive.
Please feel free contact us if you have any questions.
Malcolm and Stacey Cutler
Malcolm Cutler, Jr. CLU
CUTLER INSURANCE SERVICES
15901 Hawthorne Blvd., Suite 200
Lawndale, CA 90260