Friday, May 16, 2014

Robert Laszewski's ACA blind spot

Robert Laszewski, health insurance consultant and blogger, is among the critics of the Affordable Care Act whom supporters of the law respect the most. He knows the market, he knows the law, he wants to see everyone insured, he's not averse to calling out Republican idiocy and mendacity, and he wants to fix the law, not repeal it. Ezra Klein's Wonkblog named him "Pundit of the Year" for 2013.

Yet Laszewski has a bias, which progressive healthcare reporters, including Klein, are slow to call out.  His ur-insurance buyer is a veteran of the pre-ACA individual market, healthy, ineligible for ACA subsidies or for only limited subsidy, and so hit by rate shock.  His chief complaint seems to be that ACA-compliant plans are weighed down by unnecessary Essential Health Benefits, which drive up the base premiums and so increase the hit to the unsubsidzed.

The plight of this cohort is real, and the law could be amended to ease it. Yet Laszewski generally fails to acknowledge that such victims are far outnumbered by ACA beneficiaries, that negative responses to the law have been shaped in large part by five years of Republican disinformation, that guaranteed issue is a much larger driver of unsubsidized rate increases than the benefit mandates, and that the law is on target so far to meet long-term CBO projections.

Laszewski's bias in on display in his latest post -- which pleased progressives by acknowledging that Democrats pledging to modify the law are more in line with public opinion than Republicans vowing to repeal it. Here's the nub of his case that the law is in trouble because people do not like the core offering:

Obamacare is a product that is a monopoly––you can't buy individual health insurance anywhere else. It is a product that about everyone would agree you are much better off to have than not have. It is a product that the government will pay a big part of most people's cost. And, if you don't buy it the government will fine you.

And only a third of the subsidy eligible signed up?

I will suggest that lost in the celebration over "eight million enrollments" is the fact that two-thirds of the consumers who were eligible for a subsidy didn't buy it. And, according to my travels in the market, about half that did buy it in the insurance exchanges already had insurance.

A just released McKinsey survey done during April estimates that 74% of those who bought coverage inside and outside the insurance exchanges had been previously insured––which would be consistent with my finding.

Obamacare's two biggest problems come down to this: Not enough people are signing up for it to be sustainable in the long-term because the products it offers are unattractive.
Let's start with that last premise. The main takeaway of the McKinsey study is not that people don't like what's on offer in the exchanges. It's that they don't know what's on offer.  As I noted in a prior post, among the half of McKinsey respondents who did not buy any insurance for 2014, most cited cost as the key factor  -- and for most of those, the really determinative factor was ignorance (my emphasis):
In our April survey, 72 percent of the respondents who reported that they shopped but did not buy were both previously uninsured and subsidy-eligible. Perceived affordability remained the most common reason for exiting the purchase process; it was cited by 59 percent of all April respondents who reported shopping but not enrolling and by 64 percent of the subsidy-eligible respondents who reported that behavior. Eighty-eight  percent of all those citing perceived affordability challenges were subsidy-eligible. Consistent with our February findings, most of the subsidy-eligible respondents (66 percent) who cited perceived affordability as the reason they stopped shopping were aware of neither their eligibility nor the amount for which they were eligible.

Nevertheless, both factors appear to be strong contributors to enrollment. For example, previously uninsured, subsidy-eligible shoppers who indicated that they knew their subsidy Amounts were almost three times as likely to report having enrolled as those who did not (Exhibit 6). Consistent with this finding, 71 percent of the respondents who reported shopping but not enrolling indicated that they would be more likely to enroll if they had more information about the cost of different plans (including subsidy eligibility, net -of-subsidy premium amounts, out-of-pocket maximums, and expected out-of-pocket total cost).

Perceived affordability was also the reason offered most often for not enrolling among those reporting that they had not even shopped for coverage; it was cited by 71 percent of all respondents in this group and by 75 percent of the subsidy-eligible individuals in this group. Ninety percent of those citing perceived affordability challenges who did not shop were subsidy-eligible. Seventy-nine percent of the subsidy-eligible respondents who cited perceived affordability as the reason they did not shop were unaware of their eligibility or the amount of subsidy for which they were eligible.
The relentless smearing of the law by Republicans and their third-party allies like Americans for Prosperity doubtless deterred many from finding out what the ACA had to offer them, as in the case of the Fox-watching Pennsylvania logger who probably would have died if his progressive friend didn't drag him to a computer. Others were deterred by the first two-and-a-half months of web dysfunction. (In a March 2014 post, Laszewski cites the volume of exchange visits and phone calls as of Feb. 1 as evidence that people were trying but not liking the product on offer. But that assumption is pretty lightly supported.)

