Affordable Health Plans Have Gone Extinct; Obamacare Killed them Off
Obamacare declared open season on affordable health plans. Qualifying health plans must now provide a costly essential benefit package. There are also limits placed on how much premiums can differ between older applicants and younger ones; between men and women; and sick and healthy. Moreover, at a minimum all but a few plans must cover 60 percent of all medical costs with no lifetime or annual caps on benefits. These rules may sound benign, but the results are skyrocketing premiums.
The Affordable Care Act (ACA) was designed to force most Americans to buy something unaffordable so a few high-cost individuals can get coverage for less than they otherwise would. The inevitable result is that the Obamacare exchange has become a high-risk pool for people who are poorer or sicker than average. Obamacare plans are a bad deal for all but the most costly enrollees or those receiving lavish subsidies. Middle-class, healthy folks have largely shunned Obamacare Marketplace plans. Consider this: according to the comparison website, HealthPocket.com, a family who receives no subsidies pays nearly $1,000 per month for a bronze plan with a high deductible. Bronze plans would cost my family $12,000 per year and require deductibles of $6,750 apiece. These plans are a poor value for most enrollees by design. Here’s why.
Advocates for public health and left-leaning policy advisors (who loath to assign personal responsibility) all want everyone enrolled in health coverage. This includes not only those with significant medical needs but also those with few medical needs. Advocates like insurance because they want individuals with health concerns to bear little of the cost out of pocket. They prefer that insurers, employers and healthy individuals subsidize the cost. Thus, it should come as no surprise that proponents of Obamacare wanted for an individual mandate forcing all U.S. residents to have health insurance coverage. Proponents also lobbied for regulations prohibiting insurers from providing discounts for favorable health risks or turning away customers because they’re likely to be unprofitable.
To accomplish these goals, ACA regulations had to limit Americans’ choice of health plans. Health insurance that does not cover a plethora of preventive care, plans that cap benefits at predetermined levels and plans that reward Americans for having led healthy lifestyles are no longer allowed. Granted, insurers are allowed to discount premiums slightly for participation in wellness programs. But insurers know this is like closing the barn door after the horse has bolted. Whereas unhealthy lifestyles have little impact on 25-year olds, decades of unhealthy living makes a huge difference in 55-year olds.
Most people covered by health insurance actually experience very low claims in any given year. Thus, health plans with modest benefits would meet the typical medical needs of most Americans. Limited benefit plans, sometimes called “mini-meds,” only cover the first few thousand dollars of medical costs each year and do not cover catastrophic costs. By contrast, high-deductibles plans cover catastrophic costs, such as major surgery or illness, but typically require an individual to pay for the first few thousand dollars of care out of their own pockets.
Prior to Obamacare, health plans with limited benefits (or high deductibles) were less expensive than coverage with onerous mandates and costly regulations. Those who could not afford comprehensive coverage could choose to either self-insure for day-to-day medical needs (now illegal), enroll in a limited benefit plan (now banned under Obamacare) or enroll in a high-deductible plan. Of those three options the only option left are high-deductible plans. Prior to Obamacare, high-deductible plans were very affordable. Premiums were low enough to have money left over to fund Health Savings Accounts to cover a portion of the cost below the deductible. Since Obamacare high-deductible plans have become costly even though they cover almost none of Americans’ day-to-day medical needs.
Although annual health care spending per capita approaches $5,000 per year late into middle age, about half the population spends less than $500 annually on medical care. According to health economists, about 60 percent of medical costs are attributable to behaviors and lifestyle choices. These include heart disease, diabetes, hypertension and high cholesterol. High medical spenders tend to be older individuals whose bodies are damaged from years of neglect and poor lifestyle choices that sometimes exacerbates being dealt a lousy genetic hand. In an attempt to transfer subsidies from low-spenders to big-spenders, Obamacare has purposely undermined affordable coverage. In the process it also removed the incentives health plans use to encourage healthier lifestyles.
Obamacare mandated plans have priced many Americans out of health coverage altogether. As the evidence shows, this strategy doesn’t work. Insurance is not a one-size-fits-all product. A high-risk pool or a health status-based tax credit would be a better way to assist individuals with health concerns. The market needs the flexibility to allow people to purchase coverage that meets their needs and their budget.
An earlier version of this Health Alert appeared in Town Hall.
In 1993 Hillary wanted all Americans on HMOs and Obamacare is making her wish come true. The public is very upset that their HMO that they have been forced onto doesn’t include their doctors in network. With HMOs the consumer gets ZERO benefits using an out-of-network provider.
When the consumer gets cancer their insurance won’t allow them to use the medical providers that they choose but they can see a doctor about their depression, as long as they are in network.
The people on employer-based health insurance are rapidly being switched to HMOs with skinny networks with large deductibles as well. Talk about the destruction of the doctor – patient relationship. When we let the payer decide who we can see for treatment you can expect the cheapest treatment, doctors that don’t speak English, and a large hassle to get even that.
Ron, the business model of the old HMOs back in the 1990s was you had a restricted network of providers, but you had first dollar coverage for the care deemed necessary. Now you have a restricted network of providers, but you are responsible for the first $3,000 to $6,750 in care.
People used to think that HMOs meant ZERO deductible.
I have to correct you Devon on that $6,750 deductible, it’s $6,850 deductible, soon going over $7,000 for the Presidential Election.
Hillary is really worried about these deductibles. Hillary told the Des Moines Register in May she was worried about the “Family Glitch” and the large deductibles on Obamacare.
Maybe the Health Care Fairy can wave her magic wand and zap us all some free medical care using pixy dust! My idea actually makes more sense than Hillary’s proposals.
True.
And – – Employer-sponsored groups (by far the largest number of potential members) were at first offered HMOs as an option, depending on one’s residence within HMO service areas. That element of choice was also an important factor in early HMO membership growth.
Additionally, most HMOs offered to groups have since early on covered emergency care out of area, and members living out of area while attending school.
Spoken like a true HMO salesman John. Yes, employers were the 1st to suck employees into HMOs because the employee has far fewer choices.
John forgets to tell you that EMERGENCY has a definition at the HMO that may be different than your definition. But John is throwing out there that HMOs will cover students in a different state, come on John that is very rare. YOU HMO salesman will say anything to put people in danger and make a buck or two.
John should always say that HMOs pay NOTHING with out-of-network providers instead of trying to change the subject to EMERGENCY. But John isn’t big on full and proper discloser and being ethical like an insurance license requires.
John, was that full time students in an out of state situation or was just one class at a community college that kick in this so-called national HMO network? lol Did the student need a referral from some gatekeeper in the far off state? John, you should just list the out-of-network language that was in these HMOs that were so kind to students. Were all doctors in network for students? Maybe this wonderful HMO for students was only in Connecticut. What were the names of these HMOs that had no networks for students and they could just use the docs of their choice? Is this the way your HMOs still work today?
