Structural Changes
While structural changes are the most highly touted benefits of the Affordable Care Act (ACA) their fiscal impacts vary greatly depending upon a family’s particular circumstance. Including children through age 26 in family, coverage helps many of us with post-college children (myself included). However, the fiscal impact of this change is minimal as most of these “covered lives” are not particularly costly to save in a catastrophic occurrence.
No longer permitting insurers to separate costs based upon preexisting conditions simply means distributing those costs over all of us rather than allocating them to a particular pool. While this is good for those of us with chronic conditions not of our making, there are many choices that people make that influence disease such as smoking, obesity, and poorly controlled diabetes. The so-called “community rating” is a good social policy for the minority but it doesn’t dissuade bad behavior, thereby increasing costs for the majority.
The greatest benefit of the ACA is the theoretical portability of health insurance, if truly affordable. There are very few changes that will make healthcare more affordable; rather than making healthcare more affordable the act has made insurance more affordable. But not all insurance is the same.
Transitional Changes
Thirty years ago when the market was suffused with indemnity plans, we were used to deductibles and co-insurance. The fees charged were not regulated (except for Medicare and Medicaid) until managed care started negotiating with providers to reduce expenses. Managed care ratcheted down fees in favor of insurance profits but didn’t really “manage care”. When insurers did try to limit utilization they were accused of limiting access and quickly cored down those efforts in favor of increasing premiums to generate greater profits.
In the interest of gaining market share, managed care introduced greater first dollar coverage eliminating deductibles in favor of copays. This only encouraged utilization as the out-of-pocket cost of seeing one’s physician was quite limited. Little did people know that paying the $45 copay for a visit exposed the insurance company to less expense per encounter than paid by the patient themselves!
The ACA protects consumers by obligating insurers to spend 80 cents of each dollar on care and limiting administrative costs to no more than 20%, a good achievement. However, the act also mandated significant deductibles for patients. It’s not surprising that the commercial insurance marketplace has followed with similarly structured products. Now it uncommon to find insurance that does NOT have a significant deductible, thus increasing out of pocket costs for most consumers. The secondary benefit may be reduced utilization but this has yet to be seen.
High deductible insurance plans are now the norm. Coinsurance has reemerged as well. The maximal out-of-pocket expenses dictated by the ACA are particularly high and not truly “affordable” for the majority of individuals and families who have pursued this coverage. This has prompted many authors to question the term AFFORDABLE Care Act when what has been achieved MAY be affordable insurance that exposes many to high out-of-pocket costs.
– Richard Lipton MD, Chief Executive Officer, Advanced Specialty Care