Affordable Care Act
A letter from our CEO: America Needs Affordable, Stable Health Insurance
Published on June 27, 2017
America Needs Affordable, Stable Health Insurance
As the CEO of eHealth, I’ve spent as much time as I can over the last few months talking to many of you on the phone.
I’ve asked you to be honest and direct with me about the parts of the Affordable Care Act (the ACA or Obamacare) that you think are working, and the parts you think are not.
I also spend as much time as I can in Washington D.C. so that I can share your stories with our elected representatives. It’s my sincere hope that we can influence public policy to create a more stable, affordable health insurance market.
At eHealth we believe effective health reform depends on these three, basic principles:
- Guaranteed, equal access to coverage for people with pre-existing conditions
- Replacing the individual mandate, which hasn’t worked, with a functioning alternative
- Making coverage affordable for middle-class families and young healthy people
How did Obamacare do in achieving these three principles?
If I had to give Obamacare a score, I’d give it a 1-and-a-half out of three.
It got the pre-existing conditions right, but its mandate failed to create a stable market and it only made coverage affordable for those who receive tax credits.
Pre-existing conditions: I don’t want to understate the importance of the changes Obamacare made to the individual insurance market.
For the first time ever, Obamacare guaranteed access to health insurance for people with pre-existing medical conditions. That was a monumental achievement.
The individual mandate: The purpose of the individual mandate was to make sure people didn’t buy insurance when they were sick and drop insurance when they were healthy. It hasn’t worked.
The individual insurance market has been destabilized and prices have risen dramatically every year, in part because too many people sign up for insurance during open enrollment, get expensive medical care, and then drop their insurance.
The Great American Physician Survey, done every year by Physicians Practice, found that 45% of doctors with patients on Obamacare have problems collecting deductibles from patients, and 24% have claims denied because a patient didn’t pay their monthly premiums.
The Centers for Medicaid and Medicare Services recently published a report showing that 16% of policyholders on Obamacare don’t pay their first month’s premium.
Without a functioning alternative to the individual mandate, the individual insurance market can’t work for those people who sign up, play by the rules and pay their bills every month.
Making coverage affordable for middle-class families and young people: Obamacare’s complicated, income-based tax credits have created two Americas when it comes to affordability.
If you earn less than 400% of the Federal Poverty level, Obamacare provides unlimited financial aid to pay for health insurance, no matter the cost. Even with these generous subsidies, the premiums are often prohibitively high for many families.
If you earn 401% of the Federal Poverty level, or more, Obamacare gives you premium increases that have exceeded 99% in the last four years.
By next year, we project that Obamacare health insurance will meet its own legal definition of unaffordable, for the majority of middle-income families who earn more than 400% of the poverty level.
The Senate’s Health Care Bill
On June 22, 2017 Senate Republicans released draft health care legislation that would make significant changes to the 2010 health reform law.
Here is a link to eHealth’s side-by-side comparison of the different health care plans (ACA, AHCA, and the BCRA).
There are notable differences between the Senate’s proposals and legislation already passed by the House of Representatives, and any final bill may differ markedly from both.
On the whole, eHealth believes that the House version would do more to address the spiraling costs of Obamacare and to stabilize the market for consumers and insurers alike.
Here’s how the House and Senate’s draft legislation address eHealth’s key principles for reform:
On equal, affordable access to coverage for people with pre-existing medical conditions – Everyone agrees that people with pre-existing medical conditions need access to affordable health insurance, but there are different ways to get there.
- The House version protects equal access to coverage for people with pre-existing conditions through an invisible high-risk pool. People with costly medical conditions should generally get the same insurance at the same price, but when their medical costs reach excessive levels, federal funds kick-in to keep insurance premiums low. States can apply for a waiver to opt out of this invisible high-risk pool.
- The Senate version keeps Obamacare-style protections in place for those with pre-existing conditions. States can apply for a waiver to opt out. The Senate does not prescribe an invisible high-risk pool, but it does allocate federal funds to try to keep insurance costs affordable when medical costs reach excessive levels.
On replacing the individual mandate with a functioning alternative – Under Obamacare, the federal government uses the individual mandate (with very limited success) to make sure healthy people don’t stay on the sidelines and not buy insurance.