I tell ya, HMO salesmen will say anything.
Ron, I believe you were the insurance agent, not me. I priced the stuff – you made your career selling it.
Still, it’s endlessly amusing and sometimes even informative to read your posts. But you do have a tendency to leap in without reading others’ comments carefully, and too often in your zeal to prove others wrong, you obsess over small points. So be it. You always make me smile. Thanks.
John, I knew you could not produce any proof of your statements about how easy it was to use an HMO out of state.
I’m sure people listened to you think you know what you are talking about when it is obvious you don’t and I find that puts a big smile on my face.
You say that when people like you say you can use out-of-state providers who are not on the HMO network and then people find out it is a lie you say it is a “small point”.
You John were the one who jumped in and said that people can use non-network providers with an HMO – not me. Why did you think you should say such a thing and then call it a small point?
YOU do know that there is a definition for the HMO emergency right? It is different than what normal people consider an emergency. What do you mean you price it?
QED, Ron.
John, I have NEVER heard of an HMO paying for students when they are out-of-network and I have spent a lot of time looking at the definitions in the HMO policies.
YOU never offer proof with the stuff that you say. You make these claims and then say it is a small point. Are you sure you don’t sell HMOs because you sure sound like someone who does or maybe you were scammed and are just repeating the lies that were told you.
Right John, the HMO legal definitions don’t really mean anything, sure, sure. Just because you were scammed by an HMO salesperson don’t expect us to be suckered like you were John.
QED, Ron.
Enlightening the world, one helpful article at a time.
What a neat article. I had no inkling.
This artical explains exactly what we have been talking about. Healthy people have options and will find affordable alsternatives like STM plans. How come you didn’t point out a viable solution for healthy individuals? In fact there are guaranteed issue short term medical plans now in the market. They are cheap compared to the ACA compliant plans but can be a viable alternative to get people from one open enrollment to the next.
What people should do now is take out a 12 month short term and in July cancel it and take out a 6 month plan if they are still healthy. This would cut there premiums substantially the last 6 months of the year. Here is an example. 75201 zip code. 50 year old couple 2 kids.
UHC $5000 deductible 80/20 is $647 a month for the 360 day plan. Then cancel the plan July 1 and take out a 6 month plan, the premium drops to $446.this would bring the cost for the year to about $6,558 compared to the cheapest ACA PLAN of $12,228 50% cheaper with lower deductibles.
Bottom line healthy people have options. The goal now is to get from one open enrolment to the next as inexpensively as possible.
the big ham, my STM has more medical underwriting than UHC’s STM so the premiums are smaller along with the deductible. With a $3,000 deductible per person then 100% coverage for the above family the premium is $512.42 a month for the entire year. So my STM is cheaper this time of year and yours is cheaper after July 1st of the year. So a tight wad should enroll with me now and then in July call you big ham.
My STM also has a $100 deductible on AME (Accident Medical Expenses).
Remember, Medical Underwriting is Required!
The rising cost of the ACA compliant plans are also exempting more and more individuals from any tax penalties. The example above shows the cheapest ACA plan cost at $12,228 . Using the 8.05 affordability exemption the family is exempt until there income exceeding $118,000 a year.
I carried Short Term Medical for 10 years prior to the ACA, about $300/mo with a $10,000 deductible. Never had any claims, just routine flu shots which I paid for. The kicker was that anything treated during the year of coverage then became a pre-existing condition for the next year and would not be covered for 3 years.
So a high blood sugar or diagnosis of high blood pressure in 2006 would nor be covered for the next 3 years no matter what the deductible was.
Two months into coverage on Obamacare, I had a major heart attack, open heart surgery and was diagnosed with diabetes, hypertension and kidney disease. Bills were sky high and it was mostly all covered under my plan.
I guess I am one of the ones that needed it and was fortunate it was there.
I don’t offer a good alternative, but I think higher deductible plans with Health Savings Accounts are the way to go. Still have a couple years before Medicare, which we all know is heavily subsidized by the taxpayer.
Doc, sorry to hear about the heart attack. Unfortunately our hospitals are full of people who were healthy up to the day the got sick. My brother was just diagnosed Monday with an inoperable brain tumor.
You purchased a STM and saved 10’s of thousands in premiums over the years. Then got sick, had coverage that paid. Now you can buy guaranteed issue coverage at the normal rate during open enrolment. Hopefully your agent was smart enough to wrap you STM with a life policy with a CI rider so when you had the heart attack you would have collected $200,000 so you could afforded the higher premiums of guaranteed issue. Life with living benefits are a cheap way to finance claims and future premiums.
ObamaCare is just another of the primary action plan of the Federal government. It is known far and wide as “Theft by Fiat”! Which is also known as “Good for You, Not for Me”!
While I am certainly no fan of the garbage called the Affordable Care Act I have to say that it is our own fault we had this shoved down our throats. For years getting health care has been a problem for those who did not have employer sponsered health care plans or were poor enought to qulaify for state sponsored programs or wealthy enough to buy what ever care they needed. When I became self employed we couldn’t even buy health insurance because all of the potential insurers perceived that at some point and time we may need to actually use our insurance. It wasn’t a matter of affordability. The point was we couldn’t buy insurance at all. Mind you we didn’t have problems at the time, they just considered us high risk for their own reasons. While Obamacare is a joke….sitting on our hands and doing nothing wasn’t an option either. Granted their are those who feel medical care is a priviledge as opposed to a right. I understand that from that view point you may not feel their needs to be a happy medium. However for those that feel their is enough knowledge and money in this country to affordably care for our citizens in one way another their needs to be an alternative to the way it was. Obamacare is not the solution but going back to nothing isn’t either.
I don’t necessarily disagree. Obamacare is a travesty. But the health care system prior to Obamacare was in dire need of reform — a condition that has not changed.
I would prefer a system where people begin saving in a HSA at a young age and spend down the funds as they get older and their health status declines. This is what I refer to as the lifecycle theory of investing for health in middle age.
Singapore uses this model. I’d much prefer a mandate that people save a portion of their pay for health care than a mandate they purchase costly health insurance that provides few tangible benefits.
rb, you wrote, “The point was we couldn’t buy insurance at all. Mind you we didn’t have problems at the time, they just considered us high risk for their own reasons.”
I’m not sure why you don’t know why you were not able to get insurance. When you were declined coming off of your employer-based plan they gave you a reason, what was it?
Why didn’t you just keep that good employer-based plan? Why did you have an employer-based plan to begin with? Were you just gambling that when you quit your employer someday you would still be insurable? That’s called personable responsibility rb.
