Tuesday, November 12, 2013

What's Trying to Emerge?

I think a successful ACA is trying to emerge, through the fog of political war. Do not think the GOP can reverse the process; the policy fundamentals are in place. For me the question is not whether a working ACA will emerge, but when this will be recognized. I've said by early summer. I'll stick with that.

What are the policy fundamentals that have been put in place, causing what I see as an irreversible process:
  • Insurance Reforms - Essential benefits must be offered in all policies, except Catastrophic coverage for those under 30. Children can stay on their parents' policies until age 26. No insurance denial due to preexisting conditions. No lifetime or annual caps. Annual limit on out of pocket expenses. Community rating - no gender differences; only 3 age breaks; and a smoking/no smoking break - the end of "slicing and dicing". 80% Medical Loss Ratio for Group policies, 85% for Non Group. This represents a HUGE tilting of the scales in favor of the little guy - the middle class - and away from insurance companies. There is NO WAY people will give these new benefits up.
  • Insurance Exchanges - All 50 states, plus the District of Colombia, have Exchanges (16 are state-run, 7 are jointly run by the state and the federal government, and 27 are federally run). When Healthcare.gov is fixed, people in all states will be able to buy their insurance online, if they do not have insurance on the job, and are not on Medicare or Medicaid. Between 12 and 15 million people have been buying their individual policies directly from insurers. Many of these policies do not meet ACA Essential Benefits standards and have lost their grandfathered status by making significant benefit changes post-ACA. Estimates vary - 6-10 million policy holders who will have their old policies cancelled and will have to upgrade, often paying more. Many, perhaps most of these conversions will be handled directly with the insurer. Others will choose to move or be forced to move to the Exchanges. The CBO has estimated that 2 million people would migrate from the Individual/Non-Group market to the Exchanges. This is the "crisis" we are in right now. By March 31, this tsunami will have flowed through the system.  Thereafter, there will be a gradual elimination of the remaining grandfathered plans, but this will not create the blowback of our current round. For the most part, when open enrollment begins again in October of 2014, all the Exchanges will be working well (I am confident), and people will experience the pleasure of buying insurance in a clear, transparent way - allowing comparison shopping, and absolute certainty about what you are buying, what will be covered, and how much you will be on the hook for. When these Exchanges are truly working, people will love them; and they will never go back to the old, seemingly rigged game.
  • Medicaid Expansion - The ACA expands Medicaid, offering it to everyone with incomes between 100% and 138% FPL, but based on the Supreme Court ruling, states can refuse to accept the expansion. At this point, 25 states, plus the District of Colombia, have accepted the expansion; 25 states have declined. The CBO originally estimated that 9 million would sign up in 2014, and that this number would grow to 12 million in 2015, and 13 million in 2020. With the red state opt-outs, the 9 million estimate for 2014 has been cut to 4-5 million who will sign up in participating states, and 4-5 million eligible, but left high and dry in opt-out states. This will be a BIG political problem in opt-out states, where the GOP will be hammered for putting ideology ahead of the people of their states. The pressure for this will not go away, until each refusing state has changed their position. 
  • Income-based Subsidies - The ACA provides subsidies for people with incomes between 138% and 400% FPL ($45,000 for an individual; $94,000 for a family of four). Subsidies are structured so that people pay from 2.0% to 9.5% of their income for insurance, depending on their income levels. Subsidies can cover the entire premium for lower income people, and become more modest as you move up the income scale to 400% FPL. What many people don't yet know is that if premiums rise, your subsidy rises to completely offset the increase. If you qualify for subsidies, and income stays constant, your personal out of pocket for premiums will only change if your income changes. Subsidy-qualified people are sheltered from premium rate shock in Year 2 and beyond. In short, the subsidy program will help millions of people buy insurance they couldn't afford, and this affordability will remain in place. 60% of the uninsured will be able to buy insurance for $100 a month or less. After March 31, 2014, whether 1 million, 7 million, or more have enrolled on the Exchanges, with 60-70% receiving subsidies, NO ONE will be able to take this benefit away.
  • Individual Mandate - Beginning in 2014, everyone must have "minimal essential coverage". If not, you will be subject to a penalty (the higher of $95 or 1% of income in 2014; 2% or $325 in 2015; and 2.5% or $695 in 2016). Many analysts have focused on how modest these penalties are, relative to annual premium costs; but my perspective is that 1%/2%/2.5% of a $75,000 income will be considered relevant by people at that income level. Am confident that the individual mandate will, over time (as it did in Massachusetts) encourage most people without insurance to sign up.

The insurance reforms, theExchanges, the Medicaid expansion, the subsidies, and the mandate - all of these are in place. And they aren't going away. The ACA will not be repealed. It will not be defunded. It is here to stay. Inevitably enrollment on the Exchanges will grow - the CBO estimates 22 million enrollees by 2016.

Could the ACA collapse of its own weight, due to an insufficient number of under 35s' signing up? Conservatives will tell you this ad infinitum, but it won't happen. First, 90% of the uninsured have incomes no more than 200% FPL, and subsidies at those income levels cover most or all of the premiums. The reason young uninsured's don't buy insurance is because they can't afford it. Now they can. Second, all of the forced cancellations happening now that end up migrating to the Exchanges -the CBO estimates this number at 2 million - have been individually screened and underwritten in the old individual market, and will certainly help strengthen the new Exchange risk pools. Third, unlike an insurance "death spiral", where people facing higher premiums drop out, causing premiums to rise more, etc., people receiving subsidies in the new Exchanges (60-70% of the total) are protected against premium increases as discussed above. A Death Spiral will NOT happen. The ACA will NOT collapse. It is here to stay. And by 2016 it will be thriving.

What about now? Will this picture come clear by November 2014? I think the odds are high that the outlines of all the above will be clear by summer, making the ACA a powerful weapon against the GOP in the mid-terms.

I, too, worry about the website, the slow enrollment uptake, the GOP onslaught, and their and the MSM's total assurance that the ACA is and will remain an unmitigated catastrophe. But the facts on the ground tell me that major seeds have been planted, that they will not be dug up, that they will, now planted, grow naturally into a splendid harvest that will not be prevented.

Republicans are making a fatal and permanent mistake in seeking all-out to destroy the ACA with no attempt to replace it with something that could address the same issue of the uninsured.

And the icing on the cake? The cost curve is really and truly bending. In providing incentives for providers to move from fee-for-service to value based care delivery and billing, the ACA has set off a largely unrecognized healthcare productivity revolution that will go on for a long time.

Turns out Government can do some things extraordinarily well: they can change a very large system's incentive structure to get all the players to  innovate and move in the same direction, which is to increase productivity by reducing system utilization and complexity of care. This has never really happened before in US healthcare. It's happening now. And the ACA has a lot to do with it.

So what is trying to emerge from the fog of political war? A gold mine of help to the poor and the middle class, and to the country's economy by helping to tame healthcare costs; and this gold mine is the much maligned ACA!


  1. Thank you! I love your vision and understanding.

  2. Thank you for talking me off the ledge! I so appreciate your ability to stay centered and analytical.