Most people who have explored options or purchased health insurance on the Affordable Care Act's exchanges learned quickly that premiums and deductibles are closely related--the lower the premiums, the higher the deductibles will be. This is the insurance industry's come-on way of attracting enrollees, which may work at first but not in the longer run. Here we examine what this inter-relationship means for many millions of Americans as premiums go up and coverage goes down.
Looking first at premiums, these are the current trends. Although presidential candidate Barack Obama once promised that his health care reform bill would save the typical or average American family about $2,500 a year on their health insurance premiums (1), that promise fell by the wayside long ago. Since many of the ACA's requirements had not kicked in for the first and second enrollment periods in 2013 and 2014, insurers had some latitude in keeping their premiums low to attract enrollees in the early years. But those days are over as these premium projections for 2016 tell us: (2)
- Blue Cross/Blue Shield plans, market leaders in many states, are seeking rate increases of 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee, 37 percent in Kansas, 51 percent in New Mexico, and 54 percent in Minnesota. (2)
- The Geisinger Health Plan in Pennsylvania has filed for a 40 percent premium increase, while the Scott & White plan in Texas wants a 32 percent rate increase.
- Insurers defend these hikes in various ways, including claims that enrollees were sicker or older than expected, and that some costs were higher than anticipated, such as those for hospitalization, emergency room services, and specialty drugs. Regulation of premium rates falls to the states, where the insurance lobby tends to prevail in avoiding significant regulation of premiums. As one example of industry-friendly regulation, the Oregon insurance commissioner, after a rigorous review of the experience of Health Net, actually approved a 34.8 percent increase in premiums, almost four times what had been requested, over concerns that "inadequate rates could result in companies going out of business in the middle of the plan year, or being unable to pay claims." (3)
As premiums keep going up, so do deductibles. A 2014 survey by the Kaiser Family Foundation found that average deductibles for bronze plans, which cover just 60 percent of health care costs, were more than $5,000 for individuals and $10,000 for families, while deductibles for silver plans were $2,907 and $6,078, respectively. (4)
Narrow networks have become endemic under the ACA, which initially permitted insurers to include just 20 percent of "essential community providers" in their plans. A backlash soon broke out among hospitals and physicians on being arbitrarily excluded, forcing disruption of their established relationships with patients and breaking up continuity of care. In response, the Department of Health and Human Services raised its requirement to 30 percent, but this is still a major problem for many patients, especially since out-of-network costs are typically not covered by insurers. Since insurers, hospitals, and physician groups continue to negotiate and re-negotiate their contracts, networks are subject to change at any time, which patients (and physicians) find difficult to keep up with. A recent study found that many health plans sold through the ACA's exchanges in 2015 were so narrow as not to include such specialists as endocrinologists, rheumatologists, and psychiatrists; 15 percent of these plans did not include a single in-network physician in at least one specialty. (5)What do these well-entrenched trends mean for patients with private health insurance, whether through their employers or ACA plans purchased on the exchanges? These are three major impacts, with no resolution in sight under the ACA:
- Disruption and churning of coverage The Urban Institute estimated that 9 million people would shift between Medicaid and the ACA's exchanges in 2014. (6) We can expect that instability of coverage will continue indefinitely as insurance markets change, requiring a massive bureaucracy trying to mitigate the adverse effects of these shifts. Now, in the ACA's third open enrollment period, the Obama administration is actually encouraging enrollees to switch plans as a way to avoid steep increases in premiums, acknowledging that 86 percent of people who have coverage through the federal exchange can find a better deal (at least for premiums) by switching. (7) Unfortunately, this volatility of coverage is likely to lead to increased costs as new providers become involved in patients' care (often repeating laboratory tests and procedures that were done in the recent past by former providers), as well as decreased quality of care.