Was it cheaper, come on, why did you gamble?
I’ve often heard from agents selling individual policies that prior to Obamacare, most people could ultimately get coverage. But many just didn’t like the terms or consider it a good buy.
If one person in the family has a 25% rate up for a medical condition then the premium for the family could jump from $500 a month to $550 a month. If the consumer thinks the premium is going to be $500, because the agent didn’t prepare them, the odds of a cancellation goes way up and the consumer will start saying that for no good reason they couldn’t get insurance. What they should say is that their family premium was going up $50 a month and that upset them so they cancelled the policy.
Just for fun, here are some of the exclusions in a guaranteed issue short term health policy as sold by ehealth.com:
12.Treatment, services or supplies to address quality of life or lifestyle concerns including, but not limited to: smoking cessation; snoring or sleep disorders; the treatment or prevention of hair loss; change in skin pigmentation; or cognitive enhancement.
13.Sterilization and drugs or devices used directly or indirectly to promote or prevent conception.
14.Weight reduction or weight control programs or treatment; or surgery for weight control, obesity or morbid obesity.
15.All treatments for varicose veins.
16.Therapy or treatment for learning disorders or disabilities, except as provided in the Benefits section for developmental delays.
17.Sales tax or gross receipt tax; provider administrative expenses including, but not limited to, charges for claim filing, contacting utilization review organizations, or case management fees.
18.Cosmetic treatment or reconstructive or plastic surgery that is primarily a cosmetic procedure, including medical or surgical complications arising therefrom, except as provided in the Benefits section.
19.Treatment of mental health conditions, substance use disorders; and outpatient treatment of mental and nervous disorders, except as specifically covered.
20.Treatment or services rendered by, or supplies purchased from, a member of your immediate family or an employer.
21.Treatment or services required due to accidental injury sustained in operating a motor vehicle while the insured’s blood alcohol level, as defined by law, exceeds that level permitted by law or otherwise violates legal standards for a person operating a motor vehicle in the state where the injury occurred. This exclusion applies whether or not the injury occurred in connection with an incident involving the operation of a motor vehicle, and whether or not the covered person is charged with any violation in connection with the accident.
eHealth Plus | Guaranteed Issue 3500 Short Term Medical
11
32.Reduction mammoplasty; revision of breast surgery for capsular contraction or replacement of prosthesis, except as provided in the Benefits section.
33.Services or supplies for foot care, including care of corns, bunions or calluses, except capsular or bone surgery.
34.Treatment, services or supplies rendered or received when coverage under the policy is not in effect, except as provided under the Extension of Benefits provision.
35.Any amount in excess of the Usual, Reasonable and Customary amount as determined by us under the Policy.
36.Prophylactic treatment or services. Prophylactic means any surgery or other procedure performed to prevent a disease process from becoming evident in the organ or tissue at a later date.
37.Treatment, services or supplies that are not medically necessary as determined by us under the Policy.
38.Treatment, services or supplies that are prescribed, provided or furnished in a manner primarily for the convenience of the covered person or doctor.
39.Treatment, services or supplies not described in the Benefits section.
40.Expenses for marital counseling or social counseling.
41.Outpatient prescription drugs, medications, vitamins, mineral or food supplements, including pre-natal vitamins, or any over-the-counter medicines, whether or not ordered by a doctor except as provided in the Benefits section for diabetes.
42.Treatment, services or supplies provided at no cost to the covered person.
43.Telephone consultations except as specifically covered or failure to keep a scheduled appointment.
44.Abortions, except in connection with covered complications of pregnancy or if the life of the expectant
Chronic fatigue or pain disorders;
or immunodeficiency disorders.
57.Treatment or diagnosis of allergies, except for emergency treatment of allergic reactions.
58.Kidney or end stage renal disease.
59.Joint replacement or other treatment of joints, spine, bones or connective tissue including tendons, ligaments and cartilage, unless related to a covered Injury.
60.Hospice care.
61.Costs of services or supplies for personal comfort or convenience, including homemaker services or supportive services focusing on activities of daily life that do not require the skills of qualified technical or professional personnel, including but not limited to bathing, dressing, fee
Nancy Pelosi had better not find out about this contract.
In a more serious vein, I really like that Devon found room to mention mini-med plans. These would be perfect for millions of lower paid workers, especially if we expanded Medicare Part A as a catastrophic insurer of last resort.
My vision is that a worker would pay an extra income tax of 2 or 3 per cent, and for that amount they would have Part A of Medicare for most hospital expenses, perhaps with a $2500 or $5000 deductible.
Then the worker could buy a mini-med or have an HSA or just pay cash, and this would be no business of government at all.
My plan is a combination of socialism (part A) and free enterprise (mini-meds), just like other solutions will have to be.
I wonder if there is a way to limit guaranteed issue/community rating to a portion of the benefit package. Maybe require people to assume the risk (or get coverage) for the first $10,000 in annual medical spending. Then offer guaranteed access to policies that cover $10,000 to $50,000 or more. Then let people extend coverage beyond that. A mini med would cover small stuff. A reinsurance policy would cover the big stuff. Community rating for the core coverage would satisfy the social contract.
A recent study found enrollees derived only about 40% of the benefit of Medicaid expansion. More than half of the benefits went to the medical industrial complex. I’m afraid the current system is a huge transfer of wealth from most enrollees to hospitals.
France provides a statutory benefit that functions as a comprehensive plan, but with a fair amount of cost-sharing. The cost sharing is great enough that many people purchase private voluntary insurance, at their own direct expense, to cover most of the costs that the statutory benefit does not cover.
Devon, this seems similar to your idea in that the statutory benefit is, roughly speaking, community-rated and guaranteed-issue, and the voluntary plans cover first-dollar cost-sharing.
(Interestingly, France has begun to allow private, for-profit insurers to enter the market, and provide single insurer coverage for all medical care, thus replacing both the statutory and voluntary benefits. Sounds like Medicare Advantage.)
Bob, you write, “Nancy Pelosi had better not find out about this contract.”
I would say that most people on Obamacare have HMOs and they don’t have coverage this good that pays UCR (Usual, Customary and Reasonable fees).
No reform will work until and unless what is charged and what is reimbursed by Medicare and the private carriers is clearly published and disseminated. Price controls were put on medical care during the Nixon administration and involve a tangled mess of rules and regulations.
If the price of an MRI, a CT, a doctor visit could be predicted in some reasonable ballpark of accuracy, people could actually see how much their care is worth and maybe plan accordingly. At least have some idea of the value of their care.
In my practice patients would often see a different doc because the copay was $5 less.
In my case what was billed and what was paid varied by a factor of from 1.5-13 (150-1300%).
