Ok, it’s all over the news; ACA premiums are increasing by as much as 22% for 2017. The glee amongst the newsers as they report this “disaster” is predictable, but don’t expect them to scratch below the surface; it would hurt their storyline.
How to look at Rising Health Insurance Premiums
Under George W. Bush’s first six years in office from 2000 to 2006, FactCheck.org has family health insurance premiums increasing $5,042, for an increase of 78 percent. The chart I show is from another source that shows mid size and large firm Average Family Premiums going from about $6,300-$6,500 in 2000 and rose to around $11,500-12,000 in 2006 (Small firms were excluded from this chart because they showed the most dramatic increases that gave FactCheck.org the 78% figure because they are small groups, but more about that later.) Compare that to Obama’s first six years in office where family health insurance premiums rose $4,154, a 33 percent increase. In comparison, the Obama years show a 45% reduced growth rate. Why isn’t the media reporting that? Beside the fact that it would destroy their storyline. ...
It’s complicated; so sit back and take a long read.
Even Vox did a simplistic uninformed piece that glossed over an inadequate explanation of why ACA individual policy premiums went up a lot this year. They like everyone else, ignored the fact that health insurance goes up every year for just about everybody. No one is looking at where we would be in terms of the uninsured if the ACA hadn’t passed six years ago. That would be difficult because it’s hard to predict with absolute certainty what would have happened had the ACA not passed.
If the ACA didn’t exist:
I can’t be absolutely certain, but it wasn’t that hard to get an idea of what the health insurance market would look like today had the ACA not passed in 2010. it’s a year into a Obama’s Presidency and the recovery from the deepest recession since The Great Depression was very soft. The uninsured rate had risen from 36.6 million in 2000 to 49.9 million people in 2010, an increase of 13 million more people in 10 years. An increase of 900,000 between 2009 and 2010 alone. The ACA passed in 2010 with nearly 50 million uninsured and probably about another 50-75 million with junk insurance. Without the ACA and a very soft economic recovery, this rate was more likely to increase than stay stagnant.
Without the ACA, young adults out of school would have fed the uninsured rate. Without the ACA’s pressure on businesses to keep their employees insured, more businesses would have dropped coverage. Without the SCHIP renewal and other provisions, the uninsured rate would continue to rise. Even a conservative guesstimate of 45% of the 2009-2010 year increase in the uninsured, about 400,000 people, would have lost insurance per year since 2010; had the ACA not passed, we would probably have as few as low as 52.5 million and as high as 55 million maybe higher uninsured. Without the ACA junk insurance would have prevailed with another 75 million living under the false security of having an insurance policy that excludes most of the 10 essential benefits mandated under the ACA. There is no way the mainstream media would even consider looking at the ACA in this light, it doesn’t fit their narrative.
Healthcare sector growth from 2009-2016 is remarkable. About 1.4 million jobs in the U.S. healthcare sector alone. It’s hard to estimate what would have been, but no doubt without the ACA giving 20 million plus people access to healthcare, that number would be lower (a lot lower) with commensurate decreases in other economic factors as well. Without the ACA we would not have had the increased health care sector business from 20 million more customers, the added business from the added coverage of the 10 essential benefits and the added business from making preventive care available without cost sharing. Take away the ACA and all that business goes away and the health care sector would contract which wouldn’t help our economy. Will any finance reporter warn against repealing the ACA based on the economics? Only if they want a long vacation.
Good News! We don’t have to envision a U.S. without the ACA
After the ACA passed the unisured rate started to decrease and in 2011 the uninsured rate fell to 48.6 million and continued to fall to 48 million in 2012. Early on, the experts were concerned this rate wasn’t falling fast enough, but once the Marketplace opened, this rate fell quickly. Kaiser reports the 2016 uninsured rate to be 28.5 million. That’s a success.
Ok, the Uninsured Rate Dropped, but Healthcare is Still Crazy Expensive!
Kaiser Family Foundation calculated about 58 million people had trouble paying for their health care in 2003. In 2008 in KFF’s pre-election survey about 24% of respondents stated they had serious trouble affording health insurance and health care. If that number was representative of the U.S. population as a whole that would correlate to about 72 million people having trouble accessing health care in 2008. Some may say it wasn’t that high and I’ll spot the nay sayers 10 million, that still is an increase of four million people to a total of 62 million people in just five years. Without the ACA, that number would not have remained stagnant either. Would the number in 2016 have been 65 million or 75 million? Luckily, I don’t have to guess. The ACA passed.
