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CrowEpistemologist

What exactly is wrong with Obamacare?

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How exactly does OC interfere with the choices people make? As I understand it, you still get to pick from the same insurance companies (and plans) you do now, right?

 

Under the ACA, any plan that is sold in the individual and small group markets (not just plans offered in the Healthcare Exchanges) must cover ten 'essential health benefits,' listed here.  Plans in the individual and small group markets that do not meet these requirements do not satisfy the individual mandate.  So, for example, if you have a plan from these markets that doesn't cover maternity services, newborn care, or pediatric services (because you don't plan to have children), you will have to pay the individual mandate penalty unless you add these to your plan.  Also, as with everything, the devil is in the details.  Requiring these plans to cover prescription drugs doesn't mean that, as long as a plan covers at least one prescription drug, it satisfies the requirement (that would be the easiest way for insurance companies to circumvent these requirements).  Undoubtedly, there is a list of drugs or categories of drugs that must be covered.  If your current small group plan doesn't cover all of these, you will need to switch plans or pay the penalty.

 

Furthermore, the execution of these requirements is now in the hands of the Department of Health and Human Services, so don't be surprised if the specifics of what is an 'essential health benefit' is expanded over time through new regulations and bureaucratic fiat.

 

Note that currently, these requirements only apply to people who buy their plans in the individual or small group markets (which I believe is about 15% of the total health insurance market).  However, I also expect the scope of this to increase over time as the regulations government health insurance are expanded.  After all, ten years down the road when all individual and small group plans cover these 'essential health benefits,' why would we let people who buy health insurance through larger companies be disadvantaged?  If these are truly essential services, why would we allow employers to offer plans that don't cover them?

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 If these are truly essential services, why would we allow employers to offer plans that don't cover them?

 

I think that's the purpose of the employer mandate/subsidy set up. The subsidies are supposed to make these plans look attractive to employees, who are supposed to "choose of their own free will" to sign up... Which brings me to something I was too tired to remember last night: the reason for the 1-year (I'm not sure, but extralegal?) delay in the employer mandate. I can think of only a few possible and realistic reasons.

1) Obama caved to some backer of his. It seems that his backers know by now that he's got them all by the balls, so this doesn't seem as likely to me. But it isn't outside the realm of possibility.

 

2) The economic damage this will do will be too embarrassing, so he's willing to give up or rework the mandate as a "concession" to Republicans.

 

3) He wants to get as many people as possible to "choose of their own free will" to go onto the exchanges, triggering more subsidies when the employer mandate goes into effect.

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If we indeed see young people drop out, and the average person left in the pool costs more, then premiums will have to rise to reflect this, which could cause more young people to drop out, and ultimately the market unravels.  In this scenario, we end up with a system where older, sicker people are still basically charged according to their expected cost (exactly as I described in the first paragraph), because there's no one left to subsidize them with.  Meanwhile, young people face these same (extremely high) premiums, and decide to forego insurance altogether.  Thus, we've ended up at a point where high-cost people are no better off than they were before, and low-cost people can't get insurance at all.

 

It should be noted that the horribly flawed rollout of the Affordable Care Act exchanges only makes this 'worst-case scenario' more likely.  Again, the fundamental concern is that too few young and healthy people will sign up for the exchange.  Because the exchanges are designed to use healthier people to subsidize the cost of sick people, if too few healthy people sign up the exchanges will not be able to offer cheaper insurance to people trying to sign up with preexisting conditions.  As I mentioned before, the individual mandate is an attempt to get more healthy people to sign up, by fining them if they do not, but the low penalty is likely to be ineffective, especially if insurance in the marketplaces is very expensive.

 

Now we are seeing a disastrous rollout of the ACA's central website, which goes far beyond a few small glitches.  Millions of people have tried to sign up, and nearly all of them have been unable to, even with hours and hours of effort.  President Obama gave a speech on it in the rose garden, where he trotted out someone from Delaware who managed to sign up for the exchanges after only 7 hours (!) on the computer and on the phone, and she was undoubtedly one of the luckier ones.

 

So what does this mean for the ACA system as a whole?  Well, it should first be noted that this is a much bigger deal than simply a malfunctioning website.  For the majority of people, the website is the only way that they have to get on the exchanges and sign up for insurance.  To draw some comparisons to private businesses, the ACA exchanges are designed more like Amazon than Barnes & Noble.  If Barnes & Noble's website goes down, that hurts their business for sure, but people can still come into the physical stores and buy books, coffee, etc.  B&N's website is nice, but it isn't synonymous with their entire company.  Amazon, on the other hand, is its website in a very real sense.  That is really the only way that consumers have to purchase things from the company, and if it is down, the company is down.  That seems to be the current status of the ACA exchanges.  Furthermore, it looks like the fixes are going to be a long time in coming.  Even if the interface between consumers and the exchanges is fixed relatively quickly, it looks like the communication between the exchanges and the insurance companies themselves is also a disaster, and this problem is likely to get worse, not better, as the customer interface improves and more people successfully sign up.  The scope of the problems is detailed here; here is a key excerpt:

 

Meanwhile, the back-end communication between the exchanges and the insurers has been terrible, as is increasingly being reported. The extent of these problems has also been a surprise to CMS, and here too an increase in volume if the user interface issues are solved could lead to huge problems that would be very difficult to correct. CMS officials and the large insurers thought at first that the garbled data being automatically sent to insurers must be a function of some very simple problems of format incompatibility between the government and insurer systems, but that now seems not to be the case, and the problem appears to be deeper and harder to resolve. It is a very high priority problem, because the system will not be able to function if the insurers cannot have some confidence about the data they receive. At this point, insurers are trying to work through the data manually, because the volume of enrollments is very, very low. But again, if that changes, this could quickly become impossible.

In a couple of ways, then, the severe user-interface problems at the front end of the federal exchange has actually had some advantages from CMS’s point of view, because by keeping enrollment volume low it has kept some other huge problems from becoming instantly uncontrollable.

The final result of all this is that the cost of signing up for insurance in terms of time and frustration is much higher than anyone expected, and will be quite high for quite some time.  The people most willing to pay that cost will, of course, be people who really need the insurance, while people who are most likely to give up in frustration will be healthier people who will just decide to wait until the exchanges are working properly.  Many of these people will also probably assume that the individual mandate penalty will be delayed for at least a year; after all, how can the government charge you a penalty for not buying insurance when you can't buy insurance from their malfunctioning website?

 

The result will be that, once the exchanges get up and running normally, and insurers have sorted out everyone that's signed up so far and their expected cost, they will have to set very high premiums, because the people that waded through the site headaches to buy insurance were mainly the high-cost, sicker individuals.  These high premiums will prevent many healthier people, who decided to wait, from signing up at this point, and many of the people needed to subsidize the system simply will not sign up at all.  Thus, all of this makes the negative outcome that I talked about above more likely to occur.

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