Why Insurance Companies May Provide Our Best Path to Universal Coverage

Don’t demonize insurance companies. I know it’s tempting. After all, they are trying to make money off of people’s health. But guess what? We live in a capitalist society and this is the system we currently have. Some type of single payer (and yes there are many versions, just look at the different countries in the EU) may be the ultimate progressive goal. But we can’t get there from here overnight. In fact, the only way we can get there is probably by bringing the insurance industry along.

The success of Medicaid Expansion under the Affordable Care Act is due in no small part to insurer participation in the Medicaid marketplace. Insurers specializing in the Medicaid market are profitable, and that’s a good thing.

Who do you think covers most of the people on Medicaid and many on Medicare? Who has the expertise? State Medicaid agencies contract with insurers to cover Medicaid beneficiaries. The insurance companies take on the risks, not the states. Similarly, many Medicare recipients chose to be covered by Medicare Advantage plans run by private insurers. Insurance companies are already deeply embedded in our so-called “entitlement” programs.

Health Wealth

Right now everyone is worried about how to keep insurers in the individual market. The ACA originally provided several mechanism to help insurers deal with the uncertainty of the individual marketplace, including Risk Adjustments, Reinsurance, and Risk Corridors. You can find a good explanation of these three programs here.

The Risk Corridor program was supposed to last three years, ending in 2016. But it never really got a chance to work, because of a provision added to a must-pass 2015 budget bill by the Republican congress, requiring risk corridors to be revenue neutral. (At the time, Senator Marco Rubio characterized the risk corridors program as a bailout for insurance companies.) As a result, the federal government owes insurers billions of dollars, meant to offset losses on the exchanges. Several lawsuits are currently in progress. Is it any wonder some insurers have left the individual marketplace? Funding the risk corridor program and extending its life a few more years could help reverse this trend.

If the Feds aren’t up to the task, another solution for states with too few insurers offering policies on the individual marketplace is the “public option.” While this may seem like a more radical option, that’s not necessarily the case. I see two possible results:

  1. Insurers would out-compete the public option, rendering it obsolete

  2. Insurers would flee such markets, leaving only the public option.

But guess what? If that happened who do you think states would look to run their “public option” plans?

I keep seeing calls for “Medicare for All,” but why not make Medicaid available for everyone? After all, Medicaid in its current form (following ACA expansion) is the closest thing we have to what we all claim to want—a basic minimum level of healthcare for everyone. If you can afford more or have an employer who wants to offer you a better plan, then great (see the German system for example), but for everyone else, why not build on the part of the Affordable Care Act that already works best?

I can already anticipate some of the objections:

Giving people government handouts takes away their incentive to work.

Data on Medicaid expansion has shown this premise to be untrue. The majority of non-elderly non-disabled adults receiving Medicaid do work. They just earn too little to afford health insurance. And those who don’t work often have good reasons, like they are students or caregivers.

By expanding Medicaid to everyone, I’m not necessarily saying it should be “free” for everyone. But cost should not be a barrier to basic insurance coverage. People shouldn’t have to choose between healthcare and other necessities?

But people don’t appreciate free insurance or don’t use it wisely, aka they need “skin in the game.”

My short response to this is look at what happened when Indiana tried to charge Medicaid recipients small sums ($1 or $2) for their coverage. The bureaucratic costs outweighed the benefits.

The “skin in the game” hypothesis also assumes that people behave rationally when it comes to their health. But they don’t. They avoid going to the doctor because of high co-pays and deductibles, then end up in the emergency room when they get really sick. Or, they refuse to go to the emergency room when they should because of the high cost. They don’t comparison shop.

Medicaid reimbursements are too low/Most doctors don’t take Medicaid.

Whether this is true or not, should this be the main determinant? Everyone complains that healthcare costs keep going up. But then they complain when a program succeeds in cutting them. Plenty of doctors are willing to accept Medicaid. Doctors who treat low income patients consider Medicaid Expansion a game changer. They no longer have to scramble to get care for their patients. Hospitals also seem more than willing to accept Medicaid’s reimbursement rates. Yes, they might pass the cost on to others. But what do you think they did before, when they had much larger amounts of uncompensated care?

I’m no expert on Medicaid, and I am the first to admit “Medicaid for all who want it” is a long shot. But Medicaid is the part of the ACA that is currently working. The robust Medicaid market is helping prop up the individual marketplace. States that expanded their Medicaid programs have seen their individual marketplace perform better (with lower premiums). Support from Republican governors in Medicaid Expansion states certainly contributed to the widespread opposition to the AHCA.

 As we look for ways to strengthen our healthcare system and move towards universal health insurance, we should build on the success of Medicaid expansion.