After the ACA passed about 26% of working age Americans (about 40.5 million) had trouble paying medical bills in 2016. 40% of those took on extra work and 63% tapped their savings to satisfy their medical debts — still a problem, but a smaller problem. So, since the ACA passed the number of working age Americans having trouble paying their medical bills is 18 million fewer than it was in 2003. Don’t expect the media to tell you about this success story, it doesn’t fit their narrative any more than the reduction in the uninsured rate.
Medical bankruptcy is still a problem.
It was hoped that the ACA would reduce medical bankruptcy, but it didn’t. The bankruptcy rate dipped to a low in 2006 in most if not all states, but has been rising ever since. There many variables to consider when examining bankruptcy, so it’s unlikely I’ll figure it out before the end of this diary. Although the ACA increased the number of insured, it didn’t do anything to control costs. In fact, one failed lure to attract GOP votes in the ACA expressly forbids the government from negotiating for the best pharmaceutical pricing for the Medicare program. Someday, I’ll write about many of the programs meant to suppress improper insurance payments, but the ACA’s anti-fraud and abuse provisions pretty much only apply to Medicare and Medicaid and the private insurance sector (outside government plan managed care contracts) are under no obligation to adhere to the ACA anti-fraud and abuse portions of the law. Although many private insurers adopt CMS rules for their private plans months to years after CMS, they are not always obligated to do so.
We know that about 97% of health care costs are born by about 50% of our population and about 21% of all health care spending is done for the top 1% of health care consumers. The ACA stop loss figure is $6,850 for an individual and $13,000 for families for 2016 and it will rise for 2017. (Stop loss means that once the policy holder incurs that much in medical financial responsibility, the insurance pays at 100% of approved charges thereafter for the remainder of the calendar year. Bills that high one year could be (painfully) absorbed by a family, but if you have a chronic condition or a long cancer fight; those stop loss maximums pile up and after a few years, bankruptcy looks like a good idea. It’s also worth considering the fact that many people getting their insurance under the Marketplace have a deductible that is the same as the maximum stop loss figure of $6,850 for individuals and $13,000 for families. Those figures shoved the health care costs onto the policy holder causing the policy holder to self-ration their care, which only works until the policy holder can’t wait any longer and they incur the bill when their condition is more advanced and more expensive to treat.
When looking at the rising deductibles and rising stop loss figures built into the ACA, I have to ask; what made anyone think the ACA was going to end medical bankruptcies? Why did we allow our Congressional members to conflate personal responsibility with sound medical decision making? Again, the average beat reporter isn’t going to take the time to comprehend the affordability aspects of U.S. healthcare — it’s way too complicated for a 400 word blurb slated to be shoehorned into the lower left corner of the front page screen.
Why Doesn’t the Media Report on Surprise Medical Bills?
The main reason people have trouble paying their medical bills is due to surprise bills for out of network medical costs. This happens more than it should. It happens when an in network physician in an in network facility calls an out of network doctor in on the case and the specialist fails to disclose they don’t accept the patient’s insurance. It happens when the primary care doctor sends the patient to the wrong lab or the wrong diagnostic center and the patient fails to double check with their insurance prior to getting medical services. Sometimes it happens when an in network physician sends specimens to out of network providers, which is totally out of the patient’s control. Most states have a standard boiler plate that emergency services must be covered by out of network providers, but few states have a provision holding the patient harmless from overages from emergency out-of network services.
The ACA does require insurers to have an “adequate network” for each insurance plan, but the law only states the Secretary of DHHS will define what “adequate” means. I think this provision needs more work. It’s obvious that people get hit with these bills on a regular basis. An out of network balance bill is for the full price of the medical service and it is not subject to hold harmless clauses in the policy that limits the services to maximum charges (aka approved charges). A full price medical bill can be devastating.
There are real solutions to surprise medical bills. There are legislative actions that could relieve people from unexpected out of network bills. We could require a provider give notice to a patient they are out of their network prior to rendering services and failure to do so limits them to the patient’s limiting fee structure outlined in their plan. We could legislate no one has to pay more than 200% of the Medicare Approved Charges rates. There’s a lot of solutions, none are in play . The media could highlight the unfairness of following your insurance company’s rules only to be blindsided by an unexpected bill for an out-of-network provider no one warned you from using. There is nothing in the ACA to end the abuse of surprise out of network balance billing, but don’t expect MSNBC to call for a fix to this ACA deficiency, they are too focused on the rising ACA insurance premiums.
