Written by Arnold Ahlert
The Affordable Healthcare Act is apparently the gift that keeps on giving. A series of new revelations are highlighted by the idea that if you like your current ObamaCare plan you can keep it—but it will likely cost you more, and you may have trouble finding a doctor who will treat you.
A devastating expose by the National Journal reveals that Americans who decide to stick with their current ObamaCare plan “are at risk for some of the biggest premium spikes anywhere in the system. And some people won’t even know their costs went up until they get a bill from the IRS.”
At the heart of this daunting new reality are the taxpayer-financed premium subsidies that Americans receive to offset the true costs of their health insurance. Because of the way the law is written, many Americans will have to switch their plans to maintain their current costs. That in and of itself is a major headache, because it means another visit to the infamous HealthCare.gov website. Healthcare experts already question how many Americans will re-visit that ordeal, especially when the Obama administration has set up an automatic renewal process for one’s current policy.
Yet that current policy may end up costing enrollees considerably more because of changes in the law triggered, ironically, by increased competition among insurers that will bring lower-priced products to the marketplace. Newer plans offered by this competition will change the entire structure of subsidy payments because those subsidies are tied to what is called a “benchmark” insurance plan. As its stands now, lower-income consumers are only required to pay a certain percentage of their total income to acquire health insurance. The rest of the premium is paid by the government subsidy. Those who choose a more expensive policy pay the difference out of their own pocket.
In 2014, 3.4 million Americans opted for the benchmark plan, or one option cheaper. While these lower cost plans attracted most of the enrollees, they are also the ones for which insurers are often seeking above-average rate hikes. When those rates are raised and new cheaper plans enter the marketplace, they will become the benchmark options. As a result, all subsidy calculations will be based on the newer plans. Those who keep their current plan will not only be responsible for whatever rate hikes are implemented, but the entire price difference between one’s current plan and the new benchmark plan.
Those prices differences can be substantial. An analysis by Milliman, an actuarial and consulting firm, reveals that a premium increase of only 5 percent could trigger net cost increases of 30 to 100 percent for low-income consumers. A survey by Avalere Health, an advisory company that focuses on the business of healthcare, notes that such changes are already occurring. In the nine states they cite as examples, the benchmark plan will change in six, and the lowest price plans will change in seven. Caroline Pearson, vice president at Avalere Health illuminates reality. “The prices of the lowest-cost [plans] tend to be going up more,” she explained. “Most people, if re-enrolled, will be enrolled in a plan that has a premium increase.”
Yet it gets worse. The HealthCare.gov website is currently incapable of automatically recalculating the subsidies for which existing enrollees are eligible. In order to do that, customers must revisit the website and ask for the recalculations. Customers who auto-renew will get their existing subsidies—even though marketplace changes make it virtually certain they will the be wrong for millions of enrollees. “That’s the totally crazy part,” Pearson said. “They’re basically going to send them what they know to be the wrong subsidy.”
Enter the IRS. They will eventually calculate one’s correct subsidy. Those lucky enough to be eligible for a subsidy greater than the one they currently receive will be issued a tax credit. Those who received one that is too large will owe the IRS money. An example cited by Milliman of someone whose income and subsidy remains the same, and who simply renews their current plan in the new marketplace—thinking nothing has changed—may end up owing the IRS between $300 and $2,500 when their tax bill comes due. And until HealthCare.gov can re-calculate subsidies automatically, the onus is on the individual to figure out what’s happening.
Larry Levitt, vice president of special initiatives at the Kaiser Family Foundation, bets that most people will fail to take the initiative necessary to maintain their current costs. “There are lots of reasons to believe inertia will take hold here and people won’t switch,” he said. “Betting on inertia is certainly a reasonable bet here.” Such inertia had precedents. Seniors enrolled in Medicare’s prescription-drug benefit plans rarely change them, even if a better plan exists. The same inertia also exists among federal employees who enroll in insurance plans.
Politics further complicates the process. The Obama administration wants as many people as possible to maintain their healthcare plans, hence the automatic renewal process. At the same time, they want premium prices kept in check. “It’s a really tough balance. You don’t want people to end up uninsured, so you want to make renewal as easy as possible, but also want to make sure people understand they have other options,” Levitt said. “Auto-renewing people is not a crazy idea, but how well that works will depend a lot on the communication that goes out to people.”
