The health plan popularly known as Obamacare is clunky and confusing but the big benefit that made it worthwhile (at least as a stop-gap until a single-payer system was implemented) was that tens of millions of previously uninsured people were now able to get access to health care. Three other major benefits were that people could not be denied coverage for so-called pre-existence conditions (an appalling feature of previous plans that insurance companies heavily exploited to deny coverage for many people) children could stay on their parents’ plans until they were 26, and the expansion of eligibility for Medicaid.
The Republicans have used the dismantling of Obamacare as one of their main planks to appeal to their supporters. This was always a hypocritical stance since the plan was essentially designed along lines that Republicans would like, one that gave private insurance companies a major role and enabled them to enroll millions of new subscribers thanks to the subsidies provided by the federal government. So like with so many other programs, especially those involving the military and so-called homeland security, this was yet another massive welfare program for big corporations. Mitt Romney’s plan when he was governor of Massachusetts was used as a model for Obamacare.
So why did the Republicans go after it? For many reasons, none of them good. One was because it enabled many more people, especially the poor, to get access to health care and thus might have meant that existing health care services would have to be spread over more people, making it (perhaps) slightly more inconvenient for those who had good plans from their employers. The second is that the subsidies to low-income people came from higher fees on the well-to-do and it has become an article of faith that rich people must under no circumstances be asked to contribute anything that does not benefit themselves. And finally because the plan was proposed by president Obama and thus had to be opposed in principle.
But one thing that even Republicans have realized is that while ‘repealing Obamacare’ was a popular slogan for them, two features of the plan (the pre-existing conditions ban and keeping children on parents’ plan) have become very popular even among the better off and they are faced with the problem of how to retain those while dismantling the rest. It is clear that they have no real plan of their own to replace Obamacare with. They are also confronting the fact that many of their own supporters are benefiting from the subsidies and the expansion of Medicaid. So one sees all manner of trial balloons being floated.
One is that they may immediately repeal parts of the plan and then delay until later implementing their own. J. B. Silvers is a former CEO of a health insurance company and is now a professor at my (former) university and I have found him to be very knowledgeable about Obamacare and in explaining its intricacies in an understandable way. In this article he describes that the very fact that Republicans are considering changes will cause the insurance companies to abandon the system long before any replacement system is even considered.
He starts by describing the problem with the free market, non-employer based model for individual health care.
Generally, this model forces insurers to take fewer risks so that they can still make money. They do this by excluding preexisting conditions and paying fewer claims. In such a market, fewer people are helped, and when they are able to get insurance, they pay a lot more for it than if they were part of an employee-sponsored plan.
The Affordable Care Act changed all of this. Companies were required to stop doing these bad things. In exchange for taking on substantially more risk of less healthy patients, they were promised more business by getting access to more potential customers.
The federal government offers subsidies to help pay the premiums for consumers whose income falls below a certain level. The law also stipulates that all people must be covered, or they face a penalty. This so-called individual mandate also guaranteed business for the insurance companies, because it led healthy people into the risk pool.
To entice insurers into the market, the ACA also offered well-established methods to reduce risk. For example, it built in protections for insurers who enrolled especially sick people. It also provided back-up payments for very high-cost cases and protected against big losses and limited big gains in the first three years.
That is the essence of Obamacare. (In a single-payer system, everyone is in the pool and everyone contributes to it is the form of taxes.)
But he said that Congress reneged on the deal and provided much less money to the system than was promised and as a result insurance companies have hiked their premiums by around 20% while costs have risen only about 5%. He says that the ‘repeal and replace’ slogan of the Republicans has led to great uncertainty in the health care industry and that in such a situation, the temptation for the health insurance companies is to exit from the markets.
And now comes the reality of the “repeal and replace” initiatives from the Republicans. If the uncertainty of this market was large before with the ACA, it is almost unknowable under whatever comes next. Thus the initial exit of some latecomers, including United Healthcare, and undercapitalized minor entrants, such as nonprofit co-ops, is almost certain to become a flood of firms leaving the exchanges. They have little choice since the risks are too large and the actuarially appropriate rates are still not obvious given the political turmoil and changing rules.
Some in Congress seem to think that passing the “repeal” part immediately but delaying its implementation for two or three years will somehow leave everything as it is now. But this naïve notion misses the fact that the riskiness of the Obamacare individual insurance exchange markets will have been ramped up to such a level that continuing makes no sense.
Even if a company reaches break-even in the “delay” years, it will lose when the repeal is effective. If the premium subsidies now available to lower-income enrollees go away immediately and the mandate to sign up for an insurance plan disappears, then the number of people purchasing individual policies on the exchanges will drop like a rock. In fact, it is clear that even debating this scenario is likely to be self-fulfilling, since insurers must decide on their participation for 2018 by the late spring of 2017. Look for many to leave then.
The future is bleak for those formerly uninsured people who were able to purchase individual policies on the individual health exchanges.
It is easy to predict that this induced uncertainty from Congress will effectively kill the exchanges even if it delays the implementation of repeal. As a result, all of the individuals who have benefited from coverage and subsidies will lose out. They will either not be able to gain insurance because of a preexisting condition, or they will not be able to afford the higher premiums.
It would be fun to watch the Republicans squirm if it were not for the real pain that their cruelty will inflict on many millions of people.
Like the dog that finally caught the car it had been chasing and doesn’t know what to do, what comes next for the administration and Congress is not clear. But we shouldn’t fool ourselves to think it will be easy or painless. Otherwise, it may be that the great experiment trying to establish a viable market for individual insurance – ironically long a conservative objective – will end in the chaos of what came before.
What we have is an inherently unstable system. The private health insurance companies are absolute parasites who do not contribute anything positive to the system but merely siphon away money to create massive profits for themselves to pay their executives huge salaries and give dividends to their shareholders, while creating a massive and inefficient bureaucratic system that drives health care providers and patients crazy. And yet, they have been given a central role in the system.
This is the fundamental problem with the US health care system. A single-payer system would remove these parasites once and for all. They would cease to be an integral part of the system and would be an optional extra for those who wanted it.