The Continued Degradation of Health Insurance Under the ACA

Even if insured how much can we depend on private health insurance any more? The bottom line--less and less as it continues to degrade after almost six years under the Affordable Care Act (ACA). Its coverage continues to degrade even as its costs become increasingly unaffordable.

• The most popular silver plan on the exchanges, with an actuarial value of 70 percent, leaves at least 30 percent of health care costs on the patient, though low-income individuals receive subsidies that have proven to be inadequate.
• Regardless of plan, insurers have many ways to shift more costs on the patient, including restricted drug formularies, benefit designs that limit access, denial of services, not covering out-of-network care, and narrow definitions of medical necessity, especially for mental health care.
• Premiums are increasing for 2016, averaging 7.5 percent for individual silver benchmark plans, with other examples far higher, such as a 35 percent hike by Blue Cross Blue Shield plans in Raleigh, North Carolina (1); nearly one-half of adults who have visited the ACA's marketplace plans have found their premiums difficult to afford. (2)
• The lower the premiums, the higher the annual deductibles, which have become prohibitively unaffordable for many, such as more than5,000 for individuals and more than10,000 for families with bronze plans which have the lowest premiums and 60 percent actuarial value. (3)
• Restricted choice through continued narrowing of network plans; for example, almost one-third of physician networks in silver plans in 2014 covered only 10 to 25 percent of physicians in a plan's region. (4)
• Lack of price controls under the ACA throughout the system, as indicated in my most recent blog on Big PhRMA, and the ACA's ban on the government's negotiating drug prices.
• Continued decline of coverage by employer-sponsored health insurance (ESI); typical American families of four with a PPO plan will pay more than25,000 for health care in 2016 (5), obviously impossible for so many, since the median annual income for American households in 2015 is about53,800.
• Despite having insurance, two of five adults with deductibles amounting to 5 percent or more of their annual incomes are not going to the doctor when they get sick, avoid a preventive care test, skip a recommended follow-up test, or get needed specialist care. (6)
• According to Pew Research, 55 percent of American households are savings-limited, able only to replace less than one month of their income through liquid savings. (7)
• Despite the ACA, our safety net through Medicaid is in tatters, including the 20 states that opted out of Medicaid expansion and others with very restricted eligibility and coverage policies.

These facts compel us to recognize the inevitable--the industry continues on a death march despite the many ways that the government has subsidized it. Jacob Hacker, Ph.D., professor of political science at Yale University and author of The Great Risk Shift: The Assault on American Jobs, Families Health Care and Retirement, and How You Can Fight Back, saw this coming ten years ago:

American health insurance is experiencing a steady erosion--a death march--as Americans find it increasingly difficult to afford the ever-rising tab for health insurance and medical services. The epicenter of this transformation is the crumbling of America's employment-based system of health financing, which arose in the mid-twentieth century as a distinctive response to the challenge of health insecurity in the United States. As health care costs have exploded in an increasingly competitive business environment, this old, odd bargain has come undone--and the Great Risk Shift has relentlessly played out. (8)

The private health insurance industry already recognizes this, and is complaining that profits are insufficient to assure its staying in the ACA's marketplace. Stephen Hemsley, CEO of UnitedHealth Group, the nation's largest insurer by revenue, recently announced that it expects to lose $500 million on ObamaCare plans in 2016, and that it may have to exit the individual market in 2017 since "we can't subsidize a marketplace that doesn't appear at the moment to be sustaining itself." (9) (Hemsley's total compensation in 2014 was $66.1 million, more than $254,000 per day). (10) Wayne Deveydt, CFO of Anthem Inc, the nation's largest insurer by membership when it completes its merger with Cigna, has decided to sacrifice market share to keep its plans profitable, acknowledging that "When you have fewer national enrollees and you have price points that we don't believe are sustainable, we've just made a conscious decision we're not going to chase it [market share]." (11) Adding to this point, a current Goldman Sachs analysis of state filings for 30 not-for-profit Blue Cross and Blue Shield insurers projects that they will post aggregate losses for 2015. (12)

