The Day We All Lost

I have been dreading this day for almost five years.  Bill Clinton, a man known for both his incredible weaknesses as much as for his successes was, above all, candid about his goals for his health care program.  In September 1993 he noted that revamping our system would result in both winners and losers.  It was his belief that the final outcome, universal health insurance coverage, outweighed the costs.  He acknowledged that the healthy and wealthy would have to pitch in, for the good of society, if the unhealthy and the poor were to be guaranteed access.  He wanted to level the playing field.  You may fault his program, G-d knows I did at the time, but you have to admire his candor.

Candor is in short supply.

Everyone lost on Monday, November 24, 2014.  When I say everyone, I mean EVERYONE – the employer, the employees, the insurer, me, and the American people.

This is the story of a Cleveland-area small business.  The names of the business, its owner, and the employees have all been changed to respect their privacy.  I’m certain that this is neither the first nor the last time this will happen.  It is simply the worst I’ve personally witnessed.  I need to share this with you.

Thomas Roberts is an American success story.  He and his parents emigrated here in search of freedom and opportunity.  His first task was to learn English.  He worked hard and eventually purchased a business.  That company has changed, evolved and grown over the last thirty years.  Tom Robert’s business is now a factory with over twenty employees.  Most of his people are unskilled or semi-skilled workers.

I have been Tom’s agent for twenty-five years.  He has always taken a personal interest in his employees.  There was never a question of what was the cheapest way to insure his employees even when many of his competitors declined to offer any benefits.  Our conversations always centered on what was the best coverage available within his budget.  Employers providing group health insurance are required to pay at least 50% of the employee’s premium.  Many don’t.  Thomas Roberts has always contributed a significantly higher percentage.

I moved the health insurance coverage to Kaiser a few years ago.  There were a few bumps in the road during the initial transition, but Tom was certain that this was the best option for his employees and he closed down one afternoon so that I could bring in a Kaiser rep to answer all of their questions and help them understand how to best access their health care.  Employee satisfaction improved.

That satisfaction and the feeling that their employer took care of them and their needs, ended on Monday.

Kaiser, now HealthSpan, decided this past summer to not seek transitional relief.  In other words, all of HealthSpan’s group contracts for businesses with fewer than 50 employees would migrate to new policies under The Patient Protection and Affordable Care Act (PPACA or Obamacare) at their renewal.  Mr. Roberts’ coverage renews December 1^st.

What does that mean?  Under the new law we no longer evaluate risk.  All businesses, the healthiest and the unhealthiest, pay the same rates, the Community Rates, within a designated territory.  Every 30 year old in Greater Cleveland would pay the same price for a HealthSpan Gold Policy.  Every 60 year old, regardless of small employer, also pays the same much higher premium.

The premium jumped over 200%.  

Thomas Roberts was priced out of the market.   Game. Set. Match.  We explored every option, quoted all of the options, and ran the numbers up and down.  We could not find a way to keep group health insurance for his employees.

This is not HealthSpan’s fault.  As pointed out in previous posts, the whole concept of insurers maintaining two separate systems, Pre-PPACA and Post-PPACA, is expensive and inefficient.  Aetna, to the surprise of both agents and insureds, eliminated their grandfathered policies in the summer of 2010.  But this group, incredibly healthy and firmly in the insurer’s best rate class, is a huge loss for HealthSpan.

I spent an entire Sunday in my office designing individual policies for the employees.  Tom was shocked when I showed him the results.  The employees were screwed.  A few could be covered under a spouse’s group policy.  Several would be chased back to Medicaid (taxpayer funded) coverage.  The employees who qualified for a tax credit subsidy would see their monthly payments double or triple.  And the employees who didn’t qualify for a subsidy would now be forced to pay $400 to $600 per month for much less coverage.

We aren’t allowed to have a subsidized premium billed to an employer.  The employer cannot deduct the premium from an employee’s paycheck.  I sat with a young woman who was close to tears.  She won’t be insured as of December 1^st.  Her husband doesn’t believe in insurance.  He grudgingly went along with her decision to participate as long as her share came out of Her paycheck.  But there would be no bills coming to His home.  That would be one fight too many.

I spent two days this week at the Roberts’ factory.  I know how few enrolled for coverage for December 1^st.  What I don’t know is how many will still have insurance four months or six months from now.  And when those newly uninsured become sick or injured in the future it will be you and I, the American taxpayer, who will receive the bill.

The insurer lost.  The employer lost.  The employees lost.  The agent lost.  And in the end society, itself, lost on Monday, November 24, 2014.

DAVE

This post includes a link to an interesting article written in 1994.  Paul Starr, “What Happened to Health Care Reform?”  The American Prospect no. 20 (Winter 1995): 20-31