In the meantime, there is “communication” going out to the American people–from healthcare providers. An NPR report reveals that ObamaCare has reduced payments to doctors to the point where many of them say they can’t afford to accept the plans. “I cannot accept a plan [in which] potentially commercial-type reimbursement rates were now going to be reimbursed at Medicare rates,” Connecticut doctor Doug Gerard explains. “You have to maintain a certain mix in private practice between the low reimbursers and the high reimbursers to be able to keep the lights on.” Gerard is only accepting patients with one of the three ACA plans available in 2014 in the Nutmeg State—the one that pays him the highest rate.
Kevin Counihan, who runs the state’s insurance marketplace, illuminates the implications, noting that such a reality may create a “tiered” healthcare system. “I think it could lead potentially to this kind of distinction that there are these different tiers of quality of care,” he warns.
And not just with regard to doctors. As the Daily Caller explains, “hospitals — especially top-tier ones that treat the most difficult diseases — are also increasingly rejecting the low reimbursement rates. The nation’s best cancer treatment centers are often covered by very few exchange plans in their states; if Obamacare customers end up with a difficult-to-treat cancer, they’re likely to face a lower quality of care right off the bat.”
Connecticut State Medical Society president-elect Bob Russo stated the obvious correlation. “You get what you pay for,” he explains. “If you can’t convince [doctors] that they’re not losing money doing their job, then it’s a problem. And they haven’t been able to convince people of that.”
In the meantime, two more states are reporting the latest rises in next year’s premiums. In Florida, those who buy insurance on the individual market in 2015 are looking at an average rate increase of 13.2 percent in their monthly premiums. Most of the insurers attributed the higher-than-expected increases in costs to attracting new customers who use more services, and the law’s mandates. Insufficient percentages of younger, healthier Floridians signing up for healthcare also contributed to the increases. And with regard to the aforementioned renewal process, it should be noted that 91 percent of Floridians receive premium subsidies.
The news coming out of Ohio is even more ominous. In May it was revealed that rates were expected to rise 13 percent for individuals and 11 percent for businesses. Yesterday EAGNews.com reported that Ohio’s ten largest school districts expect employee benefits to grow 29 percent over the next five years, driven in large part by ObamaCare.
Finally, there is some good news—sort of. According to the Wall Street Journal, newly-insured patients have precipitated a boost in the incomes of some hospitals, as more patients are showing up for back surgeries, maternity care and emergency room visits. Increased enrollment in Medicaid programs also swelled hospital coffers in some states. Unfortunately, such increases were not uniform: this year, Moody’s Investors Service has downgraded their ratings of 34 hospitals, compared to only 12 that have been upgraded.
Furthermore, the uptick in hospital usage has produced costs insurers did not anticipate. Cigna CEO David M. Cordani contended that their current enrollment structure demonstrates that public exchanges are “not a sustainable model” because Cigna spent a greater percentage on premiums they collected in the second quarter on medical expenses than they did in 2013. The company explained to investors that initial usage of oncology, orthopedic and maternity services was greater than anticipated. Employers also reported rising costs engendered in large part by new taxes on insurance premiums and penalties for individuals who go without coverage.
Glenn Steele, CEO of Geisinger Health System, a nonprofit hospital-operator and health plan owner in Pennsylvania, encapsulated the feelings many Americans share about the new healthcare law. “I have a feeling we’re going to go through an incredible amount of tumult for the next probably five to 10 years,” he predicted.
That may be an understatement, as two large variables remain up in the air. First, the “risk corridors” that allow insurance companies to keep their premium increases relatively modest, because taxpayers will ultimately be on the hook for mitigating losses incurred by those companies, will expire at the end of 2016. Absent their renewal, which might be politically impossible, premium costs are likely to soar. Perhaps just as important, but largely undiscussed, is the provision in ObamaCare that allows enrollees to remain on a plan for up to 90 days before being cancelled due to lack of payment. Insurers are only on the hook for costs incurred in the first 30 days. Health care providers will be responsible for collecting payments for any costs incurred over the subsequent 60 days. It remains to be seen how many providers will either demand upfront payment from patients, or deny coverage altogether, especially in fields like chemotherapy, where the medication involved can cost tens of thousands of dollars.
In short, the chaos is likely to continue.