Trumpcare Takeaway: Stakeholders Matter

The main lesson we should take away from the failure of “Trumpcare” (or “Ryancare”) is the importance of stakeholders. When groups representing every type of stakeholder (medical professionals, hospitals, patients, and insurers) all came out against the American Health Care Act, its fate was pretty much sealed.

By now I think everyone can agree that the American Health Care Act (AHCA) was never intended as serious legislation. The utter failure of GOP lawmakers to consult with stakeholders, not just in the past two months, but at any point during the last seven years, made it clear from the beginning that they were not really interested in replacing the Affordable Care Act (ACA) with a real healthcare plan, so much as a political “win.”

In contrast, before voting on the ACA, Democrats spent nearly a year holding hearings, listening to experts, and getting buy-in from stakeholders (doctors, patients, hospitals, insurers).

RIP Trumpcare2

The Republican leadership’s bypassing of the legislative process not only shows disregard for the people they purport to represent, but it also reveals just how little many members of Congress know (or care) about basic economics, much less healthcare economics. After listening to hours of “debate” over the past few weeks, I’ve come to the conclusion that most Republican House members (and probably some Democrats) don’t have the first clue how our health insurance system actually works, much less how changing it might effect their constituents.

Contrary to Republican nostalgia, I don’t think most Americans want to move backwards. The ACA protections (no exclusion for pre-existing conditions, essential health services, no lifetime caps, yearly out-of-pocket maximums) are the new standard. No amount of extolling the “free market” and “freedom to chose” will convince people they are better off without these ACA protections. In fact, the more protections Republican leadership gave away, to try and win over the Freedom Caucus, the more they spooked moderates in their party who feared the political repercussions of taking healthcare away from their constituents. And rightly so. By Thursday only 17% of the public supported the AHCA. By cancelling the vote numerous Republican members of the House were saved from voting against the interest of their own constituents.

Over the past few weeks Republicans couched their opposition to the ACA in terms of “freedom.” What they failed to recognize is that yes, Americans want freedom—the freedom to not worry about how they’re going to pay for healthcare.

Legislation to Repeal Health Insurers’ Antitrust Exemption Won’t Increase Competition or Lower Premiums

This week, in addition to voting on the American Health Care Act, the House of Representatives will also be voting to repeal the insurance industry’s antitrust exemption. The Competitive Health Insurance Reform Act of 2017 seems to have bipartisan support, probably because eliminating collusion between insurance companies sounds like a good thing; or at least it does if you don’t understand the history and purpose of the anti-trust exemption.

What The Antitrust Exemption For Health Insurers Means from NPR and Kaiser Health News (dating back to 2010 when Congress tried to pass similar legislation) provides a primer on the anti-trust exemption and explains why repealing is unlikely to increase insurer competition or lower prices.

But many antitrust experts say that ending the exemption — by repealing the 1945 McCarran-Ferguson Act — wouldn’t significantly increase competition or reduce premiums.

“This is just barking up the wrong tree for health insurance,” said Scott Harrington, a professor of health care management at the Wharton School at the University of Pennsylvania. While many lawmakers are eager to pass some kind of health care bill, they “don’t have a clue how the antitrust exemption works. It might sound good, but I can think of very few things in the bill that would be less consequential for consumers of health insurance.”

Here is a short primer on the issue:

What is the antitrust exemption?

Insurers are among a handful of industries, including Major League Baseball, that have a special exemption from federal antitrust laws.

The McCarran-Ferguson Act gives states the power to regulate the “business of insurance,” granting insurers a limited exemption from federal antitrust scrutiny. Insurers, for example, under the federal antitrust exemption may be able to meet, share information and agree on pricing for premiums, but experts say that most states prohibit that practice.

Read the Full Story

The High Cost of Being Uninsured—Even if You’re Young and Healthy

Uninsured_Flowchart

As we explained in a previous post, Visualizing the U.S. Healthcare Delivery System, Before, During, and After the Affordable Care Act, insurers are at the center of the healthcare delivery system in the United States. In this post we explain what that means for those outside this system—the uninsured.

U.S. Healthcare Delivery System Before ACA

If you’re young and/or healthy, going without insurance might seem like a reasonable gamble—after all, under current law (and proposed legislation) you can’t be turned down if you need insurance later. Under the ACA, you can’t even be charged more, and even the proposed AHCA only allows insurers to add a 30% surcharge for a coverage gap.

But if you’re not part of the managed care system, you lose out on its benefits. You pay more for medical care and expose yourself to unlimited economic loss in case of medical catastrophe.

Insurance provides the following benefits:

  •  Negotiated Discounts: Under managed care, insurers and managed care organizations negotiate prices with healthcare providers within their networks. When you see an in-network provider you are charged the lower negotiated price, even if you are paying out of pocket. That’s why even a high deductible plan still saves you money on healthcare.