- Unaffordability of health insuranceMore than 2 million exchange enrollees are not getting subsidies/tax credits because they selected a non-qualifying plan, such as a bronze plan with the lowest premiums and an actuarial value of only 60 percent. (8) Although the median household income in the U. S. is about53,650, Americans are spending an average of more than5,000, just for health insurance, without factoring in all the other costs associated with actual health care. By the fall of 2015, among adults age 19-64 visiting the ACA's exchanges, 57 percent could not afford a health plan. (9) The latest study by the Commonwealth Fund found that 43 percent of privately insured adults say their deductible is difficult or impossible to afford, while one-half of low- and moderate-income adults express difficulty affording their deductibles. (10)
- Inability to afford health care According to the 2015 Milliman Medical Index (MMI), total health care costs, including insurance, for a family of four with an average employer-sponsored insurance PPO plan in 2015 came to24,671, including payroll deductions and out-of-pocket costs, and is expected to exceed25,000 in 2016. (11) More than one-half of privately insured adults with incomes under 200 percent of the federal poverty level (23,340 for an individual and47,700 for a family of four) had unaffordable health care costs, while 30 percent of adults with moderate incomes (up to46,680 for an individual and95,400 for a family of four) had unaffordable costs, double the rate of higher-income adults. (12)
As we look at these trends, it seems clear that the health insurance industry needs more and more help from government and taxpayers to stay alive. Though denied by its supporters and lobbyists, it is in a death spiral and would already be in dire straits without these bailouts by the federal government over many years:
- Employers' contributions to employer-sponsored health plans have been tax-deductible for many years
- Subsidized markets through the ACA's subsidies/tax credits
- The industry continues to seek out healthier enrollees, shifting sicker patients to public programs
- The ACA's "risk corridor program" protects insurers from losses in qualified health plans sold in the individual and small group markets; as one example, Blue Cross Blue Shield, the largest insurer in North Carolina, received almost295 million in federal payouts even as it was seeking a 25.7 percent rate increase for its individual policies. (13)
Today, in effect, the Obama administration is being held hostage by the health insurance industry, since it is dependent on it to carry out its signature domestic policy success. No further bailouts are warranted. The public, including patients, families, business and taxpayers, are the patient, not the insurance industry. The industry has had a long run and failed the public interest. It is time to replace it with a more accountable system with universal access, cost containment, lower administrative overhead, and a service-oriented culture--single-payer national health insurance (NHI).
1. Wogan, JB. No cut in premiums for typical family. The Obameter. PolitiFact, August 30, 2012.
2. Pear, R. Health insurance companies seek big rate increases for 2016. New York Times, July 3, 2015.
3. Ibid # 2.
4. Goodnough, A, Pear, R. Unable to meet the deductible. New York Times, October 17, 2014.
5. Dorner, SC, Jacobs, DC, Sommers, BD. Adequacy of outpatient specialty care access in marketplace plans under the Affordable Care Act. JAMA 314 (16): 1749, October 27, 2015.
6. Bergal, J. Churning between Medicaid and exchanges could leave gaps in coverage, experts warn. The Washington Post, January 5, 2014.
7. Goodnough, A. Now, finding a health plan is annual rite for shoppers. New York Times, November 19, 2015.
8. Andrews, M. Study: 2 million exchange enrollees miss out on cost-sharing assistance. Kaiser Health News, August 21, 2015.
9. Collins, SR, Gunja, M, Dotie, MM. To enroll or not to enroll? Why many Americans have gained insurance under the Affordable Care Act while others have not. The Commonwealth Fund, September 25, 2015.
10. Issue Brief. How High Is America's Health Care Cost Burden? Findings from the Commonwealth Fund Health Care Affordability Tracking Survey, July-August 2015.
11. Milliman. 2015 Milliman Medical Index, May 2015.
12. Ibid # 10.
13. Murawski, J. Blue Cross eligible for $295 million ACA bailout, seeks rate increase. Charlotte Observer, July 7, 2015.
Adapted and excerpted, in part, from my soon-to-be-released book, The Human Face of ObamaCare: Promises vs. Reality and What Comes Next.
(See advance press release at: http://www.johngeymanmd.org)