What is To Be Done with Health Insurance Exchanges, Post-Obamacare?
Any time a Republican politician suggests that there is anything positive in Obamacare, the media are eager to declare this means the Republican establishment is backing away from repealing the Affordable Care Act and wants to “fix” it instead.
This, of course, is what most businesses and their lobbyists would prefer take place. It is consistent with the Kaiser Family Foundation’s drumbeat of monthly polls reporting that “over half the public has an unfavorable view of the Affordable Care Act (ACA) in July, up eight percentage points since last month,” but that a “majority continues to prefer Congress improve ACA rather than repeal and replace.”
The latest exhibit is a report in the Wall Street Journal that U.S. Senator Bob Corker (R-TN) thinks that “we could build on the exchange concept.” What? Build on a legacy of bloated and broken IT contracts, which swallowed up billions of dollars (including $655 million on three state-based exchanges that shut down after a few months of operation) and failed in so many different ways to enroll people properly?
“Building” on that would be a strange way to “fix” Obamacare. Fortunately, a member of Senator Corker’s staff has told me privately that he meant nothing of the sort. Instead, what he meant was expressed in a rhetorical question reported below the lede in the Wall Street Journal:
“Don’t we really want individuals in our country to have their own health insurance?” Mr. Corker said, backing the ability of individuals to take their health insurance with them as they change jobs and “move away from being dependent on employers where people feel locked in.”
“Job lock” is not nearly as prevalent as many think. Nevertheless, any politician who incurs the risk of being charged with attacking employer-based benefits deserves credit.
Congress can free people from employer-based benefits by repealing Obamacare and replacing the current exclusion of employer-based benefits from taxable income with a universal, refundable tax credit.
No exchange is needed to execute this. Pre-Obamacare, Utah and Governor Romney’s Massachusetts had health-insurance exchanges, but they were designed to partially overcome Congress’ discrimination against individually owned health insurance via the income-tax code. Once Congress gets rid of this discrimination, it is hard to see what value a state-based health insurance exchange offers.
After all, we don’t have exchanges to facilitate the mortgage-interest tax deduction, the Earned-Income Tax Credit or any other adjustment to an individual’s personal income tax. They are all done through the 1040. There is no reason that a health insurance tax credit could not be added as a line to the 1040.
What, then, will happen to state-based health insurance exchanges? Congress should be utterly indifferent to their fate. Under the ACA, state-based exchanges must be self-financing by 2015. I expect that most states will lose interest in funding them, unless IT vendors are extremely persistent in lobbying for their continued existence. States that wish to continue to operate exchanges, post-Obamacare, should be free to do so, as long as they do not get any more federal dollars for that purpose.
Government is all about control. Exchanges represent control. There nothing more to it than that
Any universal tax credit system would need to be “robust” enough to vary by at least age, and probably some proxy for “location” or it will be extremely discriminatory in its impact, because of its “relative value” to the cost of obtaining individual insurance, even if the marketplaces are perfected, etc., unless the world moves to a single set of rates no matter what your age and place of residence. I know there are issues with the geographic factor, but somehow it has to be done. Oh, and would it vary by the number of people in the household? Shouldn’t someone with 7 children get more money to work with? Or will the premium rate structure use a composite for family size? Heck, why not require a single rate no matter how many people, where you live, or any combination of ages? The point is the credit needs to “move” with the allowed rating criteria that carriers can use in the marketplace to price their products. Should the credit grade by household income? Poorer people need more to buy the same coverage, etc.
The idea of an exchange isn’t new. The Healthcare.gov exchange was unnecessarily complicated. It’s foolish to assume that it costs thousands of dollars per enrollee just to sign people. No commercial venture would accept a cost that high.
Having insurance that you can take with you between employers is very important, particularly if it builds either paid-for benefits or a savings account.
That is why we will be working on a conversion policy at National Prosperity Life and Health.
Employers will like it for the savings of not goiug through COBRA.
Employees will like it for they have a head start at pre-funding benefits, raising deductibles, and saving on premiums.
We need a change in the federal law allowing employers to subsidize individual policies without a penalty, whether an exchange policy or a converted group policy.
Don Levit
Treasurer of National Prosperity Life and Health
As Newt Gingrich said at an event I attended yesterday: “There are 150 million Americans on Facebook. No subsidy was required to make them sign up. No government-sanctioned training or certification is required to participate”.
