Affordable Care Act

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Dillian’s Loop

There is something just not right about our economic malaise. Obviously this economy is different from my father’s economy but just because it is different does not mean it is better. When I went to college in the 1970s my middle class parents cash-flowed my education. Today it is nearly impossible for middle class parents to cash-flow their kid’s college education. Is this progress? The same is true about health insurance. It was such a non-issue in the 1970s that I can only remember that I had it and did not have to pay for it. As a healthy person I get no value from my current health insurance but it has grown to be one of my largest expenses and most of the increase occurred in the last couple of years. Is this progress? We seem to stuck in a loop where we keep spending more money to get the same results our parents got for much less.  It is this value proposition that is frustrating and angering the middle class the most. Yesterday I was pleasantly surprised to read a Mauldin Economics newsletter describing “Dillian’s Loop“.  Jared described it simply by giving the following example.

  • If the regulations work, they are declared a success and they write more regulations.
  • If they don’t work, it means they need to have more regulations.

In a way it reminds me of Albert Einstein’s quote, “Insanity: doing the same thing over and over again and expecting different results“. The subtle difference is that “Dillian’s Loop” makes fun of people who continue to propose single factor answers to multi-factor problems despite getting the wrong answer or in some cases the right answer for the wrong reason. In the developed world we still cling to the belief that there are simple solutions to complex problems and we are only one smart administrator away from eventual success. This belief permeates a lot of our policy making. Many of the Affordable Care Act supporters believe that because they expanded Medicaid it is working as intended and the act only needs a little tweaking to bring affordable health care back into the Affordable Care Act. If reforming health care costs was that simple why didn’t the Affordable Care Act supporters start off with that? Do they really believe a few more regulations will fix the health care cost problem? Even if this overly simplistic belief system leads us into making bad decisions on complex problems like the Affordable Care Act, regulations, or quantitative easing, we cling to another belief that there is still time to kick the problems down the road for the next generation to fix. The problem is that our faith in these two beliefs is waning and the clock is ticking on when our problems will spin out of control. If we cannot fake till we make it, we will be screwed.

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Affordable Health Insurance And The Individual Mandate

2015-06-25 09_54_46-Exemptions Screener _ HealthCare1.govMy biggest financial problem for 2016 is keeping my grandfathered health insurance plan and paying for it with pre-tax money. In 2014 and prior years my health insurance was affordable since it was completely paid for with money from a Health Reimbursement Account(HRA) set up by my employer. Health insurance for healthy people was affordable and the HRA allowed my employer to pay for my health insurance with pre-tax money. Like most health care decisions before the Affordable Care Act it was a no-brainer. Then we passed the Affordable Care Act and everything became complicated and more expensive. In 2015 HRA’s become an inadvertent casualty of the Affordable Care Act. The next casualty I suspect will be my grandfathered health insurance plan. So I have three options:

  1. Convince someone in government to allow me to keep my grandfathered health insurance for another year.
  2. Not carry any health insurance.
  3. Get health insurance from the exchange.

No one should be surprised that health insurance from the exchange is not affordable and the only happy customers are those getting subsidies. According to the HealthCare.gov Exemptions Screener, I should be paying no more than 8% of my income on health insurance. For a couple earning $63,721(400% of the federal poverty level) this is only $425 a month. Last November I looked up the lowest cost bronze plan and it was going to cost me $979 a month or $11,748 a year.  For a couple earning $63,721, health insurance would have taken 18.4% of their income. According to HealthCare.gov a couple like me would have to earn $146,850 a year before a health insurance policy from the exchange became “affordable”. Only the subsidized, wealthy, chronically ill, or naive would choose health insurance from the exchange.

With health insurance from the exchange costing $11,748 or more per year in 2016, self-insurance becomes a financially attractive option.  As a healthy family who has gone without health insurance in the past(1998-2008) and who is exempt from the individual mandate because I cannot purchase “affordable health coverage” from the exchange, the biggest financial risk is a hospitalization that costs more than $12,000. If you have the discipline to have a large enough emergency fund to cover future health costs then this is an attractive, financially efficient second choice. $12,000 per year will buy a lot of health care especially if you are a savvy buyer. If I could get a catastrophic care policy priced at 4% of my income this would be my number one choice since it would be the best of both worlds, encouraging both healthy living and saving for medical expenses.

