Monday, August 20, 2018

Alex Azar's poison pitch to the unsubsidized uninsured

Charles Gaba is out with a magisterial take-down of HHS Secretary Alex Azar's op-ed touting the Trump administration's promotion of  medically underwritten 'short-term" health plans (now with terms of up to 364 days, renewable twice) as a solution for those who have been priced out of the ACA marketplace.

Gaba points out that in decrying the high cost of ACA-compliant plans for the unsubsidized, Azar ignores:
  • The extent to which various forms of Trump administration sabotage have driven the huge premium increases of the past two years.
  • The premium growth trend in the pre-ACA individual market.
  • The average actuarial value of pre-ACA plans compared to ACA-compliant plans.
  • The likely impact of a barely-regulated short-term market on the ACA risk pool.
  • The gross inadequacies of short-term plans now on the market.
I want to focus on two other major sleights of hand Azar indulges in. The first concerns the target market potentially served by short-term plans, and the second, the source of their affordability.

To frame the market demand, Azar points out that about 8 million people in 2018 will access subsidized ACA marketplace plans, while another 5 million will pay full freight for them
while 28 million other Americans remain uninsured, many priced out of coverage entirely.
That's carefully worded. How "many" are "priced out of coverage entirely"?   According to the Kaiser Family Foundation, the source Azar links to (indirectly, via Vox), the answer, as of 2016, was 2.9 million --- those "ineligible for financial assistance due to income."*

Admittedly, that number has likely grown dramatically in the last two years, to perhaps 5 million -- thanks to premium hikes driven largely by Trump administration sabotage (Gaba estimates that administration actions drove premiums up 17% in 2017 and 9% in 2018). Admittedly, too, unsubsidized ACA premiums were from the beginning a severe financial burden on many of the unsubsidized.  But the extent of the problem and the reach of the proffered solution are grossly overstated by implication at the top. Azar himself projects prospective short-term market enrollment at "up to 2 million, and possibly more" deeper in the piece.

The more fundamental misrepresentation is also by implication, and it's one Republicans have been exploiting since the ACA marketplace launched in fall 2013. Azar avers
these short-term plans can be a good option for many Americans priced out of Obamacare’s regulations — especially small-business owners, independent contractors in today’s “gig economy” and younger Americans transitioning between school and employment.
Strictly speaking, you can't be "priced out...of regulations." The implication, though, drawing on years of Republican rhetoric, is that the ACA's coverage mandates -- e.g.,  the law's mandatory 10 Essential Health Benefits, free preventive care, and ban on annual and lifetime coverage caps -- are the chief source of ACA premium increases.

The coverage rules did increase premiums -- probably by 5-10%, according to various estimates. But their impact was swamped by the main driver of ACA cost increases: the law's protections for enrollees with pre-existing conditions. That is, its prohibition on varying the cost -- and availability -- of insurance based on the applicant's medical condition and medical history.  Republicans claim to want to protect access for those with pre-existing conditions, whose ranks include about 25-50% of the population, depending on how tightly you define the concept.  But Republicans also keep acting to undercut those protections -- and the newly-juiced "short-term" market (short-term in name only) is current Exhibit A.

The plans to be unveiled in the lightly regulated market stimulated by the Azar HHS's new rule extending the range of short-term plans will be cheaper mainly because they're medically underwritten. As I noted recently:
In 2013, an analysis commissioned by Covered California, conducted by Milliman, estimated that extra health benefits mandated by the ACA (compared to typical pre-ACA offerings in the state) would add 4.8% to premiums. Ignoring enrollees' health status would add 26.5% (those are "best estimates": high estimates were 6.5% for more benefits and 40% for pre-existing condition protections.)

If insurers were to offer medically underwritten plans that complied with all or most ACA requirements, those plans would still be much cheaper than ACA-compliant plans in the guaranteed-issue market -- though the cost to the insurer of undertaking the medical underwriting process would have to be priced in.  Such plans might be much harder for people who don't qualify for ACA premium subsidies to pass up.

In his lede, Azar charges that the ACA "effectively split the United States’ individual insurance market in two" -- the subsidized and the unsubsidized. He obscures the fact that his short-term plan initiative, coupled with the effective repeal of the individual mandate, will split the market in three. That is, it will pull out the healthy unsubsidized (and some of the lightly subsidized), worsening the ACA-compliant risk pool and further driving up premiums for the unsubsidized with pre-existing conditions. As a further bonus, it will offer unreliable and in many cases illusory insurance to those enticed into short-term plans. In sum, it will make a serious and worsening problem worse.

* Kaiser's 2016 estimates of the uninsured populations also includes 7.8 million who are eligible for ACA premium subsidies and 3.7 million who were ineligible for subsidies because of an employer's offer of insurance. Some people in these groups might be attracted to the short-term market.

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