No Easy Answers on Obamacare

by Tim Wyman
The Wyman Group

Even aside from its embarrassing rollout, PPACA leaves tremendous complications, concerns and uncertainties in its wake.

It’s 2014, and the healthcare industry—all $1.6 trillion of it—has not collapsed under the weight of the Patient Protection and Affordable Care Act (PPACA).

Yet.

Since the law was passed in 2010, prognosticators, both those in support and against PPACA, have been predicting massive changes in the industry by the time of its full implementation, beginning in January of 2014. Undoubtedly, we have seen dramatic changes, and most would agree that some changes mandated by the legislation have indeed been for the good. On the flip side, however, there have been some catastrophes of epic proportion—bad ideas that continue to be promulgated by the administration no matter what common sense dictates.

So, what’s the good?

We have already seen a few things that turned out pretty well, beginning with the mandate allowing children to stay on their parents’ policies through their 25th year of age. Insurance companies and oversight groups alike have reported a net-zero cost to this provision of the law.

We have seen a slowdown in Medicare cost trends—but there are arguments on both sides of the aisle that these savings are actually cost-shifting maneuvers.

We are also covering children under the age of 19 without consideration of pre-existing conditions, covering a litany of preventive care issues, and have eliminated lifetime maximums. Certainly, these all have costs attached, but they are fairly minimal. I would argue that had the insurance companies taken the initiative, we might not be saddled with the entirety of PPACA now.

So, what’s the bad?

Ugh, where to begin? It has been one domino after another with regard to Obamacare.

First and foremost, since it’s now 2014, the federal government has mandated that every American carry health insurance; otherwise, it is free to assess a tax (according to Chief Justice John Roberts, and I think we should use his terminology since he wrote such a thoughtful ruling).

The “tax” for not having “minimum essential” health insurance in 2014 is the greater of one percent of your household income or $95 per person claimed on your 1040 without coverage. In 2015, it jumps to two percent or $325, and finally lands in 2016 at the greater of 2.5 percent of household income or $695 per person. The following years will have an annual inflation factor applied.

A lot of people are still not aware of this responsibility, nor the penalty. Moreover, they need to understand that by paying the penalty, they are not covered by any type of health insurance policy.

A Virtual Train Wreck
In an effort to enroll as many uninsured and underinsured Americans as possible, the government opened the health insurance exchange, healthcare.gov, in rather ignominious fashion. Here, you were supposed to enter some demographic and income data, and receive quotes from various carriers, along with whatever subsidies for which you might be eligible.

But unless you’ve had your head buried in the sand for the last three months, you know this website has been a virtual train wreck unlike any other.

At first, the government asked for patience while the kinks were fixed. Then the president, who was as “mad and frustrated as anyone,” ordered the site closed and repaired by December 1st.

I am sad to report that its reopening was anything but glorious. Though the administration claimed the $630-million website could now handle 50,000 unique visitors at a time, HHS Secretary Kathleen Sebelius still had to ask Americans to visit the site at “off-peak” times so it would not be swamped and shut down. Perhaps the government should hire the amazon.com people, who accommodate 110 million users per month.

Some words of caution. The website has in its agreement a notice that all information a person provides has no assurance of privacy. Moreover, once the enrollee picks a company and sends his information to the insurance company to be enrolled, the carriers are reporting the majority of data coming from the website is corrupt.

Do yourself a favor, and here’s a shameless plug for my industry: find an insurance agent/broker that you trust and ask them to help you navigate the site. The government, in one of the few things they have correctly decided, is allowing brokers to train and serve as agents for the online exchanges. Better yet, the cost and coverages are the same whether you use an agent or not. When you need assistance, have a question or need help getting a claim paid, it’s always best to have an advocate on your side.

Complications… and More Complications
So, aside from the fact that Americans must now have insurance and cannot get it very easily on the exchange, there is a third issue that complicates matters even more. Insurance companies are renewing individual policies with the new ACA-compliant policies at astronomical rates. People who were perfectly happy with their individual policies are receiving increases that double their premiums (or worse), and dramatically increase their copays and out-of-pockets.

This reality is a trifecta—a perfect storm (actually many more little things, but three primary issues). Remember, the government said that to avoid those nasty penalties, all Americans must have “minimum essential coverage.” That means the government has defined 10 different areas of coverage that must be included in every policy, whether you want it or not.

For example, each policy must cover maternity—even for 55-year-old single males. Granted, the vast majority of these 10 essential coverages have been included in the past, but there are a lot of little items that begin to add up to some serious money. For example, STD testing, birth control and various vaccinations must now be covered—even if the policyholder does not want them.

Insurance carriers must now cover those individuals who have pre-existing conditions or could not get health insurance before. In order to pay for these very sick individuals, the carriers are supposed to enroll more of the younger and healthier ones (the demographic who can least afford it); however, another rule states that the difference in premiums cannot be more than a 3-to-1 ratio.

So in response to this problem, the president decided to keep his “if you like your policy, you can keep it” promise (instead of putting the asterisk on it), and insurance companies were allowed to keep individuals insured under the old, non-compliant policies. The problem is these policies need state approval and a workup of how much premium the insurance companies need to charge for them.

I have not even mentioned some issues that flew under the radar—the primary one being that the online SHOP exchanges intended for small businesses will not be operational until 2015. Combine that with the abatement of penalties from the IRS that large employers (those with more than 50 full-time employees) will not incur until 2015, and critics are left pointing out that PPACA is at best not worth the time or money, and at worst, harmful to individual Americans and their employers.

My Take
People often ask for my take on Obamacare, and like most complex problems, I cannot offer an easy answer. Obviously, there is some good to keep from this law, and we should protect that. But I believe we need to drastically rethink core components of the law.

The exchange is a good idea, if it is done properly and continues to include the broker as an advocate for the insured. But remember, this law basically does a lot of cost-shifting and does not do much to control the spiraling costs of healthcare delivery.

Two other major social programs—Medicare and Social Security—have had more than a few significant changes and amendments from Congress. It is high time both parties realize they have a vested interest in keeping what is right about this law, fixing what is wrong, and adding what needs to be added.

Our future prosperity and health depend upon it. iBi

Add new comment

This question is used to prevent automated spam submissions.