Isn’t that comparing apples to bananas. Newt is past his freshness date.
Oh, no. He was talking about mobile-health technology – very fresh and up to date.
I salute a politician who is talking about decoupling insurance from the employer and giving the deduction to the individual.
Devon,
The task of the exchange was to verify qualifications for acquiring a subsidy by exchanging information across multiple departments, calculate the subsidy, verify plan selection, and forward the combination of client funds and federal funds to pay the carrier. The only part that eventually worked, sort of, was to calculate a subsidy without verifying income and forwarding a plan selection to the carrier. And, yes, to do that should never have cost even close to that much. The full process will never and should never work.
“No exchange is needed to execute this. Pre-Obamacare, Utah and Governor Romney’s Massachusetts had health-insurance exchanges, but they were designed to partially overcome Congress’ discrimination against individually owned health insurance via the income-tax code. Once Congress gets rid of this discrimination, it is hard to see what value a state-based health insurance exchange offers.”
The Obamacare exchange, unlike the origial MA and UT models, is tied to the subsidies distribution.
If we have non-empoyer based insurance, there’s no conflict regarding what the employer is willing to cover for religious reasons, either. It would make the Hobby-Lobby case a moot point.
Exactly! For those Democrats, especially women, saying my employer should not be deciding my birth control, we agree.
Plus Beverly, Hobby Lobby is “Selling” health insurance to their own employees. Then when a young woman gets cancer and can’t work 30 hours per week anymore, “Eligibility Requirement”, Hobby Lobby just puts them to a Short Term COBRA for insurance TERMINATION. Doesn’t sound like a Christian thing to me.
Selling without a license I might add without Full and Proper Disclosure. A serious ethics VIOLATION.
Personally I would have liked a more detailed explanation of the workings and theoretical ramifications of this tax credit financing.
More than half of all tax return filers don’t owe more than they have already withheld, so do they just get more back with which to pay for insurance? Would the credit be a flat amount for everyone or based on their reported income? What about those who owe no taxes or aren’t even required to file because they make so little earned income?
The devil is in the details and this piece is sorely lacking.
I think most or all of the tax credit proposals are for refundable tax credits. Although I have seen a few that mention a deduction, I suspect that these were just half-cooked ideas using sloppy language.
You gentlemen are absolutely right. We need to examine the distribution effects of a refundable tax credit, and we have not done so very well yet.
We plan to later this year and in 2015.
Use your tax credit to fund your expanded HSA that aslo pays for your HDHP and direct care contract. Similar to this plan, http://bit.ly/KyRqOc
Maybe I am misinformed, but …. didn’t ACA do away with Health Savings Accounts? What’s an HDHP? How does this help those who have no tax liability, thus no credits? Eligibility for subsidies is determined by God only knows, and this only for exchange purchases. Would tax credits replace this buck 4 buck? What about folk who do not use the exchanges to get their coverage? Details and Devils, sez eye!
No, HDHP/HSA combinations are alive, well and growing, now estimated to include $23+B in assets. One specific PPACA compliance strategy for employers, ever larger employers, is to consolidate all coverage into a full replacement HSA-qualifying HDHP.
That’s a fact Jack. HSA Bank hold’s 10% of that $23 billion. They had their $2 billion dollar party a while ago.
Future President Rand Paul will de-link tax-free HSAs and insurance. Plus, allow larger tax-free HSA deposits.
I have never used the term HDHP. I have always said low cost HSA insurance. Or I say to have a tax-free HSA you must have “certain” deductibles.
The federal health insurance exchanges is a lousy tool to fix these health care problems. Here are my reasons.
1. The cost of health care for people with high cost, pre-existing conditions is being spread across a fairly small group of people buying their health insurance via the exchanges. If health care for people with pre-existing conditions is society’s responsibility than the cost should be spread over a much larger group of people. Until we solve the problem with paying for pre-existing condition health care in a more equitable manner, health insurance exchanges will be plagued with high risk premiums and are likely to fail.
2. Health exchanges in general are a lousy way to subsidize health insurance for people earning less than 400% FPL if you want to control health care costs. This is the same problem faced by expanding Medicaid. The Oregon Medicaid experiment leads us to speculate that this group of people will consume more health care services without an improvement in health care outcomes. A health insurance credit is probably a step in the right direction of simplifying the subsidy system while providing subsidies and cost control incentives.
