By MARK BLESSINGTON – The Republicans just failed to repeal and replace Obamacare or the Affordable Care Act (ACA). Most explanations miss why the Republican plan failed. The answer comes from answering a key question: Why did ACA insurance rates rise in 2016?
The answer is absurdly simple: Because US health insurance companies jacked-up their ACA rates!
Let’s be clear. The ACA does not set insurance rates. Companies voluntarily join the ACA “marketplace” and they set their premiums independently.
In 2016, health insurance companies raised their insurance rates by 140% for policies purchased by individuals for their families. In contrast, company-sponsored premiums for family coverage only increased by 3% in 2016. This is beyond reasonable.
The biggest problem with the ACA is that it has no teeth in dealing with insurance companies.
While the rest of the industrialized world has single-payer healthcare, the US uses private insurers. Our free market system was failing before the ACA, and it still is. The only viable options are to greatly increase health insurance company regulation, or go to a single-payer system.
The Republican proposal went in the wrong direction.
It reduced restrictions on health insurance companies, which would have pushed us back toward what we had before the ACA.
Trump’s strongest concentration of support was in rural areas. And guess what? Many of these voters do not have company-sponsored or “group” health insurance. Many of them do not work for big corporations which typically pay 70% to 80% of an employee’s health insurance bill. They tend to be self-employed, independent contractors, part-time workers, or retired. They desperately need health insurance relief, and Trump-care was not going to provide it. This is the real reason why Trump-care failed.
An essential restriction that would greatly improve the ACA is:
If an insurance company offers group health insurance in a state, then:
(1) It must also offer ACA coverage in that state, and
(2) ACA and group rates must be the same in that state.
This regulation has very serious consequences. It means that:
- Major insurance carriers will not be able to opt-out of the ACA unless they choose to exit the health insurance business entirely.
- It puts individuals on the same footing as corporations when it comes to buying health insurance. If an insurance company wants to raise their rates, they must do it across-the-board in that state.
- Health insurers will be forced to focus on the cost side of healthcare. For example, what can be done about egregious prices for some pharmaceuticals and some medical equipment and devices? What can we do about the small minority of patients who drive healthcare costs through the roof? How can illness prevention help drive down costs?
The bottom line here is that if the health insurance industry can’t play a central role in fixing our healthcare cost crisis, then they have no right to be in the business. They must solve the problem, not profit from it.
What about a discount?
Adding one new regulation to the ACA does not fix it. For example, what about workers who receive no health insurance discount from an employer? This problem impacts about one-third of working America. The obvious solution is for the federal government to ensure that large discounts (e.g., 70 to 80%) are provided to individuals. Why so obvious? Because two-thirds of US workers receive it, and insurance is not affordable for those who do not receive it.
There are two avenues: increase the number of companies that offer their employees a health insurance discount, or offer it through the ACA. The ACA strives to do both. While it may need strengthening in these areas, the more immediate issue is pulling premiums back down to reality.
Who wins and who loses?
Now we have a clear picture of who wins and loses when we fix the ACA. Individuals who buy insurance through the ACA win. Insurance companies lose if they can’t reduce healthcare costs. Small companies lose because of higher expenses from offering health insurance. Taxpayers lose unless money from other areas of the Federal budget is diverted to pay for the ACA discounts.
Some argue that these losses are too high and that we can’t afford to fix the ACA. There are numerous counter arguments, such as we place too high a priority on military spending relative to the value of improving American’s health, and so on.
Rhetoric aside, Americans can see through the smoke and decipher the reality surrounding healthcare. They will hold politicians accountable for fixing this large, pressing problem. Too many people are suffering under our failing health insurance system.
It’s Time for a Single Payer Healthcare System in the US by Philip Kotler.
Mark Blessington is a sales and marketing consultant and has worked with many of the world’s largest corporations. He has written four books, ranging from Deep Economics to Sales Forecasting.