The individual mandate is an example of why I believe the Affordable Care Act was a bunch of dumb ideas that were poorly implemented. The individual insurance market as envisioned by the ACA depended on a carrot and stick approach. The carrot was affordable health insurance for the unsubsidized healthy people to lure them into the market willingly. This is how insurance companies make the money to pay for their unprofitable customers. The stick was the individual mandate. The individual mandate was designed to be scary, not effective. It would never have an influence on healthy customers like affordable health insurance. In 2010 individual insurance rates were already too expensive so healthy people made their adjustments. Some stuck with their grandfathered plans. Some went to alternative insurance products. Others dropped their insurance because they were exempt from the mandate because health insurance premiums would exceed 8.15% of their adjusted gross income. Insurance companies lost their best customers but were largely protected by the Risk Adjustment, Reinsurance, and Risk Corridor provisions. There is no free lunch. Like all dumb ideas that are poorly implemented, the American government got stuck with the bill.
The only portion of the ACA that must continue to exist for the subsidized individual health insurance market to continue to exist is the Risk Adjustment, Reinsurance, and Risk Corridor provisions. If we want to continue to subsidize health insurance premiums for those people earning less than four times the federal poverty level then it will be born the general population rather than the unsubsidized healthy customers. For the unsubsidized healthy customers, this is sweet revenge. The individual mandate has always been a moot point.
Back in 2016, I wrote a post, The Health Exchange Transformation Is Almost Complete, in which I made the argument that the individual health exchange had a better chance of reverting back to a high-risk pool exchange than a market-based exchange. It all depended on the affordability of health insurance for unsubsidized healthy customers. If you do not keep your best customers, the government will be left holding the bag. When it comes to the individual mandate, the people who wrote the ACA were not that smart. The most important thing that matters to a customer who might get penalized is not the penalty but affordable unsubsidized health insurance. Affordable health care has always been the primary objective of the Affordable Care Act and the American people. Our politicians seem to have forgotten that aspect of the ACA. If the individual mandate has always been a moot point then severability has always been a moot point, too.
I try not to listen to her but this tidbit caught my attention, “there are parts of Alabama where people are still getting ringworm because they don’t have access to public health”. When my son was in high school he was diagnosed before a wrestling match with a ringworm infection. It took us several days to get a doctor’s appointment so we treated it with Selsun Blue we picked up at the grocery store. By the time the doctor saw him, it was gone. Ringworm is a contagious skin infection but it is not a public health crisis.
If Ms. Ocasio-Cortez had spent just a few moments checking her facts, she would have noticed two things wrong with her statement. According to al.com, the two problems with her statement are:
The problem in Alabama is with hookworms, not ringworms.
Rural Alabama has a hookworm problem because it has a sewage problem. It has nothing to do with access to public health.
I found it especially ironic that the first public health crisis that the representative from Brooklyn can think of is hookworms in Alabama. The opioid crisis is undoubtedly a better example of a public health crisis she should have used her position to discuss. Unlike the hookworm problem in Alabama, public health policies play an important part in treating opioid addiction. Her opinion on this public health crisis is important and relevant to her constituents.
A Federal judge ruled that the Affordable Care Act is unconstitutional and I am not sorry. The Affordable Care Act has always been a bunch of dumb ideas that were poorly implemented. The only way the Affordable Care Act would be a “good first step” at reforming health care is if it provided affordable health care costs for everyone. The Affordable Care Act has always been a great deal for doctors, hospitals, drug companies, and health insurance companies. It was a great deal for those who will never pay enough into the system to cover their health care. For the rest of us who pay for our health care costs, it didn’t provide a path to affordable health care costs. For healthy people buying health insurance in the individual health insurance market, the Affordable Care Act has always been a failure. There has never been a greater condemnation of the Affordable Care Act than healthy people opting out of the health insurance.
The health care industry has always been a hotbed for cronyism. So while those of us who pay for our health care struggle to find a way to pay for the same old insurance at a much higher price, the Affordable Care Act supporters have been doing their touchdown dance with their industry friends. The trouble with the Affordable Care Act is that you eventually run out of other people’s money and the only path forward is to focus on health care costs. The party is over!
