“Affordable And Accessable”: The Shocking Truth About Obamacare’s Rate Shock
Imagine you went to Best Buy and found a great deal on a plasma television set. I want to be clear here: You didn’t find a great television set. This television set is actually a bit crummy. The picture is fuzzy. Consumer Reports says it breaks down a lot and it’s expensive to fix. But it’s really cheap. The price tag reads $109.
When you take it to the counter, the saleswoman tells you that the set will actually cost you $199. And count yourself lucky, she confides in a conspiratorial whisper. There are customers whom Best Buy won’t sell it to at any price. You ask her which customers those are. The ones who need the TV most, she replies.
So here’s the question: Does that television really cost $109?
Best Buy, of course, would never do this to you. If they say you can buy a television set for $109, you can buy it for $109. Plus, they’re handsome, and their customer service is great, and I hope they advertise in The Washington Post forevermore, amen.
But this is actually how the individual health-insurance market works. And understanding why is crucial to understanding a lot of what you’re going to read about health reform in the next year.
Last week, California released early information on the rates insurers intend to charge on the new insurance marketplaces — known as “exchanges” — that the state is setting up under Obamacare. They were far lower than anyone expected. Where analysts had anticipated average premiums of $400 to $500, insurers were actually charging $200 to $300. “This is a home run for consumers in every region of California,” crowed Peter Lee, director of the state’s exchanges.
The Affordable Care Act’s critics saw it differently. Avik Roy, a conservative health writer at Forbes, said Lee was being “misleading” and that “Obamacare, in fact, will increase individual-market premiums in California by as much as 146 percent.” Obamacare, he said, would trigger “rate shock,” the jolt people feel when they see higher rates. That doesn’t sound like a home run at all.
Who’s right? In typical columnist fashion, I’m not going to tell you just yet. But stick with me, and you’ll be able to parse the next year of confused and confusing Obamacare arguments with ease.
Here’s the first thing to know: We’re talking about a small fraction of the American health-care system. This isn’t about people on Medicare or Medicaid or employer-based insurance. It’s about people joining Obamacare’s insurance exchanges. That’s people who buy insurance on their own now, as well as some of the uninsured. In 2014, 7 million people, or 2.5 percent of the population, is expected to buy insurance through the exchanges. By 2023, that will rise to 24 million people, or 8 percent.
So we’re talking about a small portion of the market. Worse, we’re talking about that small portion of the market all wrong.
Roy got his 146 percent by heading to eHealthInsurance.com, running a search for insurance plans in California and comparing the cost of the cheapest plans to the cost of the plans being offered in the exchanges. That’s not just comparing apples to oranges. It’s comparing apples to oranges that the fruit guy may not even let you buy.
I ran the same search Roy did. I looked for insurance in Irvine, Calif. — my home town. The average monthly premiums of the five cheapest plans is $114. So I took the middle plan, HealthNet’s IFP PPO Value 4500. It’s got a $4,500 deductible, a $2,500 deductible for brand-name medications, huge co-pays and a little “bestseller” icon next to it. And it’s only $109 a month — if they’ll sell it to you for that price.
That’s the catch, and it’s a big one. Click to buy the plan and eventually you’ll have to answer pages and pages of questions about your health history. Ever had cancer? How about an ulcer? How about a headache? Do you feel sad when it rains? When it doesn’t rain? Is there a history of cardiovascular disease in your family? Have you ever known anyone who had the flu? The actual cost of the plan will depend on how you answer those questions.
According to HealthCare.gov, 14 percent of people who try to buy that plan are turned away outright. Another 12 percent are told they’ll have to pay more than $109. So a quarter of the people who try to buy this insurance product for $109 a month are told they can’t. Those are the people who need insurance most — they are sick, or were sick, or are likely to get sick. So, again, is $109 really the price of this plan?
Comparing the pre-underwriting price of this plan to those in Obamacare’s exchanges is ridiculous. The plans in Obamacare’s exchanges have to include those people. They can’t turn anyone away or jack up rates because of a history of arthritis or heart disease.
They also have to offer insurance that meets a certain minimum standard. Under Obamacare, for instance, the out-of-pocket limit for someone making 100 to 200 percent of the poverty line is $1,983. Under the Value 4500, you could spend up to $9,500 before the out-of-pocket limit kicked in. Obamacare also has subsidies for people making up to four times the poverty line. The poor pay next to nothing. The rich pay full freight.
