The House Always Wins

The dealer wasn’t pleased.  There I was, sitting on a 9 and a 3, and I wasn’t taking a card.  “Are you sure”, he asked.  “Yeah, I’m cool.”  His up card was a queen.  He shook his head and continued around the table.  Finally, it was his turn.  He flipped over his down card, a six, and then busted on another face card.  The pit boss came over and gave our table a new dealer.  I told my friends that it was time to go and collected my chips.  They resisted, lost the next two hands, and then agreed to shift tables.

The House always wins.  You may not know how or why, but it does.

Since this is Health Insurance Issues With Dave, the House is the federal government and the cards are The Patient Protection and Affordable Care Act (PPACA).  The dealers and bit bosses?  That would be the regulators who dole out the ever-changing rules and regs.

This blog has contended that the passage of the PPACA began a ten year transformation of our health care payment system.  How we get there may either be by accident and reaction, or it may be entirely by design.  I’m not privy to that information.  This blog can only report on the status of our payment system and leave it for the readers to determine whether there is a pattern or just a random collection of factoids and moments.

We have just ended the first phase of this year’s Open Enrollment Period.  Here are a few things I’ve learned between November 15, 2014 and December 15, 2014.

• Individuals and families saw a large price increase on subsidized health insurance policies.
• The government aggressively pushed Americans to shop on the Exchange for cheaper policies.  They weren’t lying.  There really were cheaper policies.
• More Ohioans were told that they shouldn’t buy insurance.  They should be covered by Medicaid.
• Doctors who accept Medicaid are facing a significant fee cut.

Did subsidized policies take a big rate hike for 2015?  Yes and No.  Let’s look at a real example of a renewal.  Below is the 2014 and 2015 rate information for a woman in her early 50’s.  Her policy premium is reduced by over 50%.  Her deductible and copayments are also subsidized due to her income.

2014                                                                                               2015

$476.26                                   Premium                                   $524.92

265.00                                   Subsidy                                        265.00

$211.26                                   Net Premium                           $259.92

The policy increased 10%.  Though no one wants to pay more, 10% is not unreasonable.  But the client didn’t see 10%.  The client saw 23%.  The net premium is, for the client, the real premium.  Two minutes after you finish applying for coverage you cease to remember what the actual premium is.  The client only knows the net amount.  And now, even without a reduction in the subsidy, the policy is on the road to becoming unaffordable.  What are this woman’s options?  She can resign herself to paying more or she can purchase a lesser policy, a contract with a much higher deductible.

The client was on vacation in the Caribbean when he called me the morning of December 11^th.  I have no idea how much the call cost him, but he had to talk to me.  His hotel room TV had American stations.  He saw a report urging everyone with a subsidized policy to go NOW to healthcare.gov to renew.  Even though we had talked two weeks earlier, he was convinced that his coverage might end if he didn’t stop everything and try to access the Exchange.  I told him to relax.  And don’t forget the sunscreen.

The push was hard and heavy.  The Administration begged, advised, even ordered Americans to go onto healthcare.gov to access cheaper insurance.  And yes, there were cheaper policies, some much cheaper.

Ohioans have three types of cheaper policies:

1. Medicaid like policies sold to unsuspecting consumers
2. The new federally funded co-ops
3. Even higher deductibles

Many consumers were surprised by all of the new choices on the Exchange, such as Ambetter and CareSource.  One client, living in zip code 44118, was really excited about the premium until she discovered that the only available hospitals in Cuyahoga County were St. Vincent’s and Metro.  Really?  Would you really pay for insurance that didn’t include either The Cleveland Clinic or University Hospital?  Many insurers have switched to a skinny network.  Anthem’s individual policies no longer have The Cleveland Clinic in their network, but they still have University Hospital.  But neither?  I don’t think so.  But it is cheaper.  Herding the poor, and the people who make poor choices, into lesser coverage is part of the transformation process.

Major insurers are encountering another type of competitor.  New insurance companies are being created out of whole cloth.  Brand new.  No old debt.  No legacy clients, unhealthy and going nowhere.  These new companies are not only unencumbered by a past, they weren’t even stressed with funding.  We funded them.  The federal government loaned just under $2 billion dollars to create a dozen insurance co-ops to compete with the insurers.  Ohio has InHealth, a company that appears to be offering coverage at reality-based pricing.  Some states, such as Montana and Illinois, have co-ops staking out unsustainable territory at the very bottom of the rates on the Silver Level contracts.  This may damage the future choices of the people in those states, but it saves the federal government money since the subsidies are based on the second lowest Silver rate available.

We were worried about the uninsured.  What we need to address the UNDERinsured.   Each rate increase pushes more and more people to Bronze level policies with few or no office copayments or prescription cards.  Most of my unsubsidized clients are migrating in that direction.  It is the type of policy that I have.  But I also have the corresponding Health Savings Account.  I can withstand the hit.  People purchasing family policies with a $12,000 deductible are often doing this to save a couple hundred dollars per month.  They aren’t putting the money away.  And since they aren’t, there is no way that they can afford to have a small claim.

Yes, a small claim.  If you have incur a $200,000 bill and your insurance pays almost all of it, it is safe to say that the hospital will work with you to collect the little bit that is left.  But if you have an accident and run up a $5,000 bill, you have a problem.  All the insurer did was negotiate the final price.  You are on the hook for the whole bill and you may not find the hospital to be nearly as generous and forgiving.

There is talk about a new level of underwhelming.  COPPER.  One way to make insurance cheaper (and by design/default the entire system less sustainable) would be to offer even lower levels of insurance.  The Copper level might have a $18,000 to $20,000 family deductible.  Less premium now, more bankruptcy later.

The last lesson I learned this time out was about Medicaid.  Insurance rates have increased, in part due to all of the new benefits built into the PPACA.  Even the philosophically opposed have found themselves forced to seek subsidies as the premiums have overwhelmed their finances.  I am finding many young families and most families with multiple children are not qualifying for a subsidy.  No, they are being herded into Medicaid.  It is too early to tell if this is another flaw in the government’s software or if these people are really screwed.  I cannot get the State of Ohio to return a phone call, but their website appears to extend eligibility to higher income amounts if there are children in the home.

This becomes a bigger issue as primary care doctors are about to take a pay cut on Medicaid patients.  As we force more people into Medicaid, many who once had not only their own insurance but also their own doctors, we now will further limit their access to doctors and hospitals.

The first phase of this year’s Open Enrollment was a very long month and this has been a very long post.  But this is no time to suffer from a short attention span.  The transformation I perceive will take place because insurance becomes unaffordable, because the insurance you can purchase won’t be worth having, and because people never aspire to be treated as if they are poor.  And those pressures will usher in a Single Payer (think Medicare-like) system.  Whether that is by design or by accident is up to you to determine.  I just know that the house always wins.