3. With the market distortions from pre-existing conditions and subsidies and overall incompetence in the roll-out, it is hard to imagine health insurance exchanges as an adequate substitute for the fair, unbiased health insurance market place we expected in 2013. As a person who has purchased health insurance from eHealthinsurance.com in the past, I have to assign blame for the overall incompetence of healthcare.gov to politics. The ACA made purchasing health insurance unnecessarily complicated. When you combine the public’s unfavorable view of the federal health exchange with its history of being a political football, this would be a good time to look at a replacement that involves less federal government and political partisanship. The original ACA plan relied on state exchanges and we should go back there in a modified form. My personal favorite idea is to simplify the enrollment process and replace the federal exchange with state exchanges run in cooperation with insurance companies and insurance marketers. eHealthinsurance.com and other companies like them already had the infrastructure in place. You can call this the Halbig solution with adults in the room. If we cannot get rid of the amateurs in the federal government we should at least minimize their damage.
John and Friends:
True–this is all about control. How else to look at the 7 feet of new regulations? The Federal government does not trust any part of the market; they see skulduggery everywhere, but do not even take the most obvious precaution of determining who is really eligible.
Here is my take: We should stop defining people only by income; there is a very large range of competency to consider:
High Need, Low Competency: Very poor and likely to remain poor–no English, no IQ, no education and no family. Good grief. Give them subsidized places to go that take care of both health and social needs; Community Health centers.
High Need, Medium competency. Poor, but able to function fairly well. Needs are multiple, some of long standing. Assure payment to a healthcare system that can take care of them. Should be one they already use, if possible, as they will have the right kind of staff; Teaching hospitals and county hospitals come to mind. Block grants.
Medium Need, Medium competency. Health plan that pays by capitation to a healthcare system with reciprocity with other systems.
Low Need, Medium to high competency. Health savings account policies, free choice of providers.
What’s wrong with this? There must be some mystical reason why competency is not considered.
Here are more low competency examples: Mentally-disabled. extreme rural isolation, criminal underclass, and frail people with a terminal illness. What kind of delivery solution can be bought with “health plans?”
Unfortunate, political correctness makes it politically infeasible to label someone as incompetent in any way. This guarantees that the nanny state will ignore it and simply press on with something not designed to actually work, but only to gain votes.
This law cannot be “fixed.” Just like the health system, so disdained by policy people cannot be “fixed,” but only hacked at.
Guys–what if we all wrote the substitute law?
“Global budgets to organized healthcare systems for an area’s groups of people who need care?” Disintermediate both the government and as much of health plans as possible. Talk to me.
Wanda J. Jones,
San Francisco
Wanda Jones
San Francisco
Guys, take it from someone with 35+ years of corporate employee benefits, there is no such thing as “job lock” anymore.
Pre-ex is gone for group plans – grandfathered or not, starting the 1st of the plan year in 2014. I believe grandfathered individual plans can maintain such prohibitions – but, are there any out there, and is anyone still enrolled?
There is no measurable “job lock” anymore – where an individual must remain at a specific employer for fear of losing health coverage due to pre-existing condition. I can confirm that from first hand, face to face experience. I challenge you to identify any economic analysis that uses data from this century that identifies “job lock” – data that reflect the new reality after both COBRA’s continuation of coverage provisions and HIPAA’s portability provisions (pre-existing condition limitations, actively at work prohibition, special enrollment periods, etc.) took full effect.
I suppose you could argue that COBRA was not “affordable” and therefore, creates “job lock”.
Well, that’s the nature of total compensation, guys. You work here, you earn these wages and these benefits (they are not gifts, they are not “provided”, but earned). That’s not “job lock”, that’s compensation.
Job lock is where the individual can’t access coverage, or can’t change jobs because of the “gap” created by a preexisting condition exclusions or underwriting limitation. I can confirm that if there is “job lock” out there, it is because people don’t read (or don’t understand) the various mandated notices for both COBRA and HIPAA. So, if there is “job lock”, it is not because of any limitation of code or regulation, but because the policy wonks in Congress and their staffers always default to mandatory disclosures, which are almost always ineffective.