“We as a society have never really said here’s what reasonable insurance is,” says Larry Levitt of the Kaiser Family Foundation. “It’s just been anything goes. For the first time they’re setting a minimum about what reasonable insurance should be.” They’re also setting a minimum about who should be able to get it, and at what cost. Now it really will work like Best Buy, where the price on the tag is the price everyone actually pays.
Some people will find the new rules make insurance more expensive. That’s in part because their health insurance was made cheap by turning away sick people. The new rules also won’t allow for as much discrimination based on age or gender. The flip side of that, of course, is that many will suddenly find their health insurance is much cheaper, or they will find that, for the first time, they’re not turned away when they try to buy health insurance.
That’s why the law is expected to insure almost 25 million people in the first decade: It makes health insurance affordable and accessible to millions who couldn’t get it before. To judge it from a baseline that leaves them out — a baseline that asks only what the wealthy and healthy will pay and ignores the benefits to the poor, the sick, the old, and women — well, that is a bit shocking.
By: Ezra Klein, Wonkblog, The Washington Post, June 1, 2013
“When All Else Fails”: Marco Rubio’s Solution To The IRS Controversy Is To Repeal Obamacare
The old joke went that the Republican solution to any problem from bad jobs report to a cloudy Monday was “cut taxes!”
It was funny because it was true. Days after the 9/11 attacks, White House officials were reportedly on the phone with Capitol Hill saying that the stunned economy necessitated huge capital gains and dividend tax cuts, even though they knew a war was probably coming.
Marco Rubio (R-FL) has perfected the GOP’s new version of this old trope: using every problem as a justification to repeal Obamacare.
The U.S. senator picks a letter a week to answer on YouTube. This week, “Larry” from Florida repeated the “IRS will be in charge of your health care” backwash that has been circulating in the right-wing media from the Drudge Report to AM radio.
Repealing President Obama’s signature achievement is as popular now as cutting taxes, probably because the Affordable Care act raises taxes on the richest 2 percent to help working families afford health care.
But the connections between health care reform and the IRS are dubious, says the Washington Post‘s Fact-checker Glenn Kessler:
Clearly, Republicans would like to raise doubts about the health-care law by associating it with the stench of the IRS scandal. But it’s a bit much to suggest that the IRS would now be running health care in the United States, especially since the law leaves the employer-based system largely intact. After all, as Republicans frequently note, the Department of Health and Human Services has been charged with writing the thousands of pages of regulations that will govern benefit packages, the running of health-care exchanges and the like.
The IRS, by contrast, is mostly the bill collector. It will validate whether people have insurance, but as we noted last week, it will have no access to private health-care data. As McClatchy News put it — in an article cited by [National Republican Congressional Committee communications director Andrea] Bozek — “The Internal Revenue Service is an important cog in the implementation of the Patient Protection and Affordable Care Act of 2010.” A “cog” does not mean it is in charge of people’s health care.
Rubio has alienated many conservatives by embracing immigration reform with a path to citizenship that will not be held up by constant demands to secure a border that’s more secure than it has been in decades. So even though Rubio knows there’s no hope of repealing Obamacare until 2021 — or more likely, no hope of repealing it ever – he’ll keep repeating this empty talking point until he finds one that works better.
By: Jason Sattler, The National Memo, May 29, 2013
“GOP Opposition Is More About The Man”: The Obamacare Idea Conservatives Should Be Cheering But Aren’t
Obamacare hate is a full-time occupation on the right. But a story from Monday’s New York Times is a reminder that some pieces of the law should have conservatives celebrating, for the same reason they are leaving liberals like me a little queasy.
The story is about Obamacare’s “Cadillac Tax,” which isn’t really a tax so much as a convoluted attempt to undo an existing tax break. To simplify things a bit, the government today doesn’t treat employer health insurance as taxable income. That makes a dollar of insurance worth more than a dollar of wages, giving both employers and employees incentive to load up on insurance.
Most economists think that contributes to rising health care costs, since people with more insurance tend to spend more on medical care. The Cadillac tax would limit the value of the tax break, effectively reducing that incentive and, in theory, reducing health care costs for everybody over the long run. (The mechanism is complicated; read here if you want an explanation of how it works.)