The biggest obstacle to Medicare For All is figuring out what price you are going to pay the doctors, hospitals, and drug companies. Currently, the price being paid by Medicare is higher than Medicaid but much lower than private insurance. So if the pricing formula remains unchanged under Medicare For All plan then the doctors, hospitals, and drug companies will take a pay cut. You should expect the healthcare industry will do everything in their power to avoid this situation.
As an example, Ohio voters defeated Issue 2, Drug Price Relief Act, last November. This ballot initiative would have required the state to pay a price for prescription drugs that was not higher than the lowest price that the United States Department of Veterans Affairs pays for them. Even though these costs are a relatively minor component of Ohio’s overall health care costs, the healthcare industry fought tooth and nail to defeat this bill. If we cannot pass a relatively small ballot initiative to control health care costs, what chance do we have with a drastic overhaul like #MedicareForAll?
It was not that long ago that there was general agreement amongst the health care policy wonks that the “mandate was considered necessary for the market to work“. In reality what they meant to say was that the market needed both the individual mandate and affordable, unsubsidized health insurance to work. The Affordable Care Act(ACA) supporters realized that they could not deliver expanded benefits and affordable, unsubsidized health insurance. Expanding benefits was more appealing to their political base so they chose to kill the one thing that was essential for the market to succeed, affordable health insurance. So while the individual insurance market rotted away our courts debated whether the individual mandate was a “penalty” instead of a “tax” while maintaining that it was a valid exercise of Congress’s power to “lay and collect taxes”. The idea that the individual mandate was not as important as everyone claimed must be a grating reminder to Supreme Court justices like Justice Roberts who went out of his way to rationalize its legality. I wonder if the Supreme Court Justices learned anything from this exercise in futility.
The Irony of Repealing The Individual Mandate As Part Of A Tax Cut Package
Now after the ACA has blown up the individual insurance market, our legislators find themselves in a strange predicament. They cannot pass a health reform bill but they can pass a middle-class tax cut if they repeal the individual mandate. You got to love the idea of the nonpartisan Congressional Budget Office providing the intellectual foundation for repealing the individual mandate. What’s next? Repeal the Medicaid expansion because it would save the federal government even more money? According to their analysis, the primary source of savings comes from reduced subsidies due to healthy people leaving individual health insurance market. Avik Roy has more details in his Forbes article, How The CBO Drove Obamacare’s Individual Mandate Repeal Into Tax Reform. Although this sounds like a win-win situation, there are health insurance problems when you repeal the individual mandate. Robert Laszewski goes as far to call it a nightmare for the middle class. Then he backs off from this statement when he agrees that the repeal is good for the poor and healthy people. For the poor struggling with out of pocket costs, this is probably a better alternative than insurance. The group Mr. Laszewski says has the greatest risk are those healthy people whose income is greater than 400% of the Federal Poverty Level, who get sick, and do not have the money to pay for their illness. This sounds scary but for most major medical expenses, the combination of unaffordable health insurance and high deductibles puts this group in a more precarious financial position than going without health insurance. Earlier this year I wrote how we reduced the risk of this lesser evil.
In 2015 my wife and I came to the conclusion that the healthcare industrial complex would not willingly change their ways so we started building up our HSA. At the end of 2016, I asked our insurance company if they would offer me a lower rate. They declined and we chose to drop our health insurance. The markets are working, the customer has spoken, and our health policies are dysfunctional. Although we are nervous about our choice, we think we can do a better job managing our health care than the healthcare industrial complex. It is amazing how fast the money builds up when you divert your old health insurance premium amount into a savings account. I am mildly optimistic we can get better health care advice for non-emergency room treatments if we tell our health care providers that we are a cash customer. Every month we get by without a cancer diagnosis makes us a little more confident we made the right decision. If the insurance companies want us back all they have to do is show us an affordable health insurance plan!
In retrospect, we are a lot more comfortable with our decision now than when we started. We stuck to the plan and our emergency funds are in better shape. We are confident enough about our health that I am not sure an “affordable” health insurance plan could lure us back in. The only healthcare benefit we wish we had was the ability to add more money to our Health Savings Account.