Anyway, if you believe in “job lock” that results from the retentive effects of total rewards, I am here to predict that such “job lock” will INCREASE as a result of PPACA & HERA, not decline. That is, the disparity between employers who offer coverage and those who don’t, and the value of health coverage offered by employers (value, network, employer support, etc.) versus Medicare, Medicaid and narrow network public exchange insurance options, will actually increase. This is specifically true when it comes to specialty care for those with significant medical issues, those with existing physician/patient relationships, etc.
Don’t believe me? How about Dr. Ezekiel Emanuel who recently confirmed in his new book and in a related post in the New Republic “Insurance Companies as We Know Them Are About to Die.” Ezekiel Emanuel, New Republic, 3/2/14. Having predicted the demise of employer sponsored plans (to represent less than 1/3 of those with coverage by 2025), Dr. Emanuel predicts we will see a two tier coverage structure emerge, with a base level of public coverage and supplemental policies offered by employers and insurers (a la Great Britain)
“… Having the assurance of a high-quality network is the key. … (alongside contracting with) recognized centers of excellence for rare/serious diseases … there will be a market for supplemental insurance … The well-heeled and worried will be a prime target for such plans….”
Sounds like a significant INCREASE in job lock by 2025 as a result of PPACA … at least compared to the level of job lock in effect back in 2010 upon the passage of the Patient Protection and Affordable Care Act.
Job lock is not only about remaining with a specific employer. If you can’t find a better employer who also offers benefits, you are still job locked.
COBRA only lasts 18 months in most states. HIPAA is a bit more expensive. Neither of these come with a tax exclusion. So even though COBRA is exactly the same coverage you had when you were working, the net cost to the purchaser is double. So yes, there is still job lock.
If you cannot find a better job for any reason – too old, too young, too smart, too dumb, too tall, too short – I suppose we could say you are locked into your current job.
But that is just life, I’m afraid – not government policy.
John, I like the new policy of the NCPA when you come by and chat. That makes this blog worth looking at. Tell Devon I have decided to make him my new best buddy.
WOW Jack, Dr. Ezekiel Emanuel predicts employer-based plans will still have 33% market share in 2025. Capital IQ predicts they will have 10% market share by 2020. Most will switch in 2017,2018,2019 and 2020. I think Emanuel is a little to kind on employer-based plans.
You said, “narrow network public exchange insurance options” TIME Insurance, who I work with, has the same network on or off the exchange. So don’t believe everything you read.
We can’t believe everything we read, because they cannot all be correct. The wide variance in estimates about the future of employer-based health care (all by credible experts) shows us that Obamacare is an uncontrolled, risky experiment.
My bet is that Time Insurance probably has a narrower network than CIGNA, AETNA, UHC or the Blues employer-sponsored plan networks. There is a reason why those sponsors only had limited public network participation in 2014, why some providers sued public exchange insurers after being left out of the network, AND why HHS has already mandated broader networks for 2015.
I will take the bet Jack. In Tampa Bay TIME uses the AETNA network. TIME is so big, in 43 states and nobody else is even close, that we have to pick and choose for each local market which network is best for the consumer. Many times TIME offers the consumer a choice between 5 competing networks and each one differs in price. Like I have always said, “You get what you pay for.”
At TIME we call each of the non-profit local Blue Cross MONOPOLIES, “local yocals”.
A friend of mine just went for his preventive care visit and TIME/Assurant sent him an EOB claiming he owed $314. And he’d even called before to make certain it was all preventive!
John, if my wife was taking that call she would ask, “What did the Explanation-of-Benefits(EOB) say you were being charged for?” Without asking that question it is hard to say what happened. I can tell you this, it is done by computers. So, the doctor’s office coded the procedure improperly. This happens all the time. Sometimes they make more money when they do that.
My wife is so smart she says, “When you go through all the effort to find out why the customer isn’t getting paid you find out that it makes no difference who the patient has for insurance these doctors’ offices send all the claims to Blue Cross.”
She says, “It’s never TIME’s fault. It’s always the providers who make the mistake. TIME doesn’t care [if] it’s coded properly.”
Also, to the extreme, if a customer goes into the doc’s office on a “preventive” covered annual physical and they end up doing open heart surgery – that is not preventive. That procedure code, for surgery, is not preventative. Same with a $314 non-covered, under preventative, procedure code.
