By far, the most popular provision of the Affordable Care Act is the ban on denying coverage, or charging higher rates, to those with pre-existing condition. This bar is known in the parlance as guaranteed issue and community rating. As I noted in Unraveled:
A September 2009 Kaiser survey found that 80% of respondents supported this ban – that included 88% of Democrats and 67% of Republicans. Among those supporters, however, only 56% still favored the provision if it resulted in higher premiums; 36% would oppose it. Supporters almost certainly did not realize that requiring insurers to cover sick people would necessarily shift the cost onto everyone else.
Today’s Times explains in stark detail just how expensive this coverage is.
It has turned out that so many marketplace customers need expensive medical care that some insurers are spending more on claims than they earn in premiums. And the federal government’s strategies for protecting insurance companies from large losses have not been as effective as hoped.
Insurers, including a few big ones like Aetna and Humana, are withdrawing from the marketplaces in many states, saying they are losing too much money.
Even a small number of customers with serious conditions can greatly increase costs. Roy Vaughn, a senior vice president at BlueCross BlueShield of Tennessee, said that just 5 percent of the company’s marketplace customers had accounted for nearly 75 percent of its claims costs.
Further, those who receive care frequently drop their coverage, leaving insurers with unpaid bills:
But insurers say they also wish the government could make it harder for people to drop their coverage after their health problem is treated. Health Care Service Corporation, which operates Blue Cross plans in five states, said less than half of its marketplace customers paid for coverage for the full year.
Ms. Latil dropped her coverage recently; she had finished her hepatitis treatment, a nearly six-month regimen of the drugs Sovaldi, Daklinza and ribavirin. It was not a willful swipe at the system, she said; she was struggling to make her premium payments of $179 a month.
“I got my stuff taken care of,” said Ms. Latil, who will soon have insurance through her job. “I am so extremely grateful.”
Some have argued that the GOP decision to make the risk corridors budget neutral (a budget President Obama signed–don’t forget) have contributed to the failing marketplaces. The Times counters that the overly sick risk pools explain the shortfalls:
There are other reasons insurers are raising their rates or leaving the marketplaces. A big one is that the Obama administration, thwarted by Republican opponents in Congress, has paid out only a fraction of the $2.5 billion it owes insurers under a provision of the health law that was supposed to protect them against unexpectedly large losses during their first few years in the marketplaces.
But these payments would not be so important if more of the roughly 10 million marketplace customers were in good health. The Blue Cross Blue Shield Association reported in March that new customers who bought marketplace plans from its member insurers in 2014 and 2015 had higher rates of hypertension, diabetes, coronary artery disease, depression, H.I.V.and hepatitis C.
The supporters of the ACA, from President Obama on down, insisted that guaranteed issue would not increase premiums because enough young and healthy people would enter the risk pools to diversify the costs. The arrogance of the central planners is now on full display. An honest, frank conversation would have told the American people in 2010 that they had to sacrifice to help those who were sicker. This is a worthwhile argument, but one that was never made. I wrote in Unraveled:
But the American people did not understand that this was how the law would operate. President Obama’s long-time strategist David Axelrod conceded this critical contradiction of selling Obamacare. “We’ve created a sense that everyone can expect to win,” Axelrod observed, where “nobody has to sacrifice.” 66 In February 2009, the Kaiser Family Foundation surveyed whether people would be willing to sacrifice their own health insurance policies in order to achieve national health care reform. 67 The majority answered no: 56% of respondents said “if policymakers made the right changes, they could reform the health care system without changing the existing health care arrangements of people like yourself.” This is impossible. In contrast, only 37% acknowledged “making any real reforms to the health care system will probably require people like yourself to change your existing health care arrangements.”
Instead, we were lied to. “If you like your plan, you can keep your plan.” Perhaps the only person who was candid enough to admit the truth was Jonathan Gruber, who said “Americans want a fair and fixed insurance market…. You cannot have that without some redistribution away from a small number of people.” In hindsight, “small” turned out to be quite large.