The difficult transition from substandard to standardized coverage

Some years ago, driving through an end of town where pawn shops and boarded up homes are common, I saw a small placard sign nailed on a telephone pole. “Buy Health Insurance,” it touted with premiums as low as $25 a month. I was tempted.

Health insurance, for me and for most Americans, is a necessary part of life, similar to home rent or mortgage, grocery bills and gasoline. Insurance is essential because a hospitalization for a few days costs $10,000 and medical bills for a major illness can lead to hundreds of thousands of dollars in payments. So it is no wonder that the Affordable Care Act (ACA), aka Obamacare, has created anxiety among many Americans.

And, without doubt, the ACA has caused the health insurance market to go into upheaval, with a nonfunctional Healthcare.gov website, with unexpected insurance cancellation notices, and now with a proposed “fix” by President Obama.

So let me try to put things in perspective.

The ACA is really a “Health Insurance Reform Act” — its greatest impact is to increase the number of insured individuals, to guarantee essential benefits, and to regulate health insurance companies. Perhaps most importantly, it promises health insurance no matter what your preexisting conditions are.

Today, 49 percent of Americans get their insurance from their employer and 28 percent are on government insurance such as Medicare or Medicaid. Combined, this represents nearly 80 percent of the population and they are largely unaffected directly by ACA. Another 15 percent are uninsured and they are being required to buy insurance; many of them will be helped with subsidies. Then there are 5 percent of Americans who have individual plans,and half of them are receiving letters from their insurance companies cancelling their policies.

These individual health plans vary. Some are Cadillac plans and they likely are not being cancelled because they meet the new benefits requirements. But many are “junk” or substandard health insurance, and they are being axed. Often, you only realize you have a substandard plan when you get ill.

I have patients who stop coming to the clinic after the few initial visits and then become so ill they have to be admitted to the hospital. When I ask them why they stopped taking their lifesaving medicine and making clinic visits, their response is simple: “My insurance ran out.”

We know such substandard insurance plans abound. Of all the bankruptcies in America, 60 percent are due to medical bills, and 78 percent of these, are among patients who had health insurance and paid their monthly premiums. Imagine, going bankrupt from medical bills when you have health insurance. This defeats the purpose of having insurance. The ACA helps individuals by standardizing insurance benefits into 10 essential categories which include coverage for hospitalization, maternity, chronic disease and mental health, among others.

Some say the ACA standardization is an upgrade of the insurance coverage. But I don’t believe it’s an upgrade from “economy to the business class” — it’s more like having all the basic safety features. It’s like going from a single engine Cessna to a commercial plane.

That insurance coverage offered on the telephone pole for $25 a month and those policies being cancelled fall into this category.

The transition from substandard policy to standardized coverage will be difficult. A 30-year-old man is upset because he now has to pay a higher premium than a 30-year-old woman has to pay. But honestly, discriminating against a young woman by having her pay higher health insurance premiums because she might bear children one day is morally unacceptable.

To ease the transitions, the ACA had a “grandfather clause” — which is where the phrase “If you like your coverage you could keep it” originated. However it was only if no changes where made to it after March 2010 when the law was passed. The “fix” President Obama has proposed is to extend the grandfather clause.

Another major impact of ACA on health insurance is stricter regulation. Now, insurance companies are required to spend 80 to 85 percent of the premium money towards clinical care services (not administration) — and any additional money has to be refunded. In 2012, under the ACA, $1.1 billion dollars were returned to policyholders through refunds. Such regulations ensure that insurance companies don’t make a killing off of policyholders.

The biggest question looming on the mind of most Americans is probably this: How will all these changes impact premiums? It’s hard to tell. But it will not be a repeat of the decade before the ACA, where premiums doubled and many were dropped from their insurance just when they needed it most. Yet, the transition will be a bumpy ride.

Manoj Jain is an infectious disease physician and contributor to the Washington Post and The Commercial Appeal.  He can be reached at his self-titled site, Dr. Manoj Jain. This article originally appeared in The Huffington Post.

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  • doc99

    Substandard insurance? I’d say that for this cancer patient, the Unaffordable Insurance Act has forced her

    • southerndoc1

      ” thanks to the Unaffordable Insurance Act, insurers have been given the green light to dump doctors from their networks.”

      Insurers have always had the green light to dump doctors: that has nothing to do with the ACA.

      Check out May Wright’s comment above.

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Yes, that’s a great thing the ACA does by eliminating coverage limits so insurance doesn’t just “run out” when you need it most, particularly for folks tempted by cardboard signs selling $25 health insurance.
    However, I would venture a guess that people will still show up at the academic center hospital (if it’s in their network at all) because they are not taking “lifesaving medicine”, since their insurance never kicked in, and lo and behold they didn’t have several thousands of dollars laying around to tide them over until the catastrophic high deductible was extracted by the insurance company.
    There is nothing even mildly progressive about this law.

  • Ron Smith

    Hi, Manoj.

    I respectfully disagree. You offer opinion but no substantive and demonstrable data sources for the numbers that you offer on the types of plans that were out there.

    The comment about the grandfathered plans is straight Democratic policy line and not what the President promised repeatedly ad nauseum. If he had stated it the way it is then Obombcare would probably never have passed in the first place.

    In total, this is a schill post representing a dishonest president caught without question in a falsehood trying to hide the pure ideologue who will say anything to force his views on everyone. That’s the Democratic way.

    Respectfully I say enough of this nonsense. It soured a long time ago.

    Ron Smith, MD
    www (adot) ronsmithmd (adot) com

  • doc99

    Say, here’s another family who’s making the transition from substandard insurance.

    A Gainesville family is fighting for their childrens’ lives.

    Ronald and Krista Alford’s two children, Hunter and Mikayla, were born with extremely rare types of cancer.

    Now, sven years into fighting that battle, they’ve been hit with a new one: their children’s insurance has been cancelled, affecting Hunter’s chemotherapy.

    News 12′s Allison Harris brings us their story of struggle .and strength.

    Hunter Alford is due for his next round of chemo.

    As of right now, his mom Krista says, he’s unlikely to get it.

    “Since his insurance was dropped, we’re thinking about cancelling his chemotherapy,” Krista Alford said.

    http://www.kxii.com/news/headlines/Gainesville-family-fights-for-childrens-lives-after-insurance-cancelled-232923131.html

    What a nightmare…

    • http://onhealthtech.blogspot.com Margalit Gur-Arie

      This is not a “cancellation”. This is a Medicaid child whose card got somehow lost in the shuffle. The hospital should be able to verify eligibility with the State, and either way should not deny him treatment.
      Besides, this outrage coming from Texas, a State that decided to throw a whole bunch of poor people under the bus and decline Federal funds to expand Medicaid services (as inadequate as they are), is a bit disingenuous, I think.

      • May Wright

        You are absolutely right, Margalit. Although this story could be used as an example of how incompetent government can be when it’s in charge of health insurance, it has nothing whatsoever to do with the ACA.

        This sort of bureaucratic mix-