The greatest failure of the Affordable Care Act(ACA) was its unwillingness to control health care costs. In retrospect, the ACA looks more like cronyism than meaningful health care reform. For the last eight years the hospitals, doctors, drug companies, and insurance have worked with government officials to make health care more unaffordable. In this case, I find myself agreeing with my friends on the left and the Ohio Academy of Family Physicians who said:
On August 13, the Ohio Academy of Family Physicians voted to support Issue 2, the Drug Price Relief Act, because we know something must be done so that Ohioans can afford and have access to needed medications. This initiated statute is far from perfect, simplistic, and flawed in many respects, and may not be the best approach for addressing high drug costs. But, because of the inaction of state and federal lawmakers, it is all we have. By supporting this issue, we hope to send a message to legislators—the exorbitant cost of medications and the negative impact those costs have on patients must be addressed.
In a recent opinion piece for the New York Times, Governor Kasich argued that the way forward for health care reform is more government spending. He says:
One vital improvement would be to provide adequate tax credits, which would help keep health plans in the individual market and encourage — not undermine — robust competition. Companies should also be required to continue following reasonable guardrails like ensuring minimum coverage that is genuinely useful and covers pre-existing conditions. Once we see these repairs taking hold, Congress should then take up needed improvements to Medicaid as part of comprehensive entitlement reform.
Health Care Reform Starts With Controlling Health Care Costs
The problem I have Governor Kasich’s argument is that he ignores the elephant in the room, health care costs. I can understand how the federal subsidies have benefitted hospitals, doctors, pharmaceutical companies, and insurance companies but not the consumer. Each of these groups publicly stated they were going to make health care bigger, better, faster, and cheaper. I don’t see it happening. Kasich is arguing that the health insurance markets will get better if we throw more government money at them. This is the exact same argument ACA supporters have made for the last eight years. The failure of the ACA to control costs tells us we need a different strategy if we want a different outcome. After eight years of using a carrot to encourage health care reform, maybe it is time to use the stick.
Thinking Outside Of The Box Idea Number 1 – Repeal The Individual And Employer Mandate
One of the things I learned over the last couple of years is that the individual mandate is not necessary or important. Although the ACA supporters argued in the Supreme Court that it was necessary to avoid a death spiral in the health exchanges, the consumer is largely unaffected by premium increases. It is the federal government who bears the brunt of the cost increases since the consumer’s portion is limited to 8.13% of their income. Why will the consumer leave the exchange if their payment stays the same? The primary purpose of the individual mandate was to keep unsubsidized, healthy people in the exchanges. The lack of affordable health insurance forced healthy people to evaluate their health care options. They voted with their feet.
If our politicians really wanted to help the American people by putting more money in their pocket, the simplest solution is to repeal the individual mandate. In a letter to members of Congress, IRS Commissioner John Koskinen said about 6.5 million Americans paid an average penalty of $470 for not having health insurance in 2015. Ironically these Americans are the group who can least afford the penalty. As health insurance continues to get unaffordable for more people, we should expect that fewer people will be required to pay the penalty. If the government continues to get less and less money from this penalty, maybe we should admit that the individual and employer mandate are not working and never will. This would be a great time for both parties to join together and get rid of both mandates.
Still Searching For Affordable Health Care Options
Prior to the ACA the individual market was the only health insurance market that demanded affordable health insurance. Compared to the small, medium, and large business markets, the individual market was aggressively priced in most states in 2011. The price increases I experienced from 2011 to 2016 led me to believe that federalizing health insurance has encouraged cronyism and corruption. I can see where the insurance companies and politicians benefited but not customers like me. If the health care industrial complex wants me back they have to offer me affordable health insurance(<8.05% of AGI) with a lot less lying.
I believe that the ACA attitude toward health care reform was best expressed by Professor Gruber’s “lack of transparency is a huge political advantage” comment. This attitude explains why we succeeded in creating a dysfunctional, unsustainable health care system that surprisingly poisoned the waters for a single payer system, too. The next health care reform needs to be less political and more honest.
If society wants to subsidize high-risk pool, chronic care, and low-income customers than it is society’s responsibility. Trying to get the smallest insurance market with the most price sensitive insurance customers to pay a disproportionate share of the cost is just plain foolish. The government should make the rules in markets they are paying the majority of the cost. Let’s start calling the subsidized market what it really is, Medicaid Plus. Let the individual insurance market have the flexibility to go back to being the spearhead of health care cost control for healthy people. Let’s make health care great again for the customers.
