The biggest flaw is that the product the Obama administration is trying to sell to consumers is not the product people want to buy.
By that he means that there are millions of people (like himself) who are forced to subsidize insurance for the sick (who can no longer be charged more based on their medical condition) or the relatively old (who can now be charged a mere three times more than the youngest plan members, rather than up to five times more, as was common pre-ACA) -- or to buy coverage for services they don't want, such as childbirth or mental health or substance abuse treatment.
It's true that some people in those categories will pay more for insurance on the individual market under the ACA than they did previously, though probably for only a short period (historically, most people buying insurance in the individual market have not stayed long). But I don't think they will affect the law's long-term viability by fleeing the market in droves -- because there probably are not droves of them.
Despite prices and deductibles that can look daunting to, say, healthy subsidy-ineligible 27 year-olds, a majority of people who lack access to employer-sponsored insurance are likely to be satisfied with their ACA options. Two large categories are likely to be satisfied: the subsidized, and those whose household includes someone with a preexisting condition.
Take the subsidized first. Over 80% of those who have bought plans on Healthcare.gov and the state exchanges have qualified for subsidies. It's true that for younger buyers, the subsidies fade out gradually, so that a 27 year-old earning $33,000 in New Jersey gets a subsidy of just $12 per month. With a premium of $249 per month and a deductible of $1350 for the cheapest silver plan, this buy may not be too thrilled. That premium is "a car payment," as people like to say.
But that's not who most of the subsidized are. Most are further down the income scale and qualify not only for much more substantial premium subsidies but also for subsidies reducing the deductible and maximum out-of-pocket expenses -- so-called cost-sharing reduction (CSR). While a silver plan is designed to cover 70% of the average plan member's yearly costs, CSR dramatically raises that actuarial value -- to 94% for those earning up to 150% of the Federal Poverty Level (FPL), 87% for those earning 151-200% FPL, and a more modestly boosted 73% for those between 201 and 250% FPL.
Of the 82% of buyers on the ACA exchanges who qualify for premium subsidies, how many also qualify for CSR? The Department of Health and Human Services does not break those numbers out. But Washington State does --and the answer, through January 31, was 69% of those who qualify for subsidies, and 54% of those who bought a QHP in Washington, the unsubsidized included.
There is indirect evidence that the national numbers with respect to CSR are in line with those of Washington State. Cost-saving reductions are only available at the silver plan level. According to HHS, through February. among those buyers who qualify for subsidies, 72% selected silver plans. Among those who earn to much to qualify for subsidies, only 25% selected silver. Probably the CSR is a powerful incentive to select silver (pp. 38-39).
Those qualifying for cost-sharing reductions are more likely to skew young, as the young have lower incomes. Older buyers who qualify for premium subsidies only are likelier than the young to be satisfied. First, their subsidies are much larger. The subsidies are calculated to make the premium a fixed percentage of the household income, and older buyers' premiums are up to three times higher than young buyers'. A 62 year-old New Jerseyan earning the same $33k as our 27 year-old will pay the same premium, but her subsidy will be $472 per month rather than $12. If she has bought insurance in the individual market before, she's likely to be keenly aware of the difference.
What about those who do not qualify for subsidies but must buy their insurance on the individual market? Some, like Laszewski himself, will pay higher premiums for narrower networks than they have accessed in past years. Many, however, will do better under the ACA -- most notably, those who either have a pre-existing condition themselves or have a household member who does. Their numbers are far larger than one might think.
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 number of those buying on the exchanges are in fact single. In Washington State, the average household size among QHP buyers is about 1.4 people. More QHP plan members are in households with two or more people than in single households.
A somewhat different but not inconsistent view of the size of the "pre-existing condition market" comes from a Kaiser tracking poll, which found that 49 percent of Americans under 65 report that they or a family member have a pre-existing medical condition such as heart disease, diabetes, asthma, and cancer. Only a quarter of that 49 percent reported that they or someone in their household has been denied coverage or had their premium raised because of a pre-existing condition. But most of them, like most Americans, must have had access to employer-sponsored insurance. In the individual market, a higher percentage was likely to face higher costs or be shut out of the market altogether.
Laszewski might retort that insurers need the healthy unsubsidized to get a viable risk pool. But most of them are probably in the in the risk pool. In every state, every insurer must put all its customers in one pool. It's true that in some states, insurers are allowed to sell off-exchange only -- though if they sell on-exchange, their off-exchange customers must be pooled with those who buy on-exchange.
Are there many states in which insurers selling off-exchange only will substantially thin the on-exchange risk pool? That's a question for another day.
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