Insurance industry leaders are looking at the success of the law from a financial perspective, weighing the positives of being able to provide coverage to millions more people in the US with the adverse impact of higher costs and fewer coverage options in each state. Trying to stay true to the original goals of the law while also improving their profitability is a goal for all the insurance companies and one they cannot reach without legislative assistance.
A Brief Introduction to Obamacare
The Affordable Care Act, along with the Health Care and Education Reconciliation Act amendment, represents the most substantial overhaul of the healthcare system here in the US since the 1965 passage of Medicare and Medicaid. Enacted with the primary goals of improving the quality of health insurance coverage, expanding both public and private insurance coverage, and reducing healthcare costs, the ACA introduced minimum coverage standards for insurance companies, requiring them to cover all applicants and to offer the same health insurance rates to applicants regardless of their pre-existing conditions. The inability for people with pre-existing conditions to obtain reasonably-priced health insurance was one of the major complaints before the law’s passing.
One of the most significant parts of the Affordable Care Act and one of the most controversial is the individual mandate that requires all individuals who are not otherwise covered by an employer-sponsored health insurance plan or by any government or public insurance program to obtain private insurance or pay a financial penalty. These penalties increase for every year that an individual goes without health insurance, and are collected by the IRS via its yearly taxation collection. The law also includes provisions for subsidies to assist people from low-income households in purchasing health insurance in compliance with the mandate. Health insurance marketplaces, known as exchanges, were set up state-to-state to allow people to shop for and buy individual health insurance plans.
What are Health Insurance Exchanges?
Health insurance exchanges are a significant aspect of the Affordable Care Act. These state-based exchanges are regulated online marketplaces where individuals, as well as small businesses, can compare prices on health insurances plans and purchase coverage. The exchanges take the form of websites where available plans can be compared. The sites also provide tools for individuals to evaluate their eligibility for federal subsidies and allows them to purchase their choice of insurance during the open enrollment period.
Looking Forward: Fewer Choices and Higher Prices
Costs have run high for insurers, especially when it comes to covering the public health exchange enrollees, leading them to call for higher rates for 2017. Also, the exodus of health insurers, including the news that the nation’s largest health care insurer UnitedHealth will exit all but a few of the ACA exchanges in 2017, Americans will soon be faced with fewer insurance choices and the guarantee of higher insurance premiums.
Insurance providers have struggled with the effects of Obamacare, with UnitedHealth and the other main insurance companies reporting plenty of red ink on the plans they have sold on the ACA exchanges, and most failing to turn a profit on both the state and federal exchanges. Part of this stems from the fact that ensuring the people who are signing up on the exchanges has been more expensive than the insurance companies had anticipated. According to a recent analysis of new enrollees by Blue Cross Blue Shield Association, they tend to have higher rates of chronic conditions and illnesses, ranging from diabetes and heart disease to HIV and Hepatitis. The analysis also pointed out that these newly insured Americans are using more medical services resulting in much higher medical costs compared to those insured by Blue Cross Blue Shield through private health insurance.
Closely connected to the rise in premium costs is the rising cost of medication. Drug prices are linked to the cost of premiums, making it more difficult for many Americans to pay out of pocket for the medications they need to treat their diabetes, heart conditions, erectile dysfunction and other ailments.
While recently reporting on the company’s first-quarter earnings, Aetna CEO Mark Bertolini commented on the health care industry and the kind of changes that need to be made to stabilize the exchanges and change Obamacare for the better. According to Bertolini, the key to improvement is broadening the population that is enrolling in the exchanges, including more young people, more individuals with generally good health and no chronic conditions. By bringing in more “healthy” people, insurance companies will improve their bottom line, and be better able to offer policies with lower rates and better coverage. Bertolini also stated that many of the changes, such as the ability to provide different sets of insurance products and capacity to expand into more markets, are “legislative changes” that need the right combination of president and Congress to be effective.
Conclusion
Though the potential for repeal and replacement is always there, the general assumption is that the Affordable Care Act is here to stay. Though not perfect, the ACA has availed many people who were previously uninsured the ability to obtain quality healthcare coverage. The volume of new enrollees, many of whom are in poor health, was not anticipated by many of the insurance companies, leaving them unprepared for the sheer volume of new policyholders, as well as the amount of medical cost that these new enrollees would incur.
Five years after its signing, as more aspects are implemented, insurers are finding themselves financial in the red and are making the difficult choice to pull out of many state exchanges to try and keep their heads above water. For many insurance companies, the hope is that Congress will step in and make the necessary changes to the ACA that will alleviate the strain placed on insurance companies by the sheer volume of new, less-than-healthy enrollees before they are forced to pull out of more state exchanges. Regardless of the politics, it became apparent to voices on both sides of the aisle that Obamacare has flaws that could become insurmountable if not dealt with proactively, and soon.
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