There is nothing that says health care policies are not working than 13% annual increases in health insurance premiums for healthy people. My wife and I have not had a health insurance claim in over two decades and until this year we had a grandfathered health insurance plan. Since our health insurance plan and health status did not change, we have to conclude that unbridled wealth redistribution leads to cronyism and corruption. The insurance companies raised the rates because they could get away with it. What options did we have? Some people might call that an unintended consequence of the ACA, I call it cronyism. At some point the customer has to say, enough is enough. Not only did our most recent grandfathered health insurance premium exceed 8.05% of our adjusted gross income but so did every ACA plan. I am 63 years old. For the first time in my life, I can not find affordable health insurance. Sadly this is the ACA’s most important accomplishment.
Unbridled Wealth Redistribution Versus The Healthy Customer
This embrace of unbridled wealth redistribution has corrupted the only market that had any resemblance of a well-functioning market. The only way the ACA health exchanges would succeed at attracting healthy customers is if they offered affordable health insurance. Putting healthy customers in the same market as high-risk pool and subsidized customers was probably too much to ask. Where the subsidized customer is not price sensitive, the healthy customer is. The ACA health exchange is meaningless to the healthy customer if every health insurance plan costs more than 8.05% of a person’s adjusted gross income. It did not have to be this way. The ACA chose to leave cost control to the next administration.
Making Markets Work For The Healthy Customer
In 2015 my wife and I came to the conclusion that the health care industrial complex would not willingly change their ways so we started building up our HSA. At the end of 2016 I asked our insurance company if they would offer me a lower rate. They declined and we chose to drop our health insurance. The markets are working, the customer has spoken, and our health policies are dysfunctional. Although we are nervous about our choice, we think we can do a better job managing our health care than the health care industrial complex. It is amazing how fast the money builds up when you divert your old health insurance premium amount into a savings account. I am mildly optimistic we can get better health care advice for non-emergency room treatments if we tell our health care providers that we are a cash customer. Every month we get by without a cancer diagnosis makes us a little more confident we made the right decision. If the insurance companies want us back all they have to do is show us an affordable health insurance plan!
Last December we decided to drop our health insurance. Our reasoning was pretty simple. Which would make us feel more financially secure, health insurance or an extra $7,500 per year in a savings account?
We did think it through. My wife and I have not filed an insurance claim in over twenty years. We are the perfect health insurance customers so why not take advantage of our good health?
1. Since 2011 our health insurance has increased 13% annually. Medical cost inflation was around 5% annually over the same time period. It sure looks like the health insurance companies were raising rates because they thought they could get away with it.
2. The lowest cost bronze plan for my wife and I exceeds 8.13% of our income. It also was considerably more expensive than our grandfathered health insurance plan which also failed the affordability test. Even though the lack of affordable health insurance makes us exempt from the individual mandate, we are reminded that the ACA failed at its most important mission, affordable health care. When will the ACA or the AHCA start working on this problem?
3. For most of my life, I thought that health insurance was a no-brainer. The ACA completely reversed my position. I no longer believe that giving more money to the healthcare industry is beneficial or compassionate. Although some people maintain that health insurance is the same thing as healthcare, this insularity to healthcare costs bothers me. The politics of the situation has made it easier for the healthcare industry to ignore better-valued healthcare options. As an example when I asked my insurance company for a lower price, they said, “we do not do that”. They could not seem to grasp that healthy people do not want health insurance the same way unhealthy people do. Healthy people tolerate the cost of health insurance up to a point and then they start looking at alternatives in the same way they might change auto insurance. Healthy people are different and the health insurance exchanges are not sustainable without them.
4. How do we send a message to the healthcare industry? Our choice has been to hit them in the pocketbook. We are not trying to be heroes. Their loss is our gain. Every month my wife and I get by without a major medical expense, we win and they lose. It takes only a few months of savings to cover the AHCA pre-existing illness penalty. After a year or so we are in pretty good shape to cover most major medical expenses outside of cancer. At some point, the insurance companies will realize that chasing away their best customers is bad for business.