A few weeks ago I received notice of our annual health insurance increase. This year it was 38% more to keep the same coverage. Last year the proposed increase was 22%. The year before 12%. The year before that, 18%. The next day I got a reminder from my broker that with the increase, my premium would qualify as a “Cadillac Plan,” incurring another 40% non-deductible excise tax on the premium amount over what was considered “reasonable” under the Affordable Care Act. (Employers will calculate the tax and their insurers will pay it, effective in 2018).
Let’s put aside the irony for a moment, since I don’t consider these premiums to be in any way “reasonable.” Of course, we did the same thing we’ve done for four out of the last five years, and reduced benefits until we achieved an increase that was “only” in the low double digits.
How can an act named Affordable be so expensive, and how can I keep cutting my coverage each year but have it still be considered in the “Cadillac” range? Is the ACA working, or isn’t it?
That depends on what the ACA is supposed to accomplish. When I read the bill in 2010 (at least its provisions, not all 1,600 pages), I stated in a four part series here that I thought its main purpose was to drive everyone into a single-payor system. I still do. Here’s why.
The ACA’s supporters promote increased access to health care for those who were left out of the system. In reality, access to care hasn’t improved all that much. What has improved is access to insurance. If doctor’s won’t accept it, or patients won’t abide by the parameters of the system (by staying out of the ER for example) insurance doesn’t translate automatically into care.
Every study for the last 40 years has found that the best way to contain costs is to steer people into primary care dominated networks, where their health is tracked and managed by a physician. The ACA does nothing to change the delivery system. In fact, even the government sponsored exchanges have co-payments for routine doctor visits; co-pays which can be avoided by using the Emergency Room for minor care, even though the costs are ten-fold or more. An ER is not allowed to turn you away over a co-pay. Many poorer patients consider medical collection calls a fact of life. In the ER, they just don’t have to pay right now.
The theory promoted about the ACA was that a more broadly insured community would reduce per-capita costs by encompassing the healthy. Instead, to no one’s surprise except perhaps the ACA marketing folks, easier access to insurance has resulted in adverse selection; the enrollment of people who are sicker than the average. No rational being believed it would be anything else. We are assured that the positive impact will be felt when healthy people eventually are forced to join, but the penalties for not enrolling are so minor, there is no reason to think that will come anytime soon.
So the taxes and penalties have become an income transfer mechanism from private industry to government programs. With the cost per person for health care at around $6,000 annually, how long do you think that the government will leave the tax on uninsured employers at $2,000 per employee, or exempt the first 30 employees from the qualifying head count? The law allowing those taxes is in place (and Supreme Court approved), but the amounts are to be determined by regulators, not legislators. They can change those by decree, and I’m sure they will.
In order to gain passage of the bill, President Obama publicly announced deals with the hospital, legal, physician, pharmaceutical and insurance lobbies to exempt each from specific price controls. Not surprisingly, stocks in all those industries rose on the announcement of the bill’s passage. That’s not much of a sign that the markets feared the impact on the health care industry’s profits.
When I mentioned the Cadillac Tax a colleague said “Oh yeah, but that’s not until 2018.” Like the frog in the slowly boiling water, we are being gradually exposed to the actual costs of the ACA over time. The expansion of Medicare tax to capital gains, abolishing the taxable income limits, the recasting of how we calculate “full-time” employees, the uninsured tax, the tax on carriers (which they are expected to pass along to consumers) because of “unexpectedly” high costs of care. On the horizon are the Cadillac tax and the expiration of matching funds to states for expanding Medicaid under the bill. If it all came at once, we’d be up in arms.
The ACA has made health care less affordable except for people with medical conditions who were previously denied coverage. It is designed to make private insurance so costly that almost everyone will eventually capitulate and join a government plan. Then the government will have enough muscle to control costs by fiat. That objective is being met admirably, and without the revolution that nationalizing health care would have caused. In that sense, the ACA is brilliant. It’s a British National Health Service where everyone will sign up voluntarily; if only because not signing up costs so much more.
Don’t get me wrong. I’ve been to countries where access to every public building requires negotiating a phalanx of the crippled and deformed, many of which could be saved with basic care. I don’t want to go there as a nation. We need a rational approach to universal health care that controls unnecessary spending and delivers consistent quality.
Unfortunately, the ACA isn’t designed to address those needs at all. It’s primary objective is to put the government in control, and it is working. We just have to hope that better health care will eventually be the result.
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