In an ideal world, insurers and employers would respond to the Cadillac tax by finding more efficient ways to pay for care, so that workers would end up with the same access to and quality of medicine. They’d just pay a little less for it. One way to accomplish this would be to switch employees over to a smartly managed care insurance plan—think Kaiser Permanente, where the physicians and nurses coordinate with each other, focusing on the most effective treatments and long-term health of the patient.
In the real world, alas, employers frequently find it easier just to shift costs over to their employees. They change their plan benefits, so that workers pay more for each prescription, hospital visit, and the like. The Times story, by Reed Abelson, suggests employers are doing just that.
It’s difficult to pinpoint how much the Cadillac Tax is responsible for these shifts, given that employers were looking for ways to shift costs long before Obamacare came long. The tax doesn’t start to phase in until 2018. And the Congressional Budget Office, in its most recent revision of projections on Obamacare, said that it now expects fewer plans to hit the tax threshold when it first takes effect. Still, employers are certainly talking about the tax. (I’ve heard the same chatter.) If employers are reducing their coverage in response, then—as Matthew Yglesias notes—it’s working precisely as the economists predicted it would.
That doesn’t mean the change is popular. People don’t like to hear that they’ll have to pay more the next time they go to the doctor. Unions are particularly wary of the change, since many of their members fought hard for the generous financial protection that the Cadillac Tax will curb. But the real danger is for the chronically ill, who run up huge medical bills year after year—and for whom higher out-of-pocket expenses can be a real hardship. The Times article focuses on one such person—a woman with cystic fibrosis who said she had to drop out of school and take a second job, in order to pay the bills from her higher deductibles.
Liberals who support or at least tolerate the Cadillac Tax do so because the economists have convinced us it might truly reduce costs in the long run. We also know that other parts of Obamacare, like tax credits for purchasing insurance and guarantees of coverage for people with pre-existing conditions, will help the sick and the poor far more than the Cadillac tax will hurt them.Conservatives can’t stand this kind of spending and regulation, of course. But they should have no such hostility to the Cadillac tax.
On the contrary, writers like James Capretta and Robert Moffit have long called for reducing or eliminating the tax breaks for employer sponsored insurance. They subscribe to the same economic logic that compelled Obamacare’s architects to include the provision in the first place—that, without the favorable tax treatment, employers and insurers will be more thrifty. The only difference is that conservatives think the tax incentives are even more central to the cost issue than liberals do. And, unlike liberals, conservatives don’t seem particularly troubled by the implications for the chronically ill. Either that, or conservatives do a remarkably good job of disguising their anxiety.
The Cadillac Tax will not work as quickly or smoothly as conservatives would prefer. And that’s fair grounds for criticism. But surely the concept deserves a kind word or two somewhere on the right—unless, perhaps, opposition to Obamacare is less about what’s in the law and more about who signed it.
By: Jonathan Cohn, The New Republic, May 28, 2013
“Between A Rock And A Stupid Place”: The Medicaid Scandal Of State Level Republicans
As the reality of states refusing the insanely generous terms of the Affordable Care Act’s Medicaid expansion (viz., the Texas legislature’s proactive legislation prohibiting the state from participating), begin to sink in, with it comes the realization that a completely perverse situation will now prevail in these states. The New York Times‘ Robert Pear explains for anyone who hasn’t heard:
More than half of all people without health insurance live in states that are not planning to expand Medicaid.
People in those states who have incomes from the poverty level up to four times that amount ($11,490 to $45,960 a year for an individual) can get federal tax credits to subsidize the purchase of private health insurance. But many people below the poverty line will be unable to get tax credits, Medicaid or other help with health insurance.
You will occasionally hear that people left exposed by states refusing to expand Medicaid are “covered” by Obamacare health insurances exchanges, and that’s true for what little it’s worth. The subsidies designed to make coverage affordable for the working poor (and a big chunk of the middle class), however, don’t kick in until a beneficiary’s income is above the federal poverty line. That’s because it did not occur to the Affordable Care Act’s sponsors that the Medicaid expansion provisions covering all Americans up to the poverty line would become voluntary for the states. And you know what? Had they known the Supreme Court was going to so rule, they probably would have thought no state would hate its own poor people enough to turn down the fiscal deal represented by the expansion (that was certainly the assumption a lot of otherwise smart observers made when the Court’s decision came down). Turns out as many as 25 states may in fact go in that stupid and malevolent direction, leaving up to 5.7 million Americans at the very heart of Obamacare’s intended coverage population without meaningful access to health insurance.
