Coming penalties for uninsured may boost Obamacare
From its enactment in 2010, the Affordable Care Act was designed to achieve two goals that, while not necessarily contradictory, aren’t all that complementary either. First, the ACA, or Obamacare, was intended to reduce the nation’s uninsured population. It would do this by outlawing the insurance industry’s practice of denying coverage to people with pre-existing conditions, by setting standards for coverage and premium affordability and by ending price discrimination based on the health or sex of the customer. The ACA subsidized purchase of insurance for people below certain income levels when it was bought on a state or federal insurance exchange, and it provided federal money to states that are willing, as New Mexico was, to extend Medicaid to all low-income ablebodied working-age citizens. Second, the ACA sought to preserve the private health insurance industry, despite the costly reforms it enacted to achieve its
first goal. It imposed a financial penalty on most individuals who did not have coverage and most larger companies that did not offer coverage. It set up online shopping for health insurance to give insurers easier access to customers. It gave insurers temporary financial relief to overcome the short-term costs of adjusting to the new world. The ACA has disappointed in many ways. A couple of weeks ago, no less a Democrat than former President Bill Clinton called the result “the craziest thing in the world.” The law has resulted in “people who are there busting it, sometimes 60 hours a week, (who) wind up with their premiums doubled and their coverage cut in half,” Clinton said. As for its two main goals, the law has been very good at extending coverage to millions of Americans and not so great at satisfying the insurance industry. A big part of the problem is that insurers have never been very good at anticipating how much individual customers (as opposed to groups like those covered by employers) will cost when it comes time to pay health care bills. On top of that, health care costs in general continue to grow faster than the economy grows. The Centers for Disease Control and Prevention reported last month that the percentage of our country’s population without health care coverage is at historic lows, down to 8.6 percent as of the first quarter of this year from 16 percent in 2010. CDC surveys found that 27.3 million more people are insured since ACA took effect. The most recent data show that New Mexico’s uninsured rate fell from a little more than 20 percent in 2010 to about 14.5 percent. That is largely due to a big jump in Medicaid enrollment, which offers coverage few private insurance customers would ever receive, let alone afford. The bad news for insurers is that those 27.3 million people are mostly older and, therefore, presumably less healthy customers. The CDC found that, while the uninsured rate is down to 8.1 percent for people 45 to 64 years old, it is 13.7 percent for 18- to 24-year-olds, 15.9 percent for 25- to 34-year-olds, and 14.3 percent for 35- to 44-year-olds. Only 0.5 percent of our 65-and-older population is uninsured, thanks to Medicare coverage. The ACA concept has always been that, with everyone forced into one large national insurance pool, insurers would be able to predict their costs with some accuracy and use the money they save on young and healthy customers to pay the costs of caring for older and sicker customers. The hope for a national pool would have been more easily achieved if insurance companies could sell their products across state lines. It is a rare state insurance regulator who will endorse that idea. The pool still doesn’t have enough young and healthy customers, and insurers are having a devil of a time pricing their products properly to recover costs. Blue Cross and Blue Shield of New Mexico early in the life of the ACA insurance exchanges found it had to request huge premium increases to cover health care costs. Presbyterian Health Plan has announced it won’t participate in the state insurance exchange in the coming plan year because of the cost. Several large insurers have abandoned insurance exchanges around the country. Most recently, Aetna said it would drop coverage in two-thirds of the counties where it offered insurance on the exchanges. The company said it has lost more than $430 million since January 2014 on individual insurance products. What Aetna called “individuals in need of high-cost care” were sinking the plans. The ACA requires insurers to spend 80 percent of the premiums they collect on health care (state regulators require New Mexico’s plans to spend up to 85 percent of premiums), and they can’t charge more expensive patients higher premiums to offset their cost of care. Insurance, popular opinion to the contrary, is not a very profitable business to begin with. Aetna’s 2015 net profit margin was less than 4 percent. Compare that to the CocaCola Co.’s almost 17 percent margin. Even with the withdrawal of companies like Aetna and UnitedHealthcare, the nonpartisan Kaiser Family Foundation says this doesn’t mean the ACA is failing as a public policy. Writing in The Wall Street Journal, foundation CEO Drew Altman said, “The (insurance exchanges) have a special role in health insurance, and they face real challenges, but they are a modest part of the overall insurance system. They are also only one part of the ACA — if an important part — and they are not having trouble in all states.” Penalties in 2016 for not having individual coverage might begin to solve insurers’ problems. Penalties can be as much as the national annual average premium of the cheapest category of plans sold on insurance exchanges. The hope is that individuals would rather buy insurance than pay the same money to Uncle Sam. UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to www. abqjournal.com/letters/new to submit a letter to the editor.