The very phrase Health “Insurance” for all just guarantees a gigantic portion goes to the insurers who don’t actually take care of people.
But then, Corporations are people too.
Doc Steve — If you and your colleagues had to accept Medicare rates from every patient with no uncompensated care, could you make a good living after covering practice overhead?
Also, regarding the procedures that are currently reimbursed at 1/13th of the billed amount, how was the billed amount determined in the first place? For hospitals, it seems like they just pick outrageous numbers out of the air and see what sticks.
Barry,
You are correct, Medicare rates for most primary care doctors are low and Medicaid is substantially worse. Many specialists do quite well on Medicare payments.
I believe you are correct on how hospitals determine their charges. There must be a giant wheel of fortune they spin to set fees.
If the government really did take over the insurance industry and regulate prices for Big Pharm, the stock market would tank.
Doc Steve, you are correct and the same is true with auto insurance. A bunch of bucks go to the insurance company and not to the auto repair shops.
I think you might have insurance and medical care confused.
This was a good read
The political scientist, James Piereson, categorizes U.S. history, after the founding years, into three primary periods:
A Democratic-expansionist regime from 1800 to 1860 which dissolved in the midst of the slavery and secession crisis.
A Republican-capitalist regime 1860 to 1930, which was ended by the Great Depression.
A Democratic-welfare regime from 1932 until the present, although with faltering support after 1980.
Mr. Piereson makes a persuasive argument that America’s current third regime is in the process of collapsing for three major reasons:
Debt. Our public (on which we pay interest) debt today is $13 trillion or 74% of GDP, the highest since right after the end of WWII, and is continuing to climb.
Demographics. There are over 46 million Americans aged 65 and older today and this number is growing much faster than the overall population. The same for the number of people on Medicare (48 million) and Social Security (58 million). There will soon be only two workers for each retiree. How are we going to pay for the rapidly increasing costs of old age in the U.S.?
Slowing Economic Growth. We know that economic growth has averaged only 2.1% a year since the end of the Great Recession in 2009. The economist Robert Gordon makes a strong argument, that the rate of economic growth is declining for fundamental reasons which will be very hard to counteract.
There are lots of proposals to reform entitlement programs or to rewrite the tax code to stimulate more economic growth. As Mr. Piereson says, such proposals make sense on paper but they are unlikely to be adopted. “The clearest obstacle to any preemptive solution is the polarization of the two major political parties.” Democrats have moved leftward and Republicans have moved rightward. “Polarization is characteristic of regimes as they begin to tear themselves apart in conflicts which defy resolution within the existing structure of politics.”
Any number of events or developments could throw the system into a terminal crisis which would make it difficult for the U.S. to pay off the many commitments it has made. Such an upheaval would amount to the “fourth revolution” in our nation’s history. A serious prospect indeed!
Devon, your idea of a community rated core benefit is excellent.
Perceptive observers are slowly coalescing on the idea that one single health insurance policy to cover everything is no longer feasible for the nation.
However, just to be a little probing, Devon, who would finance and administer the core benefit? It is hard to imagine that our major insurers would want anything to do with it.
I am OK with expansions of Medicare as needed. But the right wing in general will be opposed.
Devon just has to do away with the Constitution and Freedom in America for his guaranteed issue mandate to work. If we had Freedom and citizens were allowed to purchase the health insurance of their choice Devon’s plan would not be able to compete.
I think maybe some of you have been brainwashed into oblivion and are not paying attention to what the next President of the United States has said HE would do when elected. He said he would REPEAL Obamacare and I don’t think that putting all of America on Medicare is in the cards, sorry.
But Ron, what good is the Constitution if it doesn’t protect people from the risks that effect them the most!!! (Ok, just kidding Ron. This is not Families USA) 🙂
On a serious note, I doubt the next president — even if a Republican — will completely repeal the guaranteed issue mandate. It’s too popular; it tugs at the heart strings on the average voter who is perfectly willing to dole out OMP – other peoples’ money to solve perceived societal problems.
I prefer that individual pool their own health risks over their working lives. This is similar to how Singapore does it. I would gladly trade the individual mandate and the guaranteed issue mandate (and the EMTALA mandate) for a mandate that people set aside money from their own payroll for medical needs. I would only support this type of mandate if the individual controls the funds.
No mandate is needed if a tax credit can be used for the same purpose. Something similar has kept employer-sponsored insurance alive.
Devon, Bob, and Ron –
I think, at least in theory, we could define a core benefit package as the ACA essential benefits package but with a $10,000 deductible ($20,000 family). The actuarial value of such a package would probably be in the range of or somewhat lower than standard FFS Medicare which I’ve heard is rated at 56%.
I think insurers could compete to offer such a package coupled with a broad network PPO, an HMO, a narrow network or a tiered network PPO all at varying premiums. It could be purchased on a guaranteed issue basis when it first becomes available or buy anyone who had comparable continuous coverage previously without a lapse of more than 63 days.
Insurers could also offer underwritten plans for lower premiums as well as less comprehensive plans including mini-meds. To Ron’s point about freedom, nobody would have to buy insurance but if they wanted the core benefits package later and didn’t carry insurance before, they would be subject to underwriting. If they had some of the benefits but not all, they would be subject to underwriting or pre-ex exclusions for the benefits that they didn’t previously have.
Even within Medicare, you can’t buy a supplemental plan on a guaranteed issue basis unless you buy it when you first become eligible for Part B coverage or qualify under one of CMS’ life changing event exceptions.
Would that $20,000 deductible plan satisfy the ACA if hospitalization provided significant but not unlimited coverage?
I hadn’t thought about it but I suppose it could cap the number of lifetime days like standard FFS Medicare does.
I don’t see any reason the benefits could not be capped on an annual and lifetime basis. I don’t find it inappropriate that individuals (with their doctors) should have to decide on therapies that count against their lifetime cap. A 50% actuarial value also sounds appropriate. I realize that many families do not have the resources to pay their share of the costs without significant hardship. But, as an economist Thomas Sowell has pointed out, if health care is unaffordable individually it cannot be any more affordable collectively. There has to be some limits.
Collectively we will be scammed. We need death panels to let people die instead of paying $1 million for 3 1/2 months in a coma at the end of life. People would not spend $1 million of their child’s money to live a few extra months in a coma. They would do what makes sense but collectively the medical providers will keep just your head alive to make a buck.
Do you think they are dreaming in that coma?
“if health care is unaffordable individually it cannot be any more affordable collectively. There has to be some limits.”
This comment by Sowell is obvious to all but the blind socialists of despair who wish to determine what it is worthwhile for you and me. The free market is so much better as it automatically sets such limits without the political gamesmanship the socialists usually involve.
