Posted on Feb 23, 2017 by: Scott West
As the insurance industry struggles with the unmanageable costs of ACA-generated individual plans, Congress and the new administration struggle to find a way forward with Obamacare: Repeal, repair, or replace?
Massachusetts Governor Charlie Baker, presiding over a Democratic majority in the state house, is proposing a $2,000-per-employee penalty on employers who opt for a high-deductible health insurance program. Choosing a high-deductible program allows owners and managers to reduce business costs, but also motivates employees to pursue state-sponsored Medicaid instead of their employer's plan. Since Medicaid now composes over forty percent —and growing—of Massachusetts's budget, and its ACA exchange MassHealth is struggling to stay solvent, Baker and the Democrats feel an increasing urgency to solve the problem before it becomes impossible to manage.
Massachusetts employers say the problem comes from inflated health care costs, utilization of expensive hospital out-patient services for routine care, and coverage requirements for specialty services and products. In short, mandates and lack of choice drive the increasing costs. People make rational decisions: using free or low-cost services, avoiding high deductibles, and opting for lower premiums. Government-mandated plans and a lack of free-market creativity are having a negative impact on health care insurance and those paying for it.
Every national provider of Obamacare plans takes greater losses with each passing year. Regulators vetoed two mega-mergers, designed to turn the "Big Five" into the "Big Three," out of concern that the merger would create yet another "too big to fail" entity. Since they couldn’t gain the efficiencies of scale that would accompany such a merger, all five of the providers—Humana, Cigna, United Health, Anthem and Aetna—have announced plans to either scale back or completely withdraw from the ACA exchanges. Those that continue to offer coverage will implement double-digit rate increases due to “unbalanced membership” in the customer pools—too many sick people. Aetna’s CEO recently invoked the term “death spiral:" rates keep going up, healthy people keep dropping out, and the pool imbalance increases.
Many of us in health insurance industry predicted such an outcome back when this scheme was first implemented. Obamacare wasn't a new concept; it had been tried before in various states, with the same results, albeit on a much smaller scale. Unfortunately, we don’t learn from history—or the bureaucrats who designed Obamacare thought they were smarter than their predecessors. Certainly they didn’t plan on this disaster to push a single-payer plan instead, right?
Many progressives believe that the government can run our healthcare system better than the private sector, often pointing toward European models of health care as proof. However, living as we do in a relatively free market, most American voters do not yet support a single-payer system. So, in 2010, the Obama administration and Democrats in Congress used their majority power to push through a hybrid plan. It would be administered by private sector companies, and any American not participating (with a few exceptions) would face a tax penalty. Many people opted to take the penalty, and as rates increased, more people dropped out of the plans. That brings us up to date.
I wish we had more options. Before the folks in Congress roll out something new, ask your elected representative why we don’t have better choices for healthcare coverage.