Today’s Managing Health Care Costs Number is 22%
There’s been YUGE coverage of the increases in premium in the Affordable Care Act exchanges. These increases range widely – from a decrease of 3% in Massachusetts and Indiana to an increase of 116% in Arizona. The average is 22% - after much smaller rate increases in the past few years.
Here are five misconceptions about the increase in premium costs in the ACA exchanges
Misconception One: These increases came about due to lack of insurance company competition –as many insurers dropped out of exchanges | Not really. The insurance companies dropped out because it was too hard to control the cost of care – in some instances because consolidated providers demanded high rates. If the insurers couldn’t control the cost of care – they would have to charge higher premiums (or offered lower benefit levels) had they stayed in. |
Misconception Two: These increases will make Obamacare plans unaffordable for a large portion of beneficiaries | Since 85% of those who obtain insurance through the exchanges get substantial federal subsidies that peg their premiums based on income - they will in fact continue to find coverage as affordable as it was before. However, the federal subsidies will increase –a budget problem for the US |
Misconception Three: Obamacare has made health care more expensive. | Au contraire! Obamacare cut the rate of increase in Medicare hospital payments, hospital capital expenses declined, and health care costs have risen at a much lower rate than they did before the ACA was passed |
Misconception Four: Adding a “public option” would solve the problem | It depends. If the public option was able to use Medicare (or Medicaid) payment rates and did not have to negotiate provider networks or contracts – it would definitely be able to deliver lower costs, as well as offer a competing plan in all markets in the US. On the other hand, the insurance industry and the provider community have vehemently opposed a public option using these rates – and a public option that had higher provider rates might not be able to lower costs. There is also likely a risk selection issue – and if the public option took on the highest risk population – it might have to charge unacceptably high premiums or offer an inadequate benefit package |
Misconception Five: There was nothing that could have been done to prevent these rate increases. | False! The rate increases are largely due to the exchange plans enrolling far fewer Americans than expected –and a disproportionately older and sicker population than actuaries expected. Among the potential solutions: · Higher penalties for failure to be insured, which could encourage the “young invincibles” to enroll. (Good luck getting that through in an election year!) · Higher federal subsidies. (Which would never be budget neutral!) · Maintaining and fully funding the reinsurance program, to protect insurers from a few catastrophic cases that could sink entire plans. This was inadequately funded and has now sunsetted – and Congress has been unwilling to revisit so far. · Stricter regulation of non-exchange plans, to decrease adverse selection for the exchange plans |
These increases don’t mean that Obamacare is doomed – but the low enrollment means that the ACA has not performed at the level of expectations. It also means that we have to now do the hard work of actually lowering health care costs- something that will make increasing insurance coverage look very easy indeed.
(Thanks to Rick Siegrist of HSPH - who noticed that I had mistaken Indiana for Illinois. This is now corrected)
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