Now normally you’d think a Court-created “hole” in a legislative plan of this size would lead to a legislative “fix,” wouldn’t you? But that is for sure not happening until such time as Democrats regain control of the House and of 60 Senate seats–the temporary majorities that made enactment of the Affordable Care Act over the united opposition of the GOP possible in the first place.
The scandal of state-level Republicans leaving so much federal money on the table and so many poor people in the lurch may well become a campaign issue in 2014. But while this treachery is very likely to become a long-term political issue for Republicans in the affected states–particularly in the South, where its racial dimensions are impossible to ignore–the overall landscape going into the 2014 midterm election is hardly promising for Democrats there or nationally.
So putting things right and holding the happy architects of this wildly unfair situation may take a good long while. But payback’s hell.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, May 28, 2013
“Putting The Train Wreck On Hold”: Everything Anti-Obamacare Republicans Predicted Is Proving To Be The Opposite Of Reality
The Affordable Care Act, like every landmark piece of legislation in modern times, has faced its share of trials. Getting it through Congress was nearly impossible, and the law was very nearly killed by the Republican appointees on the U.S. Supreme Court.
But with the law now secure and President Obama re-elected, there’s one more major challenge for “Obamacare” to overcome: the implementation hurdle. As we discussed several weeks ago, this is at least as big a hurdle as the others, and more than a few observers have raised the prospect of a “train wreck.” Even those who generally defend the law are worried.
They are, however, a little less worried today. As Matt Yglesias explained, implementation of the law is “fundamentally” going quite well.
The latest evidence comes to us today from California, America’s largest state and one of the states that’s tried the hardest to actually implement Obamacare. As Sarah Kliff explains, their exchanges are getting set up, and it looks like premiums for “silver” and “bronze” plans are both going to be lower than was previously expected. Far from a “train wreck,” in other words, the biggest single set of clients for the program is getting something like a nice, smooth high-speed train ride.
There was also good news from Oregon recently, where insurers that had initially come in with high premium bids are now asking to resubmit with cheaper offerings in the face of competition. And the Affordable Care Act’s goal of slowing the growth in aggregate health expenditures is also coming true.
Yep, at least for now, everything anti-ACA Republicans predicted — on premiums, on competition, on exchanges, on escalating costs — is proving to be the opposite of reality.
Now, because of state-by-state differences, there will be quite a bit of variety in outcomes. If you live in California or another state dominated by Democratic officials, you’ll likely have a very positive impression of how the law is being implemented, and how it benefits you, your family, and your community.
If you live in, say, Texas, you’re likely to have a very different kind of experience.
As Jonathan Cohn explained this morning:
Unfortunately, millions of uninsured and under-insured Americans live in places like Florida and Texas, where there is far less sympathy — and a great deal more hostility — to the idea of Obamacare. It’s entirely possible that the insurance bids in those states will be a lot higher, precisely because state officials there are doing nothing to help and quite a bit to hurt implementation. But if that happens, blame won’t belong with the heath care law or the federal officials in charge of its management. It will belong with the state officials who can’t, or won’t, deliver to their constituents the benefits that California’s officials appear to be providing theirs.
It’s not necessarily an explicitly partisan matter — I’m not saying that Democrats are necessarily better at health care governance. Rather, the point is, Democrats don’t have an ideological axe to grind when it comes to trying to sabotage federal health care law. Rick Perry, however, does.
To be sure, these red-state residents won’t be left out entirely, and they’ll still benefit from all kinds of consumer protections and expanded access that they’ll really appreciate, even if they don’t yet realize the available benefits. But the full benefits of implementation will elude them for a while in ways blue-state residents won’t have to deal with.
Regardless, the news out of California is a bit of a breakthrough, and heartening news for anyone hoping to see the Affordable Care Act succeed. For more on this, also take a look at the reports this morning from Klein, Krugman, and Beutler.
By: Steve Benen, The Maddow Blog, May 24, 2013
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