Tag: "health insurance"

How to Solve the Pre-Existing Condition Problem

moneyThe primary sticking point in health reform is what to do with high -cost individuals who have pre-existing health conditions. People with episodic medical needs are easy to insure, while those with persistent needs are far more difficult unless insurers are allowed to underwrite enrollees’ risk. Republicans have long favored high-risk pools to cover individuals who are otherwise uninsurable. Prior to the Affordable Care Act (ACA) just over two-thirds of states had some type of high-risk pool. Most people turned down prior to the Affordable Care Act could ultimately obtain coverage either at a higher price or after meeting some preconditions. In 2011, high-risk pool enrollment varied from 0.1% in Alabama to a high of 10.2% in Minnesota. By most accounts only about 2% of people are uninsurable. However, one Kaiser Family Foundation study argues the actual rate may be a dozen times higher.

Invisible High-Risk Pools

Five people waiting in waiting roomThere has been some discussions about invisible high-risk pools. That is a condition where the state assumes responsibility for some subset of sick enrollees’ high claims cost. For instance, Alaska began subsidizing the cost for a few individuals so the remaining 25,000 Alaska Obamacare enrollees would not be priced out of the market.

Third-Party Payment Is The Root Cause of Health System Dysfunction

InsFormSmall(A version of this Health Alert was published by RealClearHealth.)

Largely absent from the vigorous debate over reforming the nation’s health care laws is the understanding that simply being covered by health insurance does not reduce health care costs.

Before the Affordable Care Act (ACA) passed in March 2010, President Obama repeatedly promised that the typical family’s health premiums would go down by (sometimes “up to” but frequently “on average”) $2,500. That decline did not occur because the ACA strengthened the control that insurance companies—as opposed to patients—have over health care spending. In fact, Americans’ increasing dependence on health insurance over the last seven decades has been a major contributor to exploding health costs.

Where Does Your Insurance Premium Go?

InsFormSmallAHIP, the trade association for health insurers, has a nifty infographic answering the question: “Where does your premium dollar go?”

Obviously designed to defray accusations that health insurers earn too much profit, the infographic shows “net margin: of only three percent. A full 80 percent of our premium dollar goes to paying medical, hospital, and prescription claims.”

Fair enough. However, the elephant in the infographic is the 18 percent of premium that goes to “operating costs.” Lest you think that’s a synonym for “overhead” or “bureaucracy,” AHIP helpfully explains: “Operating costs include consumer-centric activities such as communicating with members, running customer service operations, quality reviews, and data analysis, among other activities.”

Well, readers have to judge how “consumer-centric” those operations are.

Bargain Basement vs. the Sky is the Limit Health Care

Caduceus with First-aid Kit --- Image by © Royalty-Free/Corbis

Caduceus with First-aid Kit — Image by © Royalty-Free/Corbis

How much should a healthy person’s health insurance premiums reflect the cost of another person’s poor health status? Stated another way, how much should society invest in care for the sickest individuals? Moreover, should society invest in primary care or inpatient care?

Health Insurance A Cause Of Past-Due Debt?

credit-card-2A study of past-due medical debt by Michael Karpman and Kyle J. Kaswell of the Urban Institute demonstrates the expansion of coverage subsequent to the Affordable Care Act is associated with a reduction in the proportion of adults with past-due medical debt.

In 2012, 29.6 percent of U.S. adults had past-due medical debt, versus just 23.8 percent in 2015. The study does not define “past-due,” nor the average amount of medical debt that is past-due. However, it cites research that almost half of debt in collections is owed to hospitals and other providers.

Although health insurance is supposed to protect us from such a situation, it often does not. Among insured people, 26.6 percent had past-due medical debt in 2012, versus 22.8 percent in 2015. However, among uninsured people it declined more: 39.8 percent in 2012, versus 30.5 percent in 2015. What to make of this?

Replacing Obamacare with A Means-Tested Tax Credit

HSAIn his joint address to Congress last Tuesday, President Trump promoted the idea of a tax credit to support people’s purchase of health care. This is in line with the approach taken by Secretary Tom Price when he was in Congress, and that of the House Republican leadership.

Some self-styled conservatives oppose a refundable tax credit because it would cost taxpayers a lot of money. That which we currently understand to be the Republican replacement bill would offer a tax credit to individuals based on age but not on income, if they do not get employer-based health benefits.

That may be changing to a means-tested tax credit in order to win the support of conservative Republican lawmakers. “Oh, the irony,” exclaims one journalist: Don’t those Republicans know Obamacare contains means-tested tax credits? It’s still Obamacare-Lite!

No, it would not be.

Employer-Based Coverage Does Not Equalize Workers’ Access to Health Care

InsFormSmallOne reason public policy favors employer-based health benefits instead of individually owned health insurance is the former is supposed to equalize access to health care among workers of all income levels. Insurers usually demand 75 percent of workers be covered, which leads to benefit design that attracts almost all workers to be covered.

Employers do this by charging the same premium for all workers but only having workers pay a small share of the premium through payroll deduction. Most is paid by the firm. Last year, the average total premium for a single worker in an employer-based plan was $6,435, but the worker only paid $1,129 directly while the employer paid $5,306.

Although this suppresses workers’ wages, workers cannot go to their employers and demand money instead of the employers’ share of premium. The tax code also encourages this, by exempting employer-based benefits from taxable income.

Does this equal access to care? Not at all, according to new research:

Fixed-Dollar Tax Credits Would Reduce Individual Health Insurance Premiums

UntitledghgSonia Jaffe and Mark Shepard of the National Bureau of Economic Research (NBER) have written a new paper, which compares the effects of fixed-dollar subsidies for health insurance to subsidies that are linked to premiums. They conclude fixed-dollar subsidies reduce taxpayers’ costs and improve access. Unfortunately, the structure of subsidies in U.S. health insurance has moved in the other direction.

Tax credits that subsidize health insurance offered in Obamacare’s exchanges are based on the second-lower cost Silver-level plan in a region. Intuitively, this implies insurers will not compete too much because that would drive down subsidies. As long as subsidies chase insurance premiums, premiums will be higher than otherwise.

Jaffe and Shepard examine evidence from Massachusetts’ health reform (“Romneycare”), which dates to 2006. Its costs are still spiraling, and Jaffe estimates one factor is its design of subsidies, which is similar to Obamacare’s:

American Health Insurance Is Upside Down

Writing in The Week, Ryan Cooper shares a chilling story about an Obamacare Gold-level health insurance policy that let its beneficiary down when he needed it most:

Stewart is 29 years old, and was pursuing his Ph.D in American history at Texas Christian University until ill health forced him to withdraw. He lives in Ft. Worth, Texas, with his wife of six years, who is a junior high school teacher in a low-income district. They own their home. Before he came down with complications from cirrhosis caused by autoimmune hepatitis, he says he led a scrupulously healthy lifestyle — he does not drink or do any other non-medical drugs, he says, and was a devoted hiker before disaster struck. And he was insured — indeed, he had a gold plan from the ObamaCare exchanges, the second-best level of plan that you can get.

But now he faces imminent bankruptcy and possibly death.

(Ryan Cooper, “This is How American Health Care Kills People,” The Week, January 14, 2017.)