  • Preventative Healthcare: The ACA requires insurers to cover certain preventative healthcare (like a yearly checkup or mammogram) at no cost to the insured. This care is provided for free even if you haven’t met your deductible. But to enjoy it, you need to have coverage.

  • Out-of-Pocket Annual Maximums: Insurance caps your annual out-of-pocket costs. In 2016, the out-of-pocket limits for plans on the ACA marketplace were $6,850 for an individual and $13,700 for a family. This means that once you’ve reached the maximum (through paying your deductible and co-insurance) insurance covers the rest. Without insurance, an illness or injury can have catastrophic financial consequences. A hospitalization can easily run into the $100,000s. Such medical bills may take years to pay off, and failure to pay can ruin your credit. Medical debt is a major cause of bankruptcy.

Whether or not you believe health insurance should be mandated, participating in the managed care system could be in your best interest. In addition to the personal benefits, Insurance has a myriad of societal benefits—from increased public health to less uncompensated care (which costs everyone through higher medical prices and/or taxes). Not to mention, a larger, more diverse insurance pool can bring down premiums for everyone.

Infographics Part II: ACA Medicaid Expansion vs. AHCA Per Capita Caps

NYT CBO

Medicaid beneficiaries stand to lose the most under the American Health Care Act (AHCA). According to the new Congressional Budget Office Report, Medicaid recipients would make up a disproportionately large share of 24 million people expected to lose health insurance coverage by 2026 if the GOP legislation becomes law.

Under the Affordable Care Act (ACA) 32 states expanded Medicaid eligibility to low-income adults earning up to 138 percent of the poverty line (about $34,000 for a family of four). The AHCA, as currently written, continues expansion for three more years before cutting federal funding to state Medicare programs through a per capita cap, limiting coverage to those enrolled before 2020. Vox recently provided a good explanation of per capita caps as does the Kaiser Family Foundation.


current-status-of-the-medicaid-expansion-decisions-healthreform.png

Many of the best Medicaid infographics predate the release of the AHCA, but they still remain relevant to the current discussion. The KFF website includes a large collection of data on Medicaid expansion, including maps (like the image above) and detailed Medicaid State Fact Sheets.


The Center on Budget and Policy Priorities (CBPP) produced the following charts estimating the costs to states of the per capita cap.

Medicaid Cost Shift CBPP

MEdiciad Cuts Growth OVer Time CBPPCBPP also created a series of fact sheets illustrating the effects of Medicaid cuts in nine different states. Here is the fact sheet for Pennsylvania:

PA Fact Sheet CBPP.jpg


Images in the slideshow below appear in The New York Times article “Republicans’ Changes to Medicaid Could Have Larger Impact Than Their Changes to Obamacare”

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See Part I: Tax Credits vs. Premium Subsidies

Coming Soon:

Part III: Individual Mandate vs. Penalty for Break in Coverage

Part IV: Cost Comparisons

The Best Infographics Comparing the GOP’s Healthcare Plan with the Affordable Care Act

Part I: Tax Credits vs. Premium Subsidies

Infographics

In the week since the Republicans unveiled their Obamacare replacement plan multiple news outlets have  reported on what’s in the legislation, how it compares to the Affordable Care Act (ACA), who stands to benefit or lose, how much it will cost, etc.–many illustrated with helpful infographics.

Even if you follow the healthcare debate closely, the quantity of tables, graphs, and charts can quickly get overwhelming. After a while they all seem to look the same (actually, many are the same, or rely on the same data sources).

Want to know what’s in the American Health Care Act (AHCA) and how it might affect you and your community? We’ve compiled some of the best infographics from around the internet to help you make sense of it all.

Part I: Tax Credits vs. Premium Subsidies

One of the most significant changes in the GOP legislation is the replacement of premium subsidies (based on age, income, and geography) with age-and income-based tax credits, with no geographic variation. Several graphs from the Henry J. Kaiser Family Foundation (KFF) show how people of different ages and incomes fare under tax credits depending on where they live.(If you aren’t already familiar with the Henry J. Kaiser Family Foundation you should check out their website now.)

Their Interactive map provides county-and-state level comparisons of of ACA vs. AHCA tax credits  based on age and income level.

Note: To try it out, click on the picture below to go to the KKF site. Once the new page opens, scroll down a bit to find the interactive map.

KFF interactive

A related KFF report, How Affordable Care Act Repeal and Replace Plans Might Shift Health Insurance Tax Credits, includes the following charts, illustrating the effects of the GOP plan’s tax credits on individuals and families in different age and income groups in high and low cost states.

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Many prominent news outlets cite KFF as a source for their illustrations. For example, last week,  both The Los Angeles Times and The New York Times used similar graphics (in different colors) based on KFF data.