We need to recognize that private health insurance has become obsolete. It has only been sustained by subsidies and other industry-friendly provisions of the ACA. Further bailouts will just prolong its death march and worsen the situation for patients, families, and taxpayers. Because of prices and costs of health care continuing out of control, including its enormous costs of bureaucracy and waste, and with no containment on the horizon, it is now beyond the reach of ordinary Americans as well as government payers. The ACA has failed to contain health care costs, make them more affordable, or to assure ongoing adequate access to health care. My soon to-be-released new book, The Human Face of ObamaCare: Promises vs. Reality and What Comes Next, documents all of these points in detail, including more than 50 patient stories that best illustrate these ongoing trends, not reversed under the ACA, while describing the fix--publicly financed national health insurance (NHI), coupled with a more accountable private delivery system. (13)

Despite persuasive evidence that the private insurance industry has outlived its usefulness and despite solid public support for NHI, including a majority of U. S. physicians, nursing groups and many health care organizations, the political landscape is still a major barrier to NHI. The GOP remains intent on repealing the ACA, replacing it with a non-plan that includes health savings accounts, selling insurance across state lines, and other free market ideas that have already failed. Of the Democratic presidential candidates, only Bernie Sanders recognizes NHI as a workable and affordable solution, while Hillary Clinton continues to think that NHI will cost too much (14) (either unaware of the classic 2013 study by Gerald Friedman, professor of economics at the University of Massachusetts, that showed that we would save some $592 billion a year with NHI while 95 percent of Americans would pay less than they do now for health insurance and get far more (15), or distorting the issue by claiming increased taxes).
It is clear that deregulated health care markets and the ACA have failed the common good. But there is so much economic and political power in the corporate medical-industrial complex that the obvious solution is still being kept off the table. Can our supposed democracy meet this challenge?

1. Radovski, L, Overberg, P, Armour, S. Price rise challenges appeal of health law. Wall Street Journal, November 19, 2015: A1.
2. Collins, SR, Gunja, M, Rasmussen, M et al. Are marketplace plans affordable? Commonwealth Fund, 2015.
3. Goodnough, A, Pear, R. Unable to meet the deductible. New York Times, October 17, 2014.
4. Andrews, M. Study finds almost half of health law plans offer very limited physician networks. Kaiser Health News, June 26, 2015.
5. Milliman. 2015 Milliman Medical Index. May 2015.
6. How High Is America's Health Care Cost Burden? Findings from the Commonwealth Fund Health Care Affordability Tracking Survey, July-August 2015. The Commonwealth Fund, November 20, 2015.
7. Pew Charitable Trusts. The precarious state of family balance sheets. January 29, 2015.
8. Hacker, JS. The Great Risk Shift: The Assault on American Jobs, Families Health Care and Retirement, and How You Can Fight Back, New York. Oxford University Press, 2006, p. 143.
9. Mathews, AW, Armour, S. Biggest insurer threatens to abandon health law. Wall Street Journal, November 20, 2015.
10. SEC 14A Schedules, Bureau of Labor Statistics, Current Population Survey, 2014.
11. Deveydt, W, as quoted by Tracer, Z. Obamacare premiums climb, but insurers struggle for profit. Bloomberg Business, October 30, 2015.
12. Ibid # 9.
13. Geyman, JP. The Human Face of ObamaCare: Promises vs. Reality and What Comes Next. Friday Harbor, WA. Copernicus Healthcare, 2016 (soon to be released).
14. Meckler, L. Clinton and Sanders escalate sniping. Wall Street Journal. November 19, 2015.
15. Friedman, G. Funding H. R. 676: The Expanded and Improved Medicare for All Act. How We Can Afford a National Single-Payer Health Plan. Physicians for a National Health Program. Chicago, IL, July 31, 2013.

Adapted and excerpted, in part, from my soon-to-be released book, The Human Face of ObamaCare: Promises vs. Reality and What Comes Next.
(See advance press release at: www.johngeymanmd.org)