Thursday, June 19, 2014

Does the ACA shaft the working class and middle class as Robert Laszewski claims?

HHS released statistics yesterday showing that "69 percent of enrollees who selected Marketplace plans with tax credits had premiums of $100 a month or less, and 46 percent of $50 a month or less after tax credits." Among the 87% of buyers on ACA exchanges who qualified for federal subsidies, the average premium was just $82 per month.

Healthcare industry consultant Robert Laszewski is unimpressed. In a post titled "Obamacare: What About the Working Class and the Middle Class?" he writes:
The lowest income people––who pay the lowest premiums and out-of-pocket costs––are the ones who are obviously signing up. That explains why the average consumer subsidy is so high and the average net cost is so low.

As I have said on this blog before, the biggest consumer problem Obamacare has is that the plans––with their still high premiums even after the subsidy, big deductibles, and narrow networks––are not attractive to working class and middleclass families and individuals who don't qualify for the biggest subsidies.

Simply, the Obamacare plans are unattractive to all but the poorest who get the biggest subsidies and the lowest deductibles
While Laszewski's market knowledge is to be respected, he rarely backs up his assertions as to what insurance buyers allegedly want with data.  Evidence suggests that the group of Americans who earn too much to qualify for subsidies yet lack access to employer-sponsored insurance is smaller than he thinks, and wealthier than he thinks. The ACA's direct winners will continue to outnumber its direct losers -- those who will pay more for coverage in the individual market -- and get less value -- than they would have had the law not passed. Consider the following:

1. CBO projects that by 2018, 25 million Americans will buy coverage in the ACA exchanges, 20 million of them subsidized, with another 5 million buying ACA-compliant policies off-exchange. That is, the subsidized will outnumber the unsubsidized in the individual market  2-to-1. Add in beneficiaries of the Medicaid expansion, and the ratio of direct beneficiaries to those potentially subject to higher rates exceeds 3-to-1.

2. McKinsey recently surveyed those who bought coverage in the individual market for 2014 and those who remained uninsured. Among survey respondents who remained uninsured, 72 percent were both previously uninsured and subsidy-eligible. The problem was not that the uninsured did not like what the ACA had to offer them -- it was that they remained ignorant of what was on offer. Fully two thirds of the subsidy-eligible respondents  who cited perceived affordability as the reason they stopped shopping were aware of neither their eligibility nor the amount for which they were eligible. And among those who didn't shop at all, 90 percent were subsidy-eligible.

3. There are probably 5-10 million Americans insured in the individual market who do not qualify for ACA subsidies.  Of those, a difficult-to-gauge but pretty large fraction have a pre-existing condition or a family member who has one. The percentage of Americans who have a preexisting condition -- one that would affect their ability to obtain insurance in the pre-ACA individual market -- ranges from 19 to 50 percent, according to an HHS report overviewing various studies. Most households, moreover, have more than one person-- though a disproportionate share of ACA buyers are single-person households. Most of those with preexisting conditions are likely to do better in the ACA market than the pre-ACA market.

4. The Kaiser Family Foundation just today released a survey of current individual market participants. Among those who were already in the individual market and switched to an ACA plan, more reported that they were paying less this year (46%) than paying more (39%).  That may be mainly because many switchers qualify for subsidies -- the Urban Institute estimated last fall that about half of those already in the individual market would so qualify. But another chunk may have been in the individual market with a pre-existing condition. And still other buyers, not represented among the "switchers," may have previously been shut out of the individual market by pre-existing conditions.

5. Laszewski likes to lambaste the ACA's mandatory essential health benefits (EHBs) as evidence that the law's drafters did not know what kind of insurance people wanted to buy. But as a just-published NBER study by a team led by conservative healthcare economist Mark Pauly just emphasized, the increase in base (unsubsidized) premiums caused by the ACA is driven primarily by "insurer expectations of a higher risk population being enrolled" -- that is by "guaranteed issue," the ban on varying premiums according to a buyer's medical history. As I've noted previously, health industry consultant Milliman estimated in March 2013, in a report prepared for the State of California, that while EHB's might drive premiums up 4.8%, guaranteed issue might drive them up 26.5%. Guaranteed issue, nonetheless, is among the ACA's most popular features. Republicans habitually promise to uphold it while vowing to repeal the ACA.

Laszewski's chief evidence that the ACA does not meet market needs is that only a third of eligible uninsured Americans signed up. But that was always going to be the case. Information penetration is hard, and was projected as a three- to four-year process from the beginning.   He says that Americans won't like ACA-compliant plans. But according to Kaiser's survey results released today, 55% of those in ACA-compliant plans (including the 25% who bought off-exchange) consider them good or excellent value, while only 18% consider them poor value.  It's true that those still in pre-ACA plans were more satisfied -- there is some opportunity cost in making coverage available to all.  But the evidence does not suggest that the exchanges are marketing a non-viable product.

Related:
Don't deny ACA-driven rate shock. Do put it in perspective
McKinsey's really important finding
OOPS! Don't forget the ACA's lower-profile subsidies
The ACA's preexisting condition

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