My first choice is to keep my existing health insurance and to convince the government to reinstate HRA’s for companies with less than 50 employees. My health insurance plan is almost as affordable as the subsidized insurance from the exchanges. As a person who has not filed an insurance claim in the last 15 years, I am by definition the perfect health insurance customer. It is probably in the best interest of the insurance industry to do whatever it takes to keep me as a loyal customer. Although my employer gave me a $500 a month bonus this year to pay for my health insurance I would be financially better off if that money went into a HRA. Taxing a health care bonus is just plain stupid. Once again it is in the best interest of the insurance industry to bring back the HRA before I get comfortable going without health insurance.

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HRAs Were A Smart, Affordable Way For Small Businesses To Pay For Health Care To Employees That The ACA Screwed Up

I was reading a post over at Hot Air, Administration delays another Obamacare rule, this time for small businesses, when I realized there is still a lot of confusion over what HRAs are and how they pay for health care. HRAs were adopted by small businesses because the individual health insurance market had better prices than the group market. Small businesses really liked the idea that the employee could get the best bang for their health care dollar with a portable plan available in the individual insurance market while the business could take a health care tax deduction just like the big companies. As an example my 2014 HRA was funded at $500 per month. The HRA funding was adequate enough to reimburse me for my health insurance premiums, my out of pocket health care expenses, and to roll $3,000 over to 2015. I think everyone would agree that the ACA never intended to change HRAs. Due to misguided rulings by the IRS in 2014 we find that many HRAs are not in compliance with the ACA and small businesses are royally pissed! Small businesses who were nice enough to offer HRAs were hoping they can redo their HRA before they get penalized. As a last resort they could choose the safe alternative that is both bad for the company and the employee. As an example since my HRA is no longer being offered as a benefit, my company opted to give me a $500 per month raise. When you remove the payroll taxes from the raise, it is not enough to pay my 2015 health insurance premium. Both the company and I are paying more. The only beneficiary of this scheme is the government who is collecting higher payroll taxes. So it is not surprising that the IRS has decided to show leniency to the small businesses they just screwed. It was the least they could do! Last year H.R.5860 – Small Business Healthcare Relief Act of 2014  was introduced with bipartisan support to try and overcome the hardships the ACA inadvertently created for small businesses. Maybe it will pass in 2015 and small businesses can go back to growing their businesses.

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Did The Affordable Care Act Improve Health Care Outcomes Or Are We Just Spending More For The Same Health Care Outcomes?

A recent Fox News piece on uncompensated care got me thinking about health care efficiency again. If we really had a $5.7 billion drop in hospitals’ uncompensated care costs because of the Affordable Care Act, where did the money go? Since my health insurance premium went from $407 in 2014 to $479 in 2015, I definitely am not seeing any of this love coming my way! Did we just a get a much larger version of the Oregon Medicaid experiment in which the drop in uncompensated care is replaced with an even larger increase in Medicaid spending and no discernable change in health care outcomes? The reported drop in uncompensated care is sounding like another shell game and the middle class is still stuck with Affordable Care Act supporters who really do not care about health care reforms that matter to the middle class. This is pretty simple. If you are reforming health care in a responsible and sustainable manner then we should be seeing the results in lower health insurance premiums and better health care outcomes. If we do see improvements in both areas then reforming health care has become a façade for increased cronyism and gross incompetence.

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The Affordable Care Act’s Missed Opportunity To Control Health Care Costs

For a person who has concluded that the Affordable Care Act was not only bad legislation but a missed opportunity to do something meaningful about controlling health care costs. Chris Conover highlighted this problem in the article, Steven Brill On Obamacare: Right Diagnosis, Wrong Prescription, on Forbes.com.

And perhaps most disturbing of all, when Stahl presses him “is there any way now to go back and add cost containment” Brill opines “it was impossible then; it’s more impossible now”  ultimately concluding that only when it becomes a fiscal crisis will we do anything to rein in spending.

I disagree with Mr. Brill.  The task has become more difficult but the VA model will not be a solution in my lifetime. That political bridge to a single payer system was burned with the scandal. Now we are negotiating health care cost efficiency reforms without Medicaid expansion to lure politicians to the table. You have to start somewhere and there is no other choice!

Next time someone starts whining about income inequality tell them controlling health care costs would have been a good first step at putting money back into the middle class’s pocket book.

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Is The Affordable Care Act Fundamentally Evil?