The one thing I have learned reading this blog the last year and a half is that Ron is truly a people person 😄
I think Ron abandoned his true calling when he left the employ of Richard Simmons Anatomy Asylum in Denver.
In 2005 I was talking with AIG about a health product. They had a $25,000 Deductible. 100% Major medical plan up to 2 million. The plan was obsolete and not being sold but could easily be filed with the states and reactivated. The policy was about $70 a month for a typical family. What I could not get accomplished was another company to design a cost effective mini med policy that would cover up to the $25,000.
My thought was to spread the risk over two separate companies and that should keep the costs down. I still think it’s a viable solution …although with medical inflation the deductible would probably have to go up to like $50,000. Like I have said before. With Family premiums running over a $1,000 a month.. It would be cheaper to self pay the first 50,000 or take a loan out than to pay Premiums to the insurance companies.
Big Ham has an interesting suggestion, that people forego paying $12,000 a year for overpriced, high-deductible ACA insurance, and just take out a loan for the very rare occasion of a $50,000 claim.
Now in some cases the person who has a $50,000 medical event will be a very bad credit risk, they might be unable to work, etc. I think that Medicare could be a safety net lender, with the person making repayments through extra withholding.
My general point is this:
in a population of 100 younger persons, about two or three will have a major medical event each year.
We can either force all 100 persons to buy health insurance with no dollar limit (which is the goal of the ACA),
or we can set up an emergency fund through taxes to help the two or three persons after they get sick.
(One note though: my system would require price controls on hospitals. It is easy for them now to create a $50,000 bill for a C-section childbirth or a heart attack, or other not-so-rare events. That is why I like Medicare Part A as a national solution, since Medicare has a fee schedule that it enforces though with some fraud still occurring.)
Bob – In 2014, 27.5 million people received Earned Income Tax Credits (EITC) totaling $66.7 billion. The EITC is, in effect, a negative income tax. Millions more owe no federal income taxes though they do pay FICA payroll taxes. Moreover, as I’ve noted before, 63% of households don’t have even $1,000 in savings (outside of IRA and 401-K accounts) to handle emergencies and other unforeseen expenses. They are living paycheck to paycheck.
Given the sorry record of college student loan defaults, I would not want to see the federal government get into the business of lending people money for medical debts up to a $50K deductible. The default rates would be astronomical even if the government could ultimately make a claim against the debtor’s estate upon death which it probably wouldn’t do in any case.
Instead of twisting ourselves into knots trying to figure out ways for people to buy health insurance cheaply and somehow herd most of the sick people into high risk pools that would be largely subsidized by taxpayers, I wish we would expend more effort trying to find ways to reduce the cost of healthcare which, in the end, accounts for why health insurance is (too) expensive in the first place.
Maybe we should have a Bernie Sanders style revolution against trial lawyers so we can get sensible medical tort reform to reduce defensive medicine. Maybe we should outlaw confidentiality agreements between insurers and providers so we can find out what the contract rate is before services are rendered and ascertain who the most cost-effective high quality providers are. Maybe Medicare and Medicaid should spend more on data analytics so they can detect fraud before they pay the bills. Maybe we should streamline the FDA generic drug approval process so competitors can more easily enter the market when generic drug prices are raised too much by the existing manufacturers and maybe we should just refuse to cover extremely expensive specialty drugs that only add a few months of low quality life for patients with advanced cancer. Finally, maybe the default protocol at the end of life should be comfort care and not a full court press unless the patient and family wants it and is willing to pay for it.
“I wish we would expend more effort trying to find ways to reduce the cost of healthcare which, in the end, accounts for why health insurance is (too) expensive in the first place.”
Amen.
We don’t really know what we might find. But at Faber College, I learned that Knowledge is Good. We need to know. Do other countries deliver medical care for less cost than us? Do they deliver an equivalent level of care? How do they do it?
If we decide we want what other countries have, perhaps we can reduce our cost. If we decide that we prefer the care we have, then we will have to pay the cost. Either way, we need to find ways to make medical care delivery more efficient Either way, we need to decide what we really, really want. And either way, we will make a better decision as a nation in the presence of knowledge than we can possibly make out of ignorance – which is pretty close to where we are now.
“‘T’is not too late to seek a newer world.
Push off, and sitting well in order smite
The sounding furrows; for my purpose holds
To sail beyond the sunset, and the baths
Of all the western stars, until I die.
It may be that the gulfs will wash us down:
It may be we shall touch the Happy Isles,
And see the great Achilles, whom we knew.”
Sorry about that last part. It must be the Super Bowl.
😎
“If we decide we want what other countries have, perhaps we can reduce our cost.”
I believe we could relatively easily insure the American public better than the ACA and better than before. I don’t think the problem is a lack of ability rather there are those that want the government to control the healthcare sector and they will do anything to prevent any free market based improvement of the situation since every market based improvement makes it more difficult for them to completely socialize and thus control the healthcare markets. They have frightened the American public so that demands make the system unruly and costly hoping the American public will thus find favor in government control.
You’d think that when premiums are larger than your mortgage that voters would finally show up at the polls carrying pitchforks.
@PJohnson
Especially — if after paying a mortgage-sized premium — you still have to pay out-of-pocket for virtually all of your family’s health care needs.
Fabre collage . May I have 10,000 marbles please😄
Dean Wormer has them big ham.
Barry and John, you might enjoy a recent Megan McCardle article called ‘Health Care’s Continental Divide.’ McCardle has been a solid libertarian writer on health care for years. One of her main themes is that the American health care system has enormous labor costs, and not just doctors.
Note to P Johnson, on rebellion against health care premiums as high as a mortgage payment:
Relatively few families experience those premiums:
a. Employees of government and large corporations are sometimes paying part of their premium, perhaps $350 a month for their share. Painful, but doable.
b. In the individual market, a married couple each 50 years old with a joint income under $62,000 will pay about $500 a month after subsidies. Painful but doable.
c. The real pain is doled out to the persons who do not have employer coverage but have higher incomes.
I am as disgusted as you are by what happens to group (c).
All I am saying is that group (c) may not be large enough to sway elections.
Sorry Bob
I have to completely disagree with you. Everyone is experiencing these premiums.
If people have employer based insurance or are getting advanced tax credits through the exchange . Then tax payers are subsidizing the premiums. Just because they do not pay the total premium personally the total premium is still paid …last years employers wrote off almost 900 Billion for employee coverage. This cost tax payers nearly 380 Billion. The us tax payer has been being fleeced since WW2.
Here is a CBO report from 1994 that shows how much tax payers were paying back then. https://www.cbo.gov/sites/default/files/103rd-congress-1993-1994/reports/1994_03_taxtreatmentofinsurance.pdf
What do you think we will be paying in 10 years?