NYT maps_slideLATimes Graphics_Slide


Another good set of illustrations of how the GOP plan might affect individuals at different income levels is provided in an analysis by The Century Foundation.


For a state-by-state comparison, the waterfall graph (below) from The Center on Budget and Policy Priorities (CBPP) shows the difference between the average ACA subsidy and the proposed AHCA tax credit.

tax-credits-change-waterfall_450.png

Part II: Medicaid Expansion vs. Per Capita Cap

Coming Soon:

Part III: Individual Mandate vs. Penalty for Break in Coverage

Part IV: Cost Comparisons

 

Visualizing the U.S. Healthcare Delivery System, Before, During, and After the Affordable Care Act

Before they act to repeal, replace, or repair the Affordable Care Act, the Trump administration and GOP legislators should understand how the U.S. healthcare system currently works.

This is what our healthcare delivery system looks like today:

U.S. Healthcare Delivery System Under ACA
Adapted from: E. Baranoff, D. Baranoff, T. Sager, and B. Shi, “What US Health Insurers’ Data Show for ACA ‘Repealers,’” The American Journal of Accountable Care (September 2016).

This is what it looked like before the ACA:

U.S. Healthcare Delivery System Before ACA
Adapted from: E. Baranoff, D. Baranoff, T. Sager, and B. Shi, “What US Health Insurers’ Data Show for ACA ‘Repealers,’” The American Journal of Accountable Care (September 2016).

And how it might look in the future:

post-aca

Notice what all three graphs have in common?

Health Insurers as Financial Intermediaries

Health insurers are at the center of the U.S. health care system, a position they are likely to maintain under any repeal/repair/replace scenario. Health insurance companies serve as the system’s financial intermediaries, meaning they act as the middlemen between those who seek healthcare and those who provide it. Money flows from consumers/patients/employers/governments to health care providers through health insurers.

Many people think the main role of health insurers is to act as gatekeepers to the health care system. Health insurance companies do manage access to health care services through their ability to approve or to disapprove payment for services (based on approval guidelines which may be dictated by private contracts or government regulation). But this secondary managed care role has grown out of the their primary role as financial intermediaries.

Health Insurance Markets

The U.S. health insurance marketplace is actually five different markets, each covering a different segment of the insured population.

In future blog posts we will delve into each of these segments in greater detail.

They are:

  • Group Health Insurance / Employer Coverage

  • Federal Employee Health Insurance

  • Individual Health Insurance (includes ACA Marketplaces)

  • Medicare

  • Medicaid

The first three markets (Group, Federal, and Individual) are administered almost entirely by health insurance companies (this includes third-party administrators of self-insured group plans). But health insurers can also act as intermediaries in the Medicare and Medicaid markets. While Medicare is considered a single payer system, Medicare beneficiaries can choose to be covered by a  Medicare Advantage plan (also called Medicare+Choice or Medicare Part C), with premiums paid by the Medicare Administration. Medicare Advantage plans are primarily managed-care plans, like HMOs and PPOs, administered by private health insurers. Medicaid beneficiaries may also receive coverage through managed care plans. Medicaid managed care providers (insurers) contract with state Medicaid agencies to provide care for a set amount per member per month, with the premiums covered jointly by the Federal and State governments.

State Regulation

In the U.S., insurance regulation is primarily the purview of the states. How the states came to regulate the insurance industry will have to be the subject of a future post. You can also see what we wrote about the subject way back in 2003. State insurance regulation includes licensing, financial oversight, consumer protection, and rate-regulation. Before the passage of the  Patient Protection and Affordable Care Act (PPACA) of 2010, aka the Affordable Care Act (ACA), aka Obamacare, the federal government had made limited headway into insurance regulation. Federal oversight of the insurance industry expanded with the passage of  PPACA, along with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. But state governments still serve as the primary regulators of insurers operating in their states.

The consequences of state regulation are pretty obvious. Today, despite federal requirements for who and what services health insurers must cover, insurance companies still have to be licensed separately in every state where they operate. They cannot sell insurance across state lines (as some ACA replacement plans would like  to allow them to do). Under the ACA, some states set up their own  health insurance exchanges, while others (often for political reasons) chose to provide coverage through the federal marketplace. At this point we actually have four different types of ACA marketplaces (See below).

state-health-insurance-marketplace-types-healthreform2

How well each of these state insurance markets operate is similarly varied. The steep premium increases (cited repeatedly by House Speaker Paul Ryan), affect some states much more than others. Likewise, the number of insurers offering marketplace plans vary by state. Next, add Medicaid expansion (32 states participate as of Jan. 2017) to this kaleidoscope of coverage.

current-status-of-the-medicaid-expansion-decisions-healthreform