By Barry Rascovar / August 8, 2013
IT’S A BRAVE, new world for healthcare insurance.
Republicans derisively call it Obamacare. They are bound and determined to kill, cripple or sabotage the program, however unlikely that may be.
They loudly cry that the president’s Affordable Care Act (ACA) will send insurance rates soaring and turn into a monumental debacle.
There’s no question the law is too complex, excessively detailed and bureaucratic. Liberal Democrats who passed it didn’t know enough about the dynamics of health insurance or what drives medical costs.
It’s also true this program is enormously expensive with hypothetical savings that may prove unerringly accurate or insanely off-base.
All this reminds some in the field of the “sky is falling” angst in 1965 when Medicare and Medicaid were created by Congress and Lyndon Johnson. Critics such as Ronald Reagan, Barry Goldwater, Bob Dole and the American Medical Association charged this amounted to “socialized medicine” and a dangerous government expansion that would curb individual freedoms.
No one knew for sure if the approach would actually guarantee health care coverage for retirees and the poor. No one knew if the programs were affordable.
Nearly 50 years later, we’re still struggling with the latter issue but few question the effectiveness of these insurance programs in guaranteeing medical care for two groups of vulnerable citizens.
Based on what we know to date, Obamacare may follow a similar path.
The difference this time is the active sabotage efforts by the opposition party (Republicans). Such obstructionism to achieve political gains at the polls didn’t occur in 1965.
Still, early signs indicate Obamacare may not be an immediate disaster.
Health insurance rates in Maryland, New York. Colorado and California under the new program turn out to be affordable. (Comparisons with current health-care policies are pointless because mandated coverage is much broader under Obamacare.)
If, indeed, insurers can make money by accepting lower margins on a much bigger pool of customers – a common American business occurrence – everyone might wind up a winner.
$93 Per Month
In Maryland, the state insurance commissioner recently approved rates for individual health coverage under the Affordable Care Act that starts in January. The most basic, bare-bones policy can be purchased through the Maryland Health Connection for as little as $93 a month for a 21-year-old non-smoker in the Baltimore metro area.
The ACA policies also give consumers more benefits, such as free preventive care and a minimum of co-pays.
Additionally, individuals with incomes under $46,000 a year and families earning under $94,000 a year are eligible for federal tax credits that make this insurance even more affordable. State officials estimate three-quarters of uninsured Marylanders will qualify.
All this sounds wonderful, but we’ve got a long way to go before Obamacare can be judged fairly.
First, let’s see if there’s enough competition to keep future rates low and affordable. Aetna, using conservative forecasting metrics, has pulled out of Maryland and a few other states for fear of losing money. Was this a wise short-term financial decision or a stupendous long-term miscalculation?
It means there’s one less competitor for those hundreds of thousands of Marylanders who will be eligible to shop for Obamacare health coverage in October.
One big question mark is how many of Maryland’s 740,000 uninsured citizens will seek affordable health-care protection. A big group of new sign-ups is needed to make the program work, especially among the “young invincibles” — healthy 20-somethings and 30-somethings.
We also won’t know for at least a year if the rates approved for 2014 accurately reflect the cost of insuring all those additional consumers.
A Shot In The Dark
Insurance companies are making their best actuarial assumptions as to what it will take to pay the medical expenses of so many newly insured individuals, especially those with preexisting conditions or haven’t seen a doctor in ages and may require costly initial work-ups and treatment.
Will it be more expensive than they expect or are their estimates overly cautious? It’s educated guesswork at this point.
Will the second-year and third-year rates in 2015 and 2016 shoot skyward like a rocket or come down to earth? That is a far more crucial period for establishing the viability of this program and a true baseline for insurance costs.
In Maryland, the big winners of the president’s health insurance program could be this state’s hospitals, especially those with a large proportion of uninsured patients, such as Johns Hopkins, the University of Maryland Medical Center and Sinai Hospital.
Even with Maryland’s unique all-payer rate-setting system that compensates hospitals for charity care, if the number of uninsured in the state shrinks dramatically it should mean more stable financial results for medical centers.
Given the struggles at Maryland hospitals to control rising costs with the meager rate increases approved this summer by super-cautious regulators, more insured patients would be welcome indeed.
Competition Is Key
Obamacare’s success could depend on competition – a word Republicans should be championing – among insurance companies for all the tens of millions of new potential customers. It is a once in a lifetime opportunity for insurers who can dramatically expand their subscriber base while maintaining a decent profit margin.
In states where Republicans haven’t erected intentionally daunting roadblocks, the new health insurance program is off to an encouraging start. Competition for these new members could yet drive down premiums.
It’s still early, though. It helps to remember that we’re only in the formative stages of this Grand Experiment. ###
(A shorter, less global version of this column ran in the Community Times on August 7.)
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