Sorry Bob, but I have to completely disagree with you too. My son’s employer is charging $1,200 a month to add the family onto the insurance. That is normal. I have pointed out that Tampa teachers are charged $1,168 a month to add 2 children to the schools PPO. When any of these employees go to the Exchange they not only pay the high prices with huge deductibles but they must pay with after tax dollars.
Also, a family in Tallahassee pays $1,400 a month with a $7,200 HSA deductible with United Healthcare with no tax credits if they earn $100,000 (50-years-old). A 64-year-old couple there would pay $1,700 a month if they earn over $62,000 a year with the same plan. You might think all couple earn less than $62,000 and have your “Doable” premiums but tons of people don’t qualify for tax credits and don’t have the government help pay the bill.
Bob, you might be thinking before Obamacare and are stuck in the past with those old ideas.
Ron your examples are mostly on point.
This would seem to call for two changes in the ACA subsidy structure:
a. when a spouse and children are not on the company plan, the spouse and children must be able to get subsidies on the ACA exchanges;
b. the subsidies must not stop at 400% of poverty. Any premium cost above 9 or 10 per cent of income must be subsidized.
In other words, if the 60 year old couple had a joint income of $80,000, subsidies must begin at $8,000 of premiums.
This is not wild eyed socialism. In conservative and wealthy Switzerland, 45% of taxpayers receive subsidies to help pay for health insurance.
Both of the above improvements in the ACA would cost tax money. The Republicans have opposed them because they want to scuttle the ACA, and the Democrats have not even fought for these improvements.
Bob — I agree with both points a and b.
Bob, people have good reasons for their real reasons. The ACA was not passed to get people insured but instead it was passed to eliminate competition to employer-based health insurance.
Republicans are not talking about fixing Obamacare.
There is not enough money in the world to fix Obamacare.
Ron, my numbers may be wrong but I have read that current ACA subsidies will total about $59 billion in 2016. (I am not counting the expanded Medicaid dollars in this total.)
The two enhancements that I propose to ACA subsidies will perhaps cost $25 billion.
That is just a guess, but hear me out.
$25 billion is what we spend on Medicare about every 17 days.
It is not peanuts but in federal budget-world it is small potatoes.
Again I will point out that Congress spends money on seniors hand over fist, but when it comes to spending money on the under-65 uninsured, it is like nickels become manhole covers.
As my earlier comments on Switzerland suggest, every part of society needs subsidies for health care. We should just accept that.
It’s also important to note that in Switzerland, there is no such thing as the equivalent of Medicare or Medicaid. In a given canton, everyone 26 and older pays the same premium for the same coverage offered by the same insurer. As noted previously, 45% of the population qualifies for a subsidy to help them afford the premium. It all seems to work for them.
One wrinkle in the Swiss system is that about one-third of hospital operating costs are paid from general tax revenue.
It seems to work pretty well for them and they’re a country that has, by far, the lowest VAT rate in Europe and a business friendly and banking friendly culture. The general cost of living is quite high, however.
Bob, if the goal is to help the most people afford health insurance then Sally Pipes has an article in FORBES that was published 20 minutes ago that talks about Republican Healthcare Reform. Sally writes:
–“Age-based refundable tax credits are a more straightforward way to help people pay for insurance.
As I’ve noted in my new book, The Way Out of Obamacare, these credits should be set at the following levels: $1,200 for those aged 18 to 35, $2,100 for those 35 to 50, and $3,000 for anyone over 50. Families should also receive $900 for each child covered.
According to Dr. Jeffrey Anderson of the Hudson Institute, such credits would cover most — if not all — of the premium for a basic pre-Obamacare insurance plan in most states. Anderson’s analysis is based on a report from the U.S. Government Accountability Office. The agency found that individual insurance plans were surprisingly inexpensive prior to Obamacare’s tsunami of mandates and regulations.–”
In order for these credits to pay 100% of the premium the deductible would have to be about $5,000 per person. This would work in most states but not in the North East because of their heavy mandates, sorry New York.
I suspect America is more likely to enact Republican Healthcare Reform before we enact a program from the Swiss. I also know Barry will say that this is crazy right-wing conservative talk but these are the people who will control Congress and the White House after the November vote.
Sally also wrote: –“Second, giving the credit to insurers would not tamp down health spending as much as handing it to individuals would. If consumers were directly responsible for spending their credits, they’d be more likely to shop around for the best deal on insurance — or to save any excess credit in a tax-advantaged Health Savings Account.–”
I like the idea of consumers shopping in free and open markets because that keeps costs low and quality high.
Consumer shopping is the only way to efficiently control costs and quality. But, consumer shopping requires at least a partial free market (not evident today), but government along with many others that support or supported the ACA do not wish to give up such control.
Well put Al. Right on point. The patient-consumer only sees co-pays as the cost of care and docs and hospitals pull their charges out of the stratosphere and settle for what Medicare and the Insurance companies see fit to reimburse. Too bad for anyone who pays cash for care.
The problem is too many special interests make a lot of money by hiding the real costs.
Not sure we could trust President Hillary to do any better. Her plan was devised in secret in smoky rooms (it was the 90’s) where patients and physicians were considered special interest groups.
Doc Steve, just hearing Hillary’s name is like the screech of chalk on the board. Here is the latest release (January 2016) from Judicial watch on the independent counsel memo that lays out the criminal case against Hillary Clinton’s Whitewater Land Scandal. That is just one early scandal of many so there is no way one could trust her for anything much less healthcare. In fact I don’t think we should even consider letting government run healthcare.
Ron — Why should there be a $900 credit for each child when, historically, the premium for family coverage was the same no matter how many children were in the family? Based on that history, the child credit should be limited to one per family.
Second, the age-based tax credit doesn’t really help those who can’t pass underwriting even outside of the Northeast.
Barry, since 1987 I have never sold a health insurance plan that was the same price for all children in a family. Maybe you are talking about some plans from the 1950’s.
Barry, yes we need a guaranteed issue program for those who need it. Finally you and I are on the same page.
Ron — All the employer provided plans that I’m aware of including the FEHBP for federal employees require the same contribution toward the premium for family coverage no matter how many children the employee has.
Barry that’s true in a so-called two-tier premium structure. There is a premiums rate for each employee and a separate rate for employees with dependents, no matter how many children, if any, in the family, and no matter if there are children but no spouse.
In the past, three-, four-, and five-tier structures were also used, and I assume are still used. These allow refinement of the dependent premiums based on family composition and size I.e., the number of dependent adults (zero or one) and the number of children. I’ think there are also plans that set separate premiums for each adult member and each child member, regardless of number, although I’ve had no direct experience with these plans.
note to Ron:
Age based credits are a good idea, if only to avoid the huge churn in ACA exchanges and Medicaid, where people move on and off the program based on small changes in income.