So Whats With the ACA Marketplace 2017 22% Rise in Premiums?
There’s multiple reasons why health insurance premiums rise every year. It happens across all insurance groups, but it isn’t apparent to most people because upwards of 80 million people get insurance through their employers. Many of these groups are are self-insured. They are also dealing with increased health care costs, but their employers manage these costs opaquely. So, how do you explain why large employers in large group plans are seeing an 6% increases and ACA market place individual policies are seeing 22% increases?
You have to get into the weeds of health insurance to comprehend it.
It comes down to understanding all things health insurance (here’s a helpful glossary). Start with the differences between group insurance and individual policies. It’s complicated by insurers choosing to insure healthier cohorts and the perversities of fee for service payment systems. The mix of evolving medical technologies, the ability to manage conditions that simply had to be endured before, spiring upward pharmaceutical costs and an aging population will continue to stress health care budgets for the foreseeable future. The truth no media outlet will admit to is that health care costs will continue to rise. No network admits (let alone a GOP Representative or Senator) that Medicare and Medicaid have done a far better job of controlling costs than private insurance. Even worse, no media outlet will do the analysis and advocate real healthcare reform and call for improving the ACA over repealing it.
To start understanding why the Marketplace premiums are increasing, here’s three terms to understand first and we’ll go from there.
Group Insurance — a defined set of people, usually the employees of one employer, but it can be a grouped by union, society, faith-based group, that obtain a health insurance policy that covers all the lives (including spouses and children) within that set of people (group). This plan contracts with an insurer for a set insurance plan offered by the insurer.
Self-Insured Group — Type of health insurance plan, usually large companies (a minimum of 100 lives), where the employer sets the benefit parameters within the law and takes on the responsibility of paying employees’ and their dependents’ medical claims on a cost plus basis (cost of claims plus a set percentage paid to a company to administer the various functions of the plan). The contract for insurance services administration can have separate components for enrollment, claims processing, and provider network maintenance. The advantage is that the employer has greater control over excluding services or increasing employee cost sharing per line item. This works for the most part, but in the case of AOL in 2014, not so much.
Individual Insurance— when a single person or a single family obtain a health insurance policy from an established health insurer’s plans. The individual policy holder on the healthcare marketplace is put into a “group” of all the people who select the same insurance plan….within the same geographical area (like a county or two) of the same state. People getting health insurance through the Healthcare Marketplace are getting individual insurance policies. These groups on the Marketplace tend to be older and have statistically higher acuity (sicker patients) which is skewing the premium rates higher than they would be if more younger people were in these groups.
Clearly, how you group people obtaining a health insurance policy impacts the health insurance premium. The advantage to having larger groups is the ability to spread health care costs among greater numbers of policy holders. The better able the grouper is at excluding less well people, the lower the premiums should be. What isn’t reported is the side issue of the bias employers have for hiring only pretty people who they assume will use less health care — the younger and more single male, the fewer health care claims there are likely to be. What happens is that some years you do well and some years, you don’t. What isn’t being reported is that small to mid-sized employers switch plans within an insurer’s palette of plans every year in order to manage health care costs and switch to an entirely different insurer about once every three to four years because of the ever rising costs in health insurance premiums and cost sharing (what the policy holder contributes toward their health care via deductibles, co-pays, coinsurance and excluded services).
What we were sold in the ACA was that individual policies would be put into a community rating group; implying there would be one group per policy type per insurer. Nothing further from the truth! Yes, individuals went into larger groups, but they are not diverse enough groups in terms of age and health status. Each insurer can have a separate group separated by geographical area (county or parish) per plan type. So much for community rating. The providers on the Marketplace need assistance with re-insurance policies so they can manage their risks, but again, don’t expect the media to talk about this — too much math.
What the ACA brought about in the individual policy arena was largely unexpected. The CBO failed to anticipate the impact of denying basic preventive care to the uninsured and underinsured for the better part of a decade or two was going to do. What happened was that people who were previously uninsured or those who had junk insurance that didn’t cover much (for years) sought and got health care with policies that had to cover the 10 essential benefits. Imagine that! People who previously were excluded from vital services actually wanted to get better. What’s happening is that although individual policy holders are in larger groups, there are more claims than expected and the claims are more expensive than what was expected. In effect, the ACA Marketplace worked better and worse than expected. The young people under 26 were included on their parent’s policies, but they failed to get policies on their own after they turned 26. People 40-64 saw the good sense of getting on the Exchange and did so. What Marketplace insurers need is a less expensive way to manage their risks.