Yet in the end, signups still exceeded CBO projections. And that points to Laszeweski's second blind spot: getting information to tens of millions of people in 50 states, most of them at the lower end of the income distribution, is a slow, hard process. Designers of the law knew this. The CBO knows it: that's why its projections have always mapped a four-year progression to full takeup. The most recent projections for takeup of private insurance on ACA exchanges are 6 million in 2014, 13 million in 2015, 22 million in 2016 and 25 million in 2017. In 2011, the projected glide path for the same for years was 9m, 14m, 22m, 23m.

Perhaps Laszewski has explained elsewhere why he thinks the ACA exchanges won't be able to keep pace with CBO projections going forward. But the assumption voiced in this post -- that two thirds of those eligible for subsidies rejected ACA insurance because they didn't like the offering -- looks unsupported.

Update: some further thoughts:
Early in the post, Laszewski makes a broader case for sources of the ACA's unpopularity and possible difficulties going forward. There's some truth in it, but also some sleight-of-hand:
Most voters are still very unhappy about Obamacare. They hate the individual mandate and they find the health plans––with their after subsidy premiums still too high, the deductibles and co-pays way too big, and the narrow networks too confining––unattractive. 
It's true that the individual mandate is unpopular -- and vulnerable to the constant attack to which Republicans have subjected it since Obama was elected. Asked by the Kaiser Family Foundation in December 2008, before the ACA was drafted, whether they would support a requirement that all Americans carry insurance, most poll respondents said yes -- until they asked whether they would still support the requirement if it caused some people to buy insurance they found too expensive that they didn't want. With such caveats, support plummeted, from 67% to 28%.

It's also true that people used to employer-sponsored insurance as we've known it are not going to be crazy about high deductibles or narrow networks. But Laszewski is fusing three possible streams of discontent here: overall Americans' perceptions of the ACA, the reactions of uninsured Americans who did not buy, and  those of buyers who are now starting to access their new insurance.

Americans overall know very little about the ACA. The Kaiser Family Foundation conducts monthly polls, which invariably find that respondents approve of virtually all its provisions -- except the mandate -- but disapprove of the law as a whole. As for the still-uninsured, we've just seen McKinsey's evidence of their ignorance of what's on offer. And regarding those who have signed up: 85% qualified for subsidies. Of those, probably more than half qualified for Cost Sharing Reduction, which reduces deductibles and out-of-pocket expenses for those with incomes under 250% of the Federal Poverty Level -- and quite radically for those under 200% FPL.  In Washington State, which breaks out signups by income level, 59% --85,686 out of 145,607 private plan signups --were under 250% FPL, and about 40% under 200% FPL.

The subsidies and CSR should mitigate a lot of the discontent Laszewski anticipates from ACA private plan buyers. He may have his ear to the ground -- and may prove right that many will not be thrilled with the product. But it's awfully early for hard evidence.

As for narrow networks, while it's true that they give people pause, it's also true that health insurance in the U.S. is relentlessly trending that way -- employer-sponsored insurance as well as insurance on offer in the individual market. That's because U.S. healthcare providers have too much pricing power in a fragmented market, and narrowing the network is insurers' chief means of clawing back some leverage. That is not going to change unless states or the federal government impose uniform price controls of some sort -- as governments do in every other wealthy country.

In any case, there's no real data that I know of supporting Laszewski's assertion that Americans are failing to buy private insurance on the exchanges because they don't like what they see.

1 comment:

  1. Do not underestimate the number of persons who are wary of buying anything on a computer, and/or do not have the bank accounts and computer access to do so, or were discouraged by multiple log ons and kick offs.

    The Massachusetts roll out in 2006 had an informational website no different than e health insurance, and then the enrollee went to a physical office and filled out a paper app.

    This process would have cost the federal government more money, of course, and the right wing would have fulminated at the costs, but it would have attracted more of the uninsured.