I am curious how many persons would get credits in your program. Would it be just those who had no employer coverage? If a spouse could not afford their cost for employer coverage, would they get credits?
Another thought:
It might be true that 80-85% of persons in the individual market would see a rate decrease if we went back to medical underwriting.
But as Barry asks, would a Congress step in and actually fund the high risk pools for the remainder who have a chronic health issue? Nothing in any Republican proposal so far gives me confidence that this would happen.
My own solution would be to allow a Medicare buy in for the uninsurables. There would be community rated price set for Medicare, like $800 a month, and this group would get full subsidies based on income to help pay the premium.
Any shortfall between premiums and new Medicare claims would be borne by taxpayers. Of course I would favor new taxes, so that this is not just one more addition to the national debt.
As for precedent — we subsidize senior citizens like crazy and most of them have chronic conditions. Age 65 is not a magic borderline number.
Bob, everybody is qualified for the credit who don’t have employer-based insurance.
Sally is correct that a majority of people will be able to purchase their insurance with the credit alone and any “extra” deposited into their HSA – tax free.
Talk about the largest market disruption of all time. Miami taxpayers wouldn’t have to pay $40,000 a year for Miami-Dade government workers with family coverage!! Of course New York has higher premiums because of their mandates, so they are left behind in the future. New York just keeps their over-priced Medicaid or maybe they can have a New York Single-Payer Mafia Socialist system. Hillary could be the Governor of New York.
Miami-Dade Government should deposit $10,000 a year into the employees’ tax-free HSA and save $30,000 a year per employee. Imagine, if all Miami employers had the heavy-heavy burden of health insurance expenses lifted off of their backs. Lee Iaccoca called this burden a healthcare albatross. Bob, we are talking about the rebirth of a Nation.
This Republican message is targeting prosperity to the youth. The balance at age 65 for a 25-year-old couple with a $10,000 annual HSA deposit, using 10% annual rate of return with mutual funds, the balance at age 65 is $2,710,242. Remember, 65-years-old is YOUNG in a 21st Century lifespan. When these couples are 75-years-old their tax-free HSA balance would be $7,189,048!
Who knows how much a brain transplant will cost when they are 100 years old? Hopefully, they are a dime a dozen so we don’t have to tap the HSA balance that’s growing tax free.
That would be a good HSA education problem for a high school math class. $10,000 annual HSA deposit for 75 years compounding at 10% annually would have a balance of ??? Jimmy Buffett says there are numbers so big they don’t have names.
You can use a HSA calculator but that’s cheating.
http://www.hsabank.com/hsabank/education/hsa-savings-calculator
Get your HSA from where the palm trees sway!
Thanks Ron.
If an employee has insurance but his/her spouse cannot afford being added to the coverage, does the spouse “have insurance” in your important first paragraph.
They are being “offered” insurance, but with no employer payment.
This is a huge group, many millions and growing, so I think the answer is important. Tax credits for 30 million persons in the individual market is one thing, but tax credits for 70 million persons is something else.
I am not tracking you on the Miami Dade Example, though it is provocative.
You seem to imply that the city government will drop its Cadillac plan and just let its employees sink or swim with their $2000 or $3000 tax credits. (plus $900 a child)
I guess if a city is going broke they will do this, and it would not be the end of the world. But a solvent city would face wild opposition from public employees.
There was an election on an issue like this in San Francisco a few years ago, and the public employees won the election hands down. I know that San Fran is a unique place, but the election still surprised me.
Bob, it’s simple because you can’t have both the age-based tax credit and employer-based health insurance. Each employee can choose to put his family on the age-based tax credit or at their employment. The employee can choose to either have age-based tax credits or insurance through the employer which will probably include a premium for the employee.
Most healthy employees will choose the age-based tax credit to get no cost Individual Medical (IM) and a tax free HSA deposit from the Federal Government if they choose a deductible high enough to produce excess tax credits after the purchase of their health insurance.
I know some company CEOs, who are stuck in the past, will think the Feds are paying their healthy people to escape over-priced employer-based health insurance and their sickos who are driving up premium costs. They may be correct but the intent is just to get the maximum amount of people covered in the smartest way.
Rubio, Cruz and Trump want to de-link health insurance and employment and enhance tax free HSAs. If people have a choice in which insurance company that they have we will create free and open markets with competition.
Miami-Dade Government has nothing to say about it. If their healthy employees choose the Federal HSA deposit, tax free, then only sick people will be left on the Miami-Dade health insurance which will increase premiums even more. The Unions have nothing to say about it. I suggest that healthy Union members take the tax-free HSA deposit from the Feds and cancel their Union dues so they can save in multiple ways.
It’s cheaper for the Feds to give an aged-based tax credit to the family of 4 of $4,200 (30-year-old couple with 2 children) than lose $8,000 in Income and Payroll tax when $40,000 is deducted with over-priced employer-based health insurance. The good thing for the Miami-Dade Government is they don’t have to pay $40,000 a year for insurance on this employee any more. The same thing is true for all employers. When we lift the heavy burden, the health insurance albatross, off the backs of America’s employers the economy will soar like never before.
Remember, an 18-year-old couple depositing $10,000 a year into an HSA, with 10% growth, has almost $3 million at 68-years-old. At 78-years old they would have over $7 million. It is a fact that people with large HSA balances are better prepared for 21st Century Medicare than those with nothing. When the 1st person dies of this couple the remaining HSA balance goes to the surviving spouse still in the HSA. When there is no surviving spouse the HSA balance becomes cash and goes to the children.
Republican Healthcare Reform targets wealth to the poor.
Well,I am getting closer to the concept, thanks for the details.
One sentence implies that if we go back to underwriting and no mandates, a 30 year old couple with two kids can get a family insurance policy for $4200 a year or $350 a month. (the amount of their tax credit)
Man, I’m not sure this was true even before the ACA, unless you took a $25,000 deductible.
Ron – I doubt that Congress would pass age based tax credits with the provision that individual employee could choose between the employer plan, if there is one, and the tax credits. Even if he could, employers probably wouldn’t accept it. They would probably stop offering health insurance altogether and raise wages by roughly the amount they were previously spending for health insurance though fairly allocating that amount among individual employees would be a challenge because the insurance was priced on a community rated basis before.
If such an approach did become law, employers, if they continued to offer health insurance, would have added incentive to find ways to fire or lay off workers who were unhealthy and incurring high healthcare costs or had a sick spouse or family member. In making hiring decisions, it would not hire someone who either had a significant health issue himself or had a sick family member if they knew about it in advance.
