By John C. Goodman
Originally posted on Forbes, October 2015
The news isn’t good for the ObamaCare exchanges. For the coming year expect higher premiums, higher deductibles, narrower networks and an overall market that has stopped growing. That last fact is the most alarming. Since January, 1.3 million people have dropped out of the exchanges. If the only ones who remain are the old and the sick, the prospect of a death spiral looms larger.
Don’t blame the insurers. They are doing the best they can, given the incentives created by Obamacare rules and regulations. President Obama promised a new health insurance market place – one in which health insurers would no longer discriminate against chronic patients with pre-existing conditions. What we have is worse discrimination than we had before.
At the time of enrollment, insurers face perverse incentives to attract the healthy and avoid the sick. The conventional wisdom in the industry is that healthy people buy on price. Only the sick spend time looking to see what doctors and facilities are in the health plan’s network. Only the sick pay close attention to copays and deductibles – especially for medications for chronic conditions.
After enrollment, the insurers have a perverse incentive to over-provide to the healthy (to keep the ones they have and attract more of them) and under-provide to the sick (to encourage the exodus of the ones they have and discourage enrollment by any more of them). They are acting on those incentives.
A new study by researchers at Emory University finds that out-of-pocket expenses for medications in a typical Silver plan are twice as high as they are in the average employer-sponsored plan. For example, patients in a mid-priced Silver plan with at least one chronic condition such as diabetes or asthma pay $621 out of pocket for prescriptions, on the average. That compares to $304 for those with employer coverage. The result: fewer prescriptions are being filled and refilled.
This practice is shortsighted, says health economist Ken Thorpe, one of the researchers who produced the study. The cost of drugs known to prevent illnesses, such as Metformin for diabetics, is much less than the cost of treating advanced diabetes. Discouraging the drug through high out-of-pocket charges is “penny wise and pound foolish,” he adds.
Thorpe would be correct if the insurer planned to keep the patient around for many years. But that isn’t their intention. The insurers don’t want diabetics in the first place! They would be delighted if all their diabetics left and joined some other plan!
Another of President Obama’s promises was that health reform would usher in a new era of coordinated, integrated care in which providers work in teams to insure high quality and efficient delivery. Yet the opposite is happening. According to a study funded by the Robert Wood Johnson Foundation, health plans are trying to keep premiums down by paying low provider fees – even lower than Medicaid pays in some cases – and including in their networks only the providers who will accept those low fees. In other words, narrow networks are the result of economics, not the result of the desire to have better coordinated care.
A study by Avalere finds that on the average exchange plan network includes one-third fewer providers than non-exchange plans (such as employer-sponsored plans), with even larger shortcomings in such specialties as oncology and cardiology. Commenting on the study, Robert Book notes that:
[N]arrow networks are a major impediment to care coordination, since it makes it much more difficult for patients to assemble a care team that is both in network and able to coordinate care with each other….
There are numerous reported examples of patients facing these issues, including cases in which a network includes both surgeons and hospitals, but where the none of the in-network surgeons have privileges at the in-network hospitals.
Meanwhile, yet another bait and switch is underway. Health plans are managing to avoid sky high spikes in premiums for next year by increasing their deductibles instead. An analysis at Yahoo Finance explains it this way:
Customers who choose Ambetter’s $6,500 deductible plan in Indianapolis will get limited benefits such as primary-care visits at a cost of $30, specialist visits for $60 and generic drugs for $15, along with free preventative care such as vaccines. But big-ticket items like diagnostic testing, MRIs, specialty drugs, emergency-room visits and surgical procedures aren’t covered until after a patient racks up $6,500 in in-network bills…
And there is a down side to artificially low premiums:
By offering the two lowest-cost silver plans in the Indianapolis market with ultra-high deductibles, the insurer is driving down the subsidies available to purchase either more comprehensive coverage or lower-cost bronze coverage. That’s because the size of exchange subsidies depends on the price of the second-cheapest silver plan in each market. Largely because two Ambetter plans are priced so low, the subsidy available to 30-year-olds earning 250% of the poverty level in Indianapolis-area Marion County will fall from $1,140 this year to $809 in 2016. That will hike after-subsidy premiums for the cheapest bronze plan by 25% to $1,914 a year.
As I said last week, Republicans on Capitol Hill would be doing all of us a favor by holding hearings on these problems. The pubic has a right to know.