My insurance premium for January 2015 will be $479. This is up 18% from my 2014 insurance premium of $407 and up 54% from my 2011 premium of $311. Your mileage may vary but this is the good news! If I was foolish enough to purchase health insurance from the exchange in 2015 the lowest cost bronze plan will cost $923 and my potential out of pocket costs zoomed up from $5,000 to $12,000. For a person who has not made a claim against my health insurance since the mid 1990s, the idea of paying $479 a month is revolting. The idea of paying $923 a month is beyond comprehension. I was the perfect health insurance customer. I was happy even though I was arguably getting ripped off. My existing health insurance plan was being paid by my employer and even though this was not the perfect situation, my employer was happy and my family was happy. In those days my life was simple. I could spend my waking hours on the important things in life. Not surprisingly this situation was not that different from 1976 when  health insurance was simple, transparent, and well understood. Boy, have we screwed up a good thing! In those day health insurance was the ultimate no-brainer and everyone signed up. Now we ponder to what happened to the Do No Harm philosophy to health insurance? Today I feel that I have been drug into a fight I never supposed to be fighting. Courtesy of the Affordable Care Act my employer cannot use the Health Reimbursement Act to pay for my health insurance with pre-tax money. It is just another one of those unintended ACA consequences. My employer is trying to be compassionate in a difficult business environment and will give me a bonus in 2014 to try to overcome the dysfunctionality of the Affordable Care Act. Recently I was reminded by Professor Gruber that Affordable Care Act supporters have always been negotiating in bad faith with the healthy people who were supporting the health care system. Quite succinctly he reminded us that the Affordable Care Act was never about health care reform, it was about politics. Six years later and 21,000 pages later we are still trying to figure out how to bend the health care cost curve. If increased federalism cannot reduce health care costs in six years, we have to conclude it will never reduce health care costs. Now the healthy crowd is stuck with a “fool me one, shame on me” mentality. If repeating the same old thing over and over again and expecting a different result is a sign of insanity, what can we do to reform the Affordable Care Act except to let it suffer through a slow, miserable death? Are we doomed to re-live the TennCare debacle all over again. Our health care system was better six years ago and even better 30 years ago. We are going in the wrong direction. I can see a trend and the Affordable Care Act is fundamentally evil.

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Making Health Care Less Affordable and Harder to Get One Policy At A Time

Today my boss informed me that our Health Reimbursement Account(HRA) would end on December 14, 2014, so I better schedule my remaining health expenses to a date before the 14th. To help with the increased after-tax health costs they will be increasing my paycheck in 2015. Although it is not as nice as the Health Reimbursement Account they recommended that I set up a Health Savings Account. Awhile back I wrote a post, Affordable Care Act Loser #7 – Health Reimbursement Account, that explained that the Affordable Care Act and the Department of Labor had effectively outlawed the HRA. Their decision is a sad reminder that “common sense” and Affordable Care Act do not belong in the same sentence. Although my company is making a best effort attempt to overcome the Affordable Care Act dysfunctionality, the bottom line is that I will be paying a larger part of my health insurance costs than if I had a HRA. So while I will receive a pay increase, the net result after paying for health care with after-tax money is that I just took a pay cut. Anybody wonder why the nine most terrifying words in the English language are, “I’m from the government and I’m here to help.” I keep wondering how we reform health care when the HHS is at war with the healthy people. It looks like a strategy that was born to fail. It is as if the Health and Human Services mission statement should say, “Making Health Care Less Affordable and Harder to Get One Policy At A Time”.

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Affordable Health Care Is Getting Harder Every Day

Healthcare-Lunchbox128.jpgIt wasn’t supposed to be this way but affordable health care is getting harder every day thanks to the Affordable Care Act. The likelihood that I will start 2015 without health insurance is growing every day. Today I was talking to my boss about a HRA replacement and he said that Zane’s HRP idea will not work for us. Both my boss and I have grandfathered plans that are probably not eligible to be used in a HRP arrangement.

A couple of hours later Tom was commenting on my post, Affordable Care Act Loser #7 – Health Reimbursement Account, and provided a link to to a discouraging article called, Guidelines For Using Reimbursement Arrangements Under The Affordable Care Act. Although I cannot find a date for the article the author plainly makes the point that "because employer dollars (i.e., employer contributions/reimbursements) are being used to pay for health care (i.e., the individual market plan), a Section 105 Medical Reimbursement Plan is by definition a “group health plan” under the Code". Yea, that sucks! Even though I like my health care plan and the HRA reimbursement arrangement, I cannot keep either of them. I sure wish the Affordable Care Act supporters would stop trying to help me. With friends like that who needs enemies!