So to know what happened you would have had to ask a few questions. My wife would say, “Fax me that EOB.”
Thank you. I’ve seen the EOB. (People send me their EOBs frequently. Please stop!) It just states “office visit” and a couple of codes which I have not yet looked up.
I appreciate it originated in the physician’s office but the patient in question did not pay any copay at the visit. The doctor will have trouble getting paid from that patient.
Pure dead-weight loss. The patient does not have time to follow this up and will simply ignore the invoice when it comes from the physician.
I have zero sympathy with providers in these situations.
Ha Ha John. Rand Paul says that the ACA has increased the 15,000 procedure codes to hundreds of thousands, I forget the number he said. But he said there are multiple procedure codes now for Mccaw Parrot attacks that result in injury, it’s crazy.
Your tax dollars at work.
You say that now. But when you are attacked by a macaw and cannot get treatment because the physician cannot figure out how to prepare the claim, you will regret the delay of the new codes.
(Laugh track.)
John, last night I was talking with the future Governor of Florida about this very subject. We have decided to create the Florida Tax-Free HSA Task Force to educate consumers on their health insurance options.
The problems are insane. For example, Florida is spending $1,500 a month for employees with family coverage from Blue Cross of Florida Inc. But, in the free and open markets a 30-year-old couple and 2 children can get the HSA Bronze plan for less than $500 a month in most counties. Plus, if this employee earns $50,000 a year (Modified Adjusted Gross Income) the tax credits are $500 a month so the insurance is “No Cost” for the employee. This works for all employers in Florida.
So the State can save a bundle of cash. TIME Insurance Company, America’s oldest health insurance company, is entering the Florida market this year, on the exchange, so tax credits are available to consumers who choose TIME, finally. The credits are available on and off of the exchange for TIME.
Blue Cross of Florida is going to learn that competition can be mean.
Now we can all say together, it’s TIME for your HSA.
Bart- HIPAA is not an insurance.
Tell him Big Joe. Tell him by law COBRA is 2% more not “double”.
I think what he means is that the employee’s direct share of premiums goes from 25 percent (for example) to 102 percent.
Thank you John, at Wayne State University (WSU) the family premium is $2,401/month and they are making the employees pay half, $1,200.50/month, so these people on COBRA would think it’s now double. What is funny is that a 30-year-old couple and two children can get the HSA Bronze plan for $467/month (Wayne County, MI) from Humana in the FREE and open market. Too silly. Wonder why an education costs so much? Same thing is happening at every level of Government, cities, counties, and states.
What is to be done with health insurance exchanges post Obamacare ????
Porn or online gaming – at least we’ll make out money back.
And the costumers would be government employees, who are reported to spend much of their working days in such activities (https://drive.google.com/file/d/0BzDT-egq0GTnQ3FnTk16VktRSlE/edit?usp=sharing).
John and All…
There’s a very interesting parallel between health insurance and Social Security/retirement. See the Forbes column by Peter Ferrara, 8/10/20. Explains the idea of a personal invested account as opposed to “pay as you go.” Creates assets.
In healthcare, think of area-wide credit unions, managed by banks, in which HSA’s would be deposited, invested and paid out. The members could also, and this is very important, join in recruiting their own nurses, or other health workers and have them handy in their neighborhoods. These distributed primary care solutions reduce use of ERs and hospital admissions, and can be personalized to the cultures of the members. I’m seriously hot for this, as it does away with the exchanges except as a means of implementing Federal policy. Which we don’t like, anyway.
Please, guys, let’s get in the fray to recast this whole thing; I don’t think the PPACA can be fixed.
Cheers…
Wanda Jones
San Francisco
Thank you. Are you envisioning a whole group of people sharing their HSAs? It sounds like a fraternal organization. Please tell us more.
John, I think Wanda is talking about reforming Social Security with tax-free Personal Savings Accounts(PSA). The “The Chilean Model” by Jose Pinera. Rand Paul knows all about it and once you know you don’t forget. Of course here in America the PSA should be patterned after the tax-free HSA. When Dr Ron Paul comes to the NCPA ask him about Rand calling Social Security a Ponzi Scheme. Here is Rand a long time ago. Watch this short video:
http://talkingpointsmemo.com/dc/rand-paul-in-the-90s-medicare-is-socialism-and-social-security-is-a-ponzi-scheme-video