This article was originally written by Matthew Clark and published in the GSA Business Journal.
A recent poll by The Henry J. Kaiser Family Foundation found that 49% of Americans want the Affordable Care Act to be repealed and 28% of that number want details of a replacement plan before that repeal.
As the Trump administration gets underway, members of Congress have begun plans to repeal the act best known as Obamacare. The ACA was signed into law in 2010 with the intent of expanding health insurance coverage and making insurance more affordable.
But, there’s an argument that the law works for some, but not for all.
Guy Furay, president of The Insurance Source, an independent insurance agency in Greer, said the ACA works for people with pre-existing conditions that otherwise would not be able to obtain health insurance or would have premiums so high, insurance would not be economically feasible.
Even for healthy individuals, premiums have gone up. The Kaiser Family Foundation found that, in Columbia, premiums for the most popular coverage choice from the ACA marketplace were expected to go up an average of 29% before the application of any tax credit.
“It’s math,” Furay said. “If you have someone being asked to pay $350 a month, that is $4,000 a year and that is the cost if there is no subsidy. But, they get a $6,000 deductible and that is not feasible, so that person is fined $600 a year. It’s an easy decision for someone who doesn’t use insurance.”
Those with pre-existing conditions are more willing to pay the higher premiums because, prior to the Affordable Care Act, there was the likelihood they would be unable to secure any health insurance coverage at all. Furay said that enrollment ratio has caused fluctuation in the cost of insurance across the country.
“The insurance companies are getting clientele that are older and sicker because the healthy don’t have an incentive to enroll,” Furay said. “When the health insurance companies — which are businesses — lose money, they have to make that up and they do that by increasing the rates. When they do that, it impacts those that are unsubsidized and the ones that pay the higher rates are the sicker.”
According to The News & Observer in Raleigh, N.C., Blue Cross Blue Shield of North Carolina lost over $400 million on its ACA business in 2014 and 2015. Independent health insurance guide website healthinsurance.org reported Blue Cross Blue Shield of Tennessee expects “to incur half a billion dollars in individual market losses” during the same time period.
Blue Cross Blue Shield of South Carolina spokeswoman Patti Embry-Tautenhan said company would not release information regarding profits or losses.
Another issue is the number of insurance companies providing health insurance options via the ACA exchange. The Kaiser Family Foundation reported only 57% of exchange enrollees have a choice of three or more insurers in 2017, down from 85% in 2016. In South Carolina, Blue Cross Blue Shield of South Carolina is the lone provider. In 2013, there were between 10-12 providers in the state, according to Furay.
“Most of those companies left after the ACA because they couldn’t compete,” Furay said. “That is why the need for health care reform is severe and if they choose not to work together, it will get worse.”
Embry-Tautenhan said Blue Cross Blue Shield of South Carolina has had similar experiences with customers using more health care services more frequently, making the market what she called “challenging and expensive.” It led to unsustainable current and future losses for insurance companies.
“We made tough decisions so that we could continue in the market at this time and like everyone else, we are keenly interested in what lies ahead,” Embry-Tautenhan said.
What to do
The biggest question surrounding the ACA isn’t necessarily when or how it will be repealed, but what happens after repeal.
It depends on whether a replacement is proposed and passed before complete repeal or if the repeal is phased in.
The Kaiser Family Foundation estimates 52 million Americans under 65 have pre-existing conditions that would make them uninsurable before the ACA. Then there are questions about how Medicaid will be impacted if the ACA is repealed. And, what happens to those who have insurance through the exchange? In South Carolina, there are over 204,000 enrolled through the marketplace and 91%, or 186,000, are receiving advance premium tax credits.
Embry-Tautenhan said it was difficult to prognosticate what may or may not happen with regard to a possible plan to repeal the ACA.
“We don’t think it’s constructive to speculate and there is too much that is unknown at this time,” Embry-Tautenhan said. “The situation, at this point, is so fluid.”
Furay said the solution may lie in compromise in Washington, D.C. He said both sides of the aisle have to have ideas considered because “when you are talking about one-fifth of the economy with the medical industry, you can’t just have one idea that works.”
“To replace it is the more difficult side of the equation,” Furay said. “Trump has to have eight Democrat senators sign off on a plan because you need 60 and he has 52 Republicans and Democratic senators are not going to go for anything they don’t think is workable.”
He pointed to the plan outlined on Trump’s campaign website that includes a complete repeal of the ACA, expanding the ability to sell health insurance across state lines, allowing individuals to fully deduct premiums from their taxes, issue block grants for Medicaid to states and lift restrictions prohibiting drug manufacturers from entering the free market.
Furay said the most important aspect of the Trump plan was the requirement of price transparency from all health care providers. Under the proposal, hospitals and doctors would have to provide prices for procedures and exams.
“Customers that do want to shop around that realize they all do MRIs and there are all different price points,” Furay said. “Even if customers had incentive to price shop, they would not get the information.
“When you buy a car, you are nervous and feel like you get gypped, but there is a price tag … you know what you are buying, but there is nothing in the medical industry.”
The business impact
In a 2015 survey, the National Federation of Independent Businesses found 60% of small businesses don’t offer health insurance coverage and 52% of those cited costs as the reason why. But, Furay said even larger businesses struggle with the finances of following regulations.
“Many businesses, particularly in larger business segments, are spending a lot of time and money simply to follow the rules,” Furay said. “It’s also forcing employers to move people to less than 30 hours a week.”
That creates a double-edged sword where employees who see their pay cut may qualify for better tax credits, thus lowering their insurance premium. Then, any positive fluctuations in income will lead to higher premiums.
“Because your health is actually irrelevant to the cost of your health insurance, it is how much you make that is key,” Furay said. “And, it is not based on the prior year. They ask the person to project what they will make in the upcoming year.
“That’s a problem for many small business owners and sales people.”
Even with all the questions, Furay said he believed there was still a solution that will keep health insurance costs down and provide coverage.
“If both sides work together, there is a way to come out with a great system, but they have to have both Democrat and Republican ideas,” Furay said.