October 30, 2016
The Washington Post had a fact check on Obamacare to explain some of the issues around the widely reported rate hikes for policies in the exchange. It gets a few points wrong in a generally solid piece.
First, it explains the problem of the exchanges as being one in which people are more willing to pay the penalty for not having insurance than signing up on the exchange:
“The feared individual mandate has not had the expected result of convincing people to buy insurance, with younger and healthier Americans apparently more willing to pay a $695-per-person fine than sign up for health care they think is too costly. So the mix of people in the insurance pools have tended to be people who have chronic illnesses and thus require more care and frequent doctor or hospital visits. The risk pools are also why insurance companies have sought higher premiums and the biggest deductibles.”
While it is true that the mix of people in the exchanges are less healthy than expected, the problem is not that people are opting to pay the penalty rather than get insurance. This has been a frequent mistake in reporting.
In fact, the percentage of the population that is insured is running above the projections at the time the law was passed. This is in spite of the fact that a 2012 Supreme Court ruling allowing states to opt out of the Medicaid expansion provided for in the law. The reason that the exchange population is less healthy than expected is that more people continue to get insurance through their employer than expected. And, since the people who get employer provided insurance are healthier on average than the population as a whole (most are working full-time jobs), this means that relatively healthy people are being kept off of the exchanges.
The piece also somewhat misrepresents the issue in people to buy insurance on the exchanges:
“Research by Avalere, a health-care consulting firm, shows that participation in the exchanges declines dramatically as incomes increase. More than three-quarters of eligible individuals with income at 100 to 150 percent of the federal poverty level (FPL) are enrolled in exchange plans, but just 41 percent of those with income between 151-200 percent FPL. Only 2 percent of those making over 400 percent of FPL participate.”
As the piece explains, these higher income people are likely not eligible for subsidies in the exchanges. However, this does not mean that they will not buy insurance, it just mean they are not getting their insurance through the exchanges. To get a subsidy it is necessary to be in the exchange, but if a person’s income is too high to qualify for a subsidy they have no particular reason to buy insurance in the exchanges.
This is worth noting in the context of the widely reported premium increases. These figures only applied to policies in the exchanges and in fact, just to the nine million people receiving insurance in the exchanged run by the federal government. Individuals buying insurance outside of the exchanges did not see comparable increases, nor did people buying insurance through the state run exchanges.
This raises a final point. The piece concludes by telling readers who the biggest losers from Obamacare are:
“But about half of the people in the individual market are not getting such tax credits — and their premiums are increasing because of mandates in the law, a sicker-than-expected pool of applicants and decreasing competition because insurance companies have found it too difficult to make money. These people are the losers, at least so far.”
This is not quite right. One of the main features of Obamacare is that people can now buy insurance at the same price as everyone else in their age group regardless of their health. This means that many cancer survivors or people with heart disease, who might otherwise have been forced to pay tens of thousands of dollars a year for insurance, if they can get it all, are now able to buy insurance as the same price as anyone else their age. This is a huge benefit even if their income is too high to qualify for a subsidy.
With this in mind, the biggest losers from Obamacare would be relatively healthy people in the oldest age bracket (ages 55 to 64) whose income is too high to qualify for subsidies. These people will be paying higher premiums because the pool is now less healthy than it would have been pre-Obamacare.
Of course, even these people now benefit from the fact that they have true insurance. If their health were to deteriorate so that they were among the high cost segment of the population, they would still be able to buy insurance at the same price as everyone else.
Comments