Reasons Why the Affordable Care Act is Wrongly Blamed for Increased Premiums

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What has affected everyone, and what is often erroneously attributed to the ACA, is the marked increase in insurance premiums.
What has affected everyone, and what is often erroneously attributed to the ACA, is the marked increase in insurance premiums.

Currently, under the Affordable Care Act (ACA) little has probably changed, other than new protections and benefits, for individuals who have health insurance through an employer. If the employer's plan is deemed unaffordable (ie, 9.69% of the household income or more),1 families and individuals now have the ability to purchase insurance at a lower cost through the ACA marketplace. 

Although there are anecdotal accounts of some employers switching up plans on their employees, such occurrences are rare and most individuals have not been affected.

But what has affected everyone, and what is often erroneously attributed to the ACA, is the marked increase in insurance premiums. This is the case for insurance through an employer and through the ACA marketplace, even with government subsidies taken into account. The increases over the last several years have become a larger and more significant percentage of Americans' household incomes.

In fact, the increase in premiums, coupled with the ongoing stagnation of wages, has led to middle class families spending roughly 10.1% of their household income on health care. Naturally, they blame the ACA. What they don't realize is that they probably would have been paying even more without the ACA in place.2,3

Republicans have capitalized on this misunderstood concept and the resulting negative sentiment to mislead voters, turning them against the ACA and exacerbating the fallacy that the ACA is responsible for their health premiums going up.

Actually, only 3% of Americans have experienced astronomical increases in their insurance premiums, as a result of decreased market competition within the ACA.4 Decreased market competition is often cited by the GOP as a consequence of the ACA and more prevalent now. The truth is that it's Republicans' refusal to allow a public option in the insurance marketplace that has contributed to the decreased market competition and allowed insurance companies to spike up their rates in these select markets. 

I would argue that the solution for the unfortunate 3% of Americans struggling to find health insurance is not to scrap the ACA. Instead, they should pressure their House and Senate representatives for a public option that would allow either more market competition in their state or, at the very least, an affordable alternative to private insurers.  

Nonetheless, the point remains that healthcare premiums have been consistently growing every year — even before the ACA and long before Obama ran for president.5 The ACA was, in part, designed to address that specific issue — namely, the exponential rise in healthcare costs as a proportion of our GDP. 

Unfortunately, while the rate of insurance-premium increase under the ACA has slowed, it has not stopped. 

The increase just happened to reach an unacceptable threshold percentage of American household income just as the ACA was implemented.

Rather than focus on policies aimed at controlling the rising costs of health care, Congress appears to be fixated on a politically driven repeal of the ACA, with no interest in a viable and reasonable replacement. Thus far, proposals have been poorly thought out and obviously rushed. 

To make matters worse, there is an unwillingness to work across the aisle. While that also may be said of Democrats, they are not the ones proposing to reverse the law to pre-ACA policies, but rather are willing to work toward improvements that are more in line with our nation's future needs.

To better understand how the uninsured financially affect all of us, consider the large safety-net hospital where I completed my post-graduate training.

Before ACA, local hospitals channeled their uninsured patients to our center. More than 66% of the patients were uninsured, and they all were very sick because they invariably waited until need was dire before seeking care. Uninsured patients got admitted, got treated for acute exacerbation of a chronic illness, and then were discharged with prescriptions — which they often did not fill because they could not afford them. 

The hospital had programs to help them, but that just wasn't enough. The result? Many came back. Over 3 years, the tax-supported hospital had racked up $400 million in debt. That debt belonged to the state taxpayers. Who footed the bill? Taxpayers.

Instead of paying the relatively low cost of the medications required to prevent acute illness and keep patients out of the hospital, taxpayers were paying for the most expensive aspect of care — acute hospital admissions.

For example, consider heart failure, which costs Americans over $40 billion a year. The medications that can treat heart failure and help keep patients out of the hospital cost about $20-$40 per month. Compare that to the cost of a single hospital admission for heart failure: about $13,000 on average.6 And patients with heart failure who do not have access to medications get admitted more than once per year.

At one point, during my training, there were rumored threats that the hospital would close. Luckily for the community, under new leadership and with the help of the ACA, which flipped the uninsured-to-insured ratio, the hospital turned the corner and has grown into one of the most competitive healthcare systems in our local market. 

Now, with the specter of the Senate adopting the American Healthcare Act proposed by Republicans which would repeal the measures that allowed it to thrive and still provide care to the poor, the hospital's future is again at risk.

The individual mandate of the ACA helped to reduce the uninsured rate and increased revenue for state subsidies. This mandate is probably one of the most hated provisions of the ACA. However, what is often not discussed is that many families that did not have health insurance unexpectedly lost their life's fortunes when hit with an unexpected illness. 