If there were an opportunity to choose between employer coverage and tax credits, anyone who chose the tax credits presumably could not get the employer coverage later unless they could pass underwriting which they wouldn’t be able to do if they got sick or if a family member got sick. If they had employer coverage and got too sick to work, they couldn’t pass underwriting in the individual market either.
In short, there is enormous potential for unintended consequences here.
Barry, times are changing. I think you are down playing the market disruption here because it’s going to be pretty big. The good news is that age-based tax credits bail out the local governments with their heavy burden, the health insurance albatross around their neck as Chrysler CEO Lee Iaccoca would say, because they can’t afford to pay for employer-based health insurance without raising taxes.
I’m sure there are going to be unintended consequences but companies like Ford might keep their factory in the United States instead of moving to Mexico City if they didn’t have to pay for the American’s health insurance. With the tax free HSA employer deposits the employer is in control and nobody tells the employer that the HSA deposits are going up this year. As a matter of fact, if the employer is maximizing the HSA deposits they can’t go up more rapidly than the CPI, it’s the law. That is a better position for the employer than at the mercy of the bloodthirsty insurance company for rapidly escalating premiums. Those guys are heartless.
GM’s CEO Wagner was with Lee Iacoca in begging for Socialized Medicine in America so they could keep manufacturing autos in this country. Well, Obamacare didn’t deliver so now it’s time to try Republican Healthcare Reform and like Ted Cruz says, “De-link health insurance and employment!” Employers need to get out of over-priced employer-based health insurance business and into employer HSA deposits business to the benefit of the employees.
Republican Healthcare reform targets wealth to a majority of the younger middle class. These people need help. Also Barry, you make it sound like companies don’t terminate employees now because of age or because their son has cancer. That’s not true because many companies hire younger people because older people cost more for health insurance and I think you would be the 1st to admit that we don’t need age discrimination at the workplace that is induced by employer-based health insurance charging more for older employees.
So to recap, age based tax credits pay 100% of the premiums for a majority of Americans. The heavy burden of health insurance is lifted off the backs of American employers so the economy would soar. Local governments shed their costs for employee health insurance so the cities don’t go bankrupt and local taxes can drop like a rock. Ford can move their manufacturing back to the United States. Younger Americans will have large tax free HSA balances in the future so they are better prepared for 21st Century Medicare and they won’t have to get on their knees and beg a politician for a handout in retirement. Older employees will no longer suffer the age discrimination at their work-site, the byproduct of employer-based insurance.
But, when Obamacare is repealed we can go back and discriminate against young women and make them pay more for IM, just like the good ole days.
Ron — I think age-based tax credits would make more sense as a complete substitute for employer provided health insurance as opposed to a system where each individual employee can choose one or the other. In the latter case, it’s possible that half of an employer’s workforce could choose the credits and the employer would still be stuck paying 90% of what it did before to insure the remaining less healthy half.
Also, as I’ve noted before, at the end of the day, insurers have to take in enough in premiums one way or another to cover the cost of medical claims, administrative overhead and profit. I’m less optimistic about the potential for a significant decrease in utilization as a result of higher deductibles coupled with HSA accounts than some others are though I do see potential for lower demand for diagnostic imaging.
here is the legislation Barry
http://tomprice.house.gov/sites/tomprice.house.gov/files/Section%20by%20Section%20of%20HR%202300%20Empowering%20Patients%20First%20Act%202015.pdf
It is all the same numbers Sally Pipes is using
Ron – I read through the legislation and there is quite a bit that I like, especially the section on medical tort reform. I do, however, have a few questions and concerns which are: (1) how much will the age-based credits cost and how will they be paid for, (2) I’m concerned that the funding for the high risk pools will not be close to adequate and (3) I wonder why the credit for the older folks is only 2.5 times as much as the credit for young adults when insurers tell us that the older people consume 5-7 times more healthcare at the population level compared to the younger age group. The ACA’s 3 to 1 age rating limit is broadly criticized as burdensome to young people and beneficial to older people.
I also think it is likely that the cost for comparable coverage can vary by 100% or more from one region to another just as it does in Switzerland and elsewhere. I think an overlay of subsidies that would limit any given individual’s out-of-pocket premium to 10% of pretax income from all sources may be necessary. I’m also concerned about the ability of lower income people to be able to afford the deductible that would likely be required to keep the premium within the value of the tax credit or only slightly above it. Subsidies or expansion of Medicaid eligibility may be necessary to address that issue as well.
Finally, I think it is probable that many employers, especially those with fewer than 200 employees would stop offering health insurance and adjust wages instead. For those who opt for a defined contribution approach, it would presumably have to be age-adjusted as well. If it is based on the community rated approach used in the past, it would create a windfall for young people and a shortfall for older people as they go shopping for insurance in the individual marketplace.
The bottom line is that the overall cost for the credits and possibly subsidies plus the disruption of the employer market might be a bridge too far for the political process to tolerate but the current system isn’t working so we need to try something different so let’s have at it in 2017 after a new president takes office.
Bob, I sell a STM PPO for a 30-year-old couple with 2 children for $317 a month with a $3,000 deductible per person right now. I admit that Individual Medical (IM) would cost more. I assume somewhere around 20% to 25% more.
Sally says $2,100 for the parents and $900 for each child. I suggest round numbers like $1,000 for a child and $2,500 for the parents so the credit would be $5,000 for this family. Currently, I charge $3,804 annually for the STM premium with a $3,000 per person deductible. I predict that this family could get IM for about $4,000 a year with a $5,000 deductible per person so $1,000 would be left over for the HSA deposit which could be used for anything medical, vision or dental.
I think $3,000 for those over 50-years-old is enough which would make younger people get larger HSA deposits.
I know that my company would be less expensive if we had a competitor, which we don’t in about 40 states. This family should have the choice to get $5,000 per person deductible with $1,000 going in the HSA or a $10,000 deductible and $1,800 in the HSA. If the employer was maximizing the families HSA then they would want to use the credit on smaller deductibles on their insurance.
In most of the states where my agency does business, all the companies selling short term coverage impose a limit of one year for anyone’s policy to be in force.
Plus anyone who is pregnant will be denied.
For these reasons, I think that selling the cheaper short term coverage will not work for all young families.
Correct, medical underwriting is required.
A lot of the arguments we are airing on this string are part of an old debate in American health care — community rating vs. individual rating.
The history of health insurance over the last 60 years is full of efforts to impose community rating, and then counter-efforts of healthy people and healthier groups to escape community rating.
There was a very interesting exchange right here a couple of years ago, with good comments throughout…
http://healthblog.ncpathinktank.org/is-there-an-argument-%E2%80%95-any-argument-%E2%80%95-for-community-rating/