Will the Affordable Care Act Really Be Affordable?

With a name like the Affordable Care Act (a.k.a. Obamacare) it is obvious that the intent of the law is to make healthcare affordable to as many Americans as possible, especially those who up to now because of preexisting conditions have found health insurance to be unaffordable or simply unavailable at any price.

 

But how well will it accomplish this aim? Right now, it is too early to say because most of the attention has been on getting the website fixed so people can actually shop for and buy insurance and not yet so much on how much the policies will cost.

 

There have been some reports of ‘sticker shock’ where the premium costs are at higher rates than expected (even with the government subsidy) and in some cases, what people were paying before for policies they already had. 

 

But the problem with comparing insurance policies simply based on the premiums is that the coverage, deductibles, and out-of-pocket costs may not be the same.  Put another way, it is easy for an insurance company to make the price of a policy more attractive by cutting out some of the benefits.  To try and prevent this ‘race to the bottom’ by insurers competing on price by stripping down benefits, the ACA has a level of benefits that all of the policies must adhere to so that the prospective customer can more easily compare ‘apples to apples’.  In some cases, the ACA policies offered cost more because they provide coverage that preexisting policies did not.  Because of this, it was a big mistake for President Obama to tell everybody that if they liked their policy, they could keep it. And his approval ratings have taken a hit because of this.

 

In other countries with universal health care like Canada and the United Kingdom, co-pays and out of pocket costs are at a minimum which keeps healthcare in these places truly affordable.  But a look at the Heathcare.gov website gives an array of choices for each policy labeled Bronze, Silver, Gold, or Platinum which corresponds to roughly how much of the medical expenses will be covered at 60%, 70%, 80% and 90% respectively.  Presumably, someone who expects to use lots of medical care will pay the higher rate for more coverage with others opting for the lower rate.

 

Even with annual caps, this can lead to some very hefty out-of-pocket costs to the consumer once the insurer has paid their part of the bill as shown in this link.

 

And as shown in this link, the government subsidies for coverage can fall off very sharply once somebody’s income reaches a certain level which can place some in a very difficult position to afford insurance.

 

And while insurers are no longer permitted to charge differently by gender, they can charge older people more which can make the insurance more difficult to afford for those in their 50s and 60s getting close to the Medicare retirement age of 65.  And there are those who want to raise the Medicare retirement age!

 

In addition, some areas of the country have plenty of competition for the insurance buyer which is good for them.  But other areas have few competitors which makes for more limited (and expensive) choices.  And with health insurance companies still having exemptions from anti-trust laws, it is unclear how this will adversely affect pricing over the long run, especially if not enough healthy people enroll to spread the risk among the other policyholders.

 

To take care of those who are not poor enough to qualify for Medicaid but don’t make enough to afford insurance on the open market even with a subsidy, the ACA proposed to expand Medicaid to cover these people.  But as part of the Supreme Court decision on the constitutionality of Obamacare, states have the choice whether to opt-in and accept the government funds to expand Medicaid in their states.  Unfortunately, many (but not all) states run by Republican governors have refused this help for their people who need it the most based on ideological grounds.

 

All of this is not to bash Obamacare and say that it has to be repealed as so many Republicans are demanding. Indeed, there are many people who now have vital access to health insurance who simply didn’t have it available to them before.  It just means that when a system like this which keeps the private for-profit insurance companies in the loop unlike single-payer systems (like Medicare here in the US) which replace them, there are going to be lots of unforeseen consequences that will have to be worked out and fixed for things to run properly.   The system that has been used in Massachusetts (a.k.a. Romneycare) is pretty much identical to Obamacare.  And while it too had its rocky start, it seems to have worked just fine with about 92% of its residents having health insurance.  As long as Obama is president, Obamacare isn’t going away! Rational members of the Republican Party whether they like Obamacare or not, know this. If someday we can get both sides to finally agree that Obamacare is here to stay and to work on fixing what’s wrong with it instead of non-productive rhetoric arguing for its abolition (a big if)...maybe there is hope for a healthcare system that works for all Americans!