Most publications blame the rising premium costs on not enough healthy people enrolling in these individual health plans; but that dodges the real issue — affordability. Who can blame the healthy for doing a cost benefit analysis when purchasing insurance? If you are single, twenty-five and never see a doctor, then why incur a $300/month expense? What the media class isn’t saying, but should, is that the Public Option is the missing puzzle piece. That would lead to a group of one for the Public Option which in turn would lead to lower insurance premiums for that group. The Public Option would put in place cost controls similar to that of Medicare and Medicaid, which would improve viability of the plan in the long term — a lot longer than the private sector three to four year cycle we deal with now. That’s what private insurers are fighting against; one public group to share the pain of all enrollees that would suck premium dollars out of the publicly traded corporate insurance sector.
Understanding the grouping system when buying health insurance is only one piece of the puzzle. These plans are laid over the patchwork of federal and state laws that govern health insurance. The ACA requires all Qualified Health Plans (QHPs) to offer the 10 essential benefits and set rules about the mandate and required insures to spend 80-85 cents of every premium dollar on health care (MLR-Medical Loss Ratio). State laws are all over the place, which was a major factor in bringing the ACA into the picture. To give you an idea, before the ACA, Florida only required health insurers to spend 65 cents of every premium dollar on health care and a policy could exclude maternity or physical therapy benefits at will. It’s the state laws with their loopholes that led to the junk insurance issue — policies in name only. Policies that were nearly worthless when the policy holder tried to obtain health care. These policies either excluded just about everything prescribed or the policies had impossibly low approved charges and no providers would accept that insurance policy leaving the policy holder on the hook for whatever the policy didn’t reimburse. The ACA solved a lot of problems. Now we need to go forward, not back to the old days where insurance companies made millions off policies that didn’t cover vital services.
The ACA forced insurers to put people seeking individual policies into larger groups which helped, but no one really anticipated the success of the Healthcare Marketplace — despite the poorly functioning website. People who worked within the healthcare sector instantly saw the problems with the Marketplace, but knew 1. The ACA was a good start on the overall problems in U.S. healthcare and 2. it would take about 4-7 years before the problems would need serious attention. Why four years? Because, the Healthcare Marketplace wasn’t enrolling people for insurance coverage until the Fall of 2013 for the 2014 calendar year. It would three to four years to cycle through the honeymoon year of the lowest rates, the second year of cost adjustment and the third year of heftier cost adjustment and the fourth year where consumers look for a different solution altogether — the affordability cycle corporate benefit mangers know and hate. Every year people on the Marketplace switch to cheaper policies that cover less. In 2014 they had a silver plan. In 2015 they found another silver plan with a higher deductible. In 2016 they have a bronze plan. In 2017 they have fewer choices and all are more expensive than they budgeted. What we currently headed toward in the Healthcare Marketplace are de facto high risk pools without sufficient subsidy. It’s time for phase II of improving the ACA — something the GOP would rather die (or see others die) than do.
We need 1. The Public Option, 2. Open up Medicare to a wider applicant base by lowering the age to apply for it, 3. Expand Medicaid on a national basis by using national fiscal intermediaies to bypass the states, 4. Repeal the prohibition for negotiating for better pharmaceutical pricing and if possible, 5. eliminate surprise out of network balance billing , 6. require all payers to participate in cost control programs similar to Medicare and Medicaid, and 7. Create payment caps for the uninsured and those facing balance bills from excluded services.
What isn’t reported are the real issues of affordability — the fact that many of the affordable aspects were stripped out of the bill in a failed attempt to get Republicans to vote for the ACA. The lack of negotiating for the best price for everything from pharmaceuticals to diagnostic imaging to medical services. We need to incentivize efficient care and beef up the ACO (Accountable Care Organization) portion of the ACA. We don’t have a utilization standard that crosses all populations and situations. We are still fragmented by separating policies for health care, Worker’s Compensation, Auto crashes and Liability Claims. We lack patient outcome incentives. We lack medical homes because our current system forces people to change provider networks too often. In short, we have a reactive sick care system, not a proactive health care system. We have a system that pays for every service rendered and does not reward efficiency of care. We still have a system that gives people with generous paying insurance too much care and people with underpaying insurance too little care. Until we face the reality that the ACA was not designed to fix all the problems with U.S. healthcare (despite the media’s assertion that it would), we can’t move forward.
Repeal is not the solution.
We need the ACA Part II