Healthy individuals often will skip health insurance to save money. While Republicans can argue that they should face the consequence of their actions, when they get sick and don't pay their bills, we all end up sharing in the consequence of their actions.  They either lose their savings to cover their healthcare costs or, being unable to pay their bills, they eventually file for bankruptcy. Both outcomes are bad for the individual and for society as a whole. 

The individual mandate encourages all individuals to get health insurance, even those who lack the foresight to realize that they can lose everything with just one unexpected illness. As the number of individual bankruptcy filings have decreased by 50% since the implementation of the ACA, legal experts have concluded that medical bills were likely the driving force behind the high rates of personal bankruptcy claims.7

Therefore, I do not believe that repealing the individual mandate, cutting insurance subsidies, and decreasing funding for Medicaid, as proposed by House Republicans who passed the more recent version of the American Health Care Act earlier this month, is a reasonable long-term solution. Remember that healthcare expenditures continue to grow. Nothing in the proposed bill aims to decrease that growth. Rather, the proposed plan would likely result in a decrease of the number of individuals paying into insurance pools, which would only accelerate the rate of premium growth.

The tax credits built into the Republican proposal are thought to offset this planned increase in cost, but those tax benefits are not based on predictions of how much premiums will grow. Nor do they consider the current rate of growth and the change in that rate that will result from the new bill. Given that the Congressional Budget Office (CBO) has not reviewed the proposal, it seems that the credits are arbitrary values that are unlikely to result in improved costs to individuals.

I believe that motivating people to have health insurance via a financial penalty that is consequently used to cover a portion of healthcare costs makes sense. However, I do agree with Republicans that this mandate is not the best solution. A universal healthcare system should improve preventative services, drive down the cost to manage chronic conditions, eliminate the redundancy in our fragmented system, and help us address issues with the futile resource cost associated with lousy, inhumane, end-of-life care.

Eventually, a universal system could lead to a more efficient, more successful, and more affordable healthcare system such as what many of our European and Canadian counterparts enjoy. 

 

 

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References

  1. Health Refrom FAQs. Kaiser Family Foundation. Updated 2017. Available at: http://kff.org/health-reform/faq/health-reform-frequently-asked-questions/?gclid=CjwKEAjw3drIBRCOwfC-_qqyjQ8SJADvoWQpITmTpqYjDULuL94XDlFH-2BGmIeAB81XwFsQ8SJ--xoCQqHw_wcB#question-my-employer-offers-health-benefits-but-doesnt-contribute-much-toward-the-premium-i-cant-afford-my-share-can-i-apply-for-coverage-and-subsidies-in-the-marketplace-instead. Accessed May 18, 2017.
  2. Khazan O.Better Off Before Obamacare? The Atlantic. Updated November 14, 2016. Available at: https://www.theatlantic.com/health/archive/2016/11/better-off-before-obamacare/507650/. Accessed May 18, 2017.
  3. State-by-State Look at Employer Health Insurance Costs Finds Workers' Premium Contributions and Deductibles Growing More Slowly But Eating Up Greater Share of Incomes. The Commonwealth Fund. Updated October 26, 2016. Available at: http://www.commonwealthfund.org/publications/press-releases/2016/oct/slowdown-in-employer-insurance-cost-growth. Accessed May 18, 2017.
  4. Griggs T, Yourish K and Sanger-Katz M. Who is Really Affected by Rising Obamacare Premiums. New York Times. Updated March 9, 2017. Available at: https://www.nytimes.com/interactive/2017/03/09/us/politics/who-is-really-affected-by-rising-obamacare-premiums.html. Accessed May 18, 2017.
  5. Emanuel E and Kocher B. Higher Health-Insurance Premiums Don't Mean the Affordable Care Act is a Disaster. The Washington Post. Updated October 27, 2016. Available at: https://www.washingtonpost.com/opinions/higher-health-insurance-premiums-dont-mean-the-affordable-care-act-is-a-disaster/2016/10/26/1b7f7ce0-9b84-11e6-a0ed-ab0774c1eaa5_story.html?utm_term=.07e25b8ed31e. Accessed May 18, 2017.
  6. Rizzo E. Stats on the Cost of Readmission for CMS-Tracked Conditions. Berkers Hospital Review. Updated December 12, 2013. Available at: http://www.beckershospitalreview.com/quality/6-stats-on-the-cost-of-readmission-for-cms-tracked-conditions.html. Accessed May 18, 2017.
  7. St John A. How the Affordable Care Act Drove Down Personal Bankruptcy. Consumer Reports. Updated May 2, 2017. Available at: http://www.consumerreports.org/personal-bankruptcy/how-the-aca-drove-down-personal-bankruptcy/. Accessed May 18, 2017.

 



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