Under the current system, many people are gaming the enrollment periods so that they can get insurance when they need it, and drop it when they’re healthy. That increases costs for people who follow the rules, and it needs to stop.
- The House & Senate versions of the bill would allow states to apply for waivers to police their state’s insurance market to ensure that people are not gaming the system.
- The Senate’s version of the bill would also place a six month waiting period on health insurance applications for people who have gaps in coverage of more than two months.
- The House version of the bill is more specific in the flexibility that it gives states to prevent people from adding and dropping coverage at will. In the House bill, states are granted specific permission to charge higher rates to people with pre-existing conditions for one year, if they so choose.
On making health insurance affordable for the middle class – Under Obamacare, the federal government provides subsidies to qualifying individuals earning no more than about $48,000 per year, while a married couple may qualify for subsidies if they earn less than about $65,000 per year.
These subsidies help make coverage affordable, but broad swaths of the middle class don’t qualify for them, and they have been shouldering the full financial burden of rapidly increasing insurance premiums.
Obamacare also mandated that every qualified health insurance policy cover 10 essential health benefits that many people don’t want or need. For instance, coverage for treatment of drug and alcohol addiction (a health problem that is not easily treated with evidence-based medicine) is mandatory.
This combination of mandatory benefits and income-based tax credits disproportionately impacted costs for working middle-class families.
- The House version would make subsidies age-based rather than income-based and extend these subsidies deeper into the middle class. Subsidies would only begin to phase out after an individual earns $75,000 per year, or after a married couple earns $150,000 per year. The house bill also allows for the creation of health insurance plans that don’t cover all 10 essential health benefits, through a state-based waiver system.
- The Senate version actually puts subsidies farther beyond the reach of the middle class than Obamacare already does. Under the Senate proposal, individuals earning above $42,000 per year, and married couples earning above $57,000, would no longer qualify for subsidies. However, the Senate’s bill would allow for the creation of more affordable health insurance plans by allowing states to apply for waivers so that they can offer plans that don’t cover the 10 essential health benefits.
On bringing more young people into the market –Obamacare aimed to have younger adults make up 40% of the self-purchased health insurance market in order to balance out risks and make coverage affordable for everyone.
Unfortunately, only about 20% of Obamacare enrollees are young adults.
Obamacare created some challenges to insuring more young people. For starters, it forced young people to pay more than their fair share of the cost of health insurance. It also used their income to determine their eligibility for tax credits.
- The House version allowed insurers to charge younger policy holders one fifth as much as older policy holders, which is closer to the actual differences in costs to insure younger vs. older folks. As noted, above, the House version also makes it easier for everyone to apply for subsidies by tying them to an applicant’s age rather than their income – which is often hard for young adults to predict.
- The Senate version also proposes a 1/5 age-rating ratio, to help attract younger applicants, but it keeps subsidies tied to income rather than age.
It all comes down to the cost of coverage.
Since 2013, the year before major Obamacare provisions took effect, the average monthly health insurance premium has increased by 99%, and average premiums are projected to increase another 28% in 2018.
In 2018, we expect health insurance to meet Obamacare’s definition of unaffordable for the majority of middle-class families who do not qualify for Obamacare’s subsidies.
Under the rules of the Affordable Care Act (Obamacare), health insurance is officially unaffordable when the cheapest plan available costs more than 8.13% of household income.
If estimated premium increases are correct, the average individual age 41 could not afford health insurance by ACA standards if they earn between $48,240 (when they become eligible for subsidies) and $71,820 per year.
For the average family of three, with a head of household age 41, health insurance would be unaffordable by ACA standards if they earn between $81,680 and $166,245 per year.
Good news, bad news
If there’s a silver lining in insurance being unaffordable, it’s that everyone who can’t afford qualified health insurance is generally exempt from Obamacare’s tax penalty. Of course, the downside is they can’t afford to get sick.
Heading to D.C.
I’m heading back to Washington, D.C. in July. I look forward to sharing more of your stories and continuing to work on your behalf to create a more stable, affordable health insurance market for all Americans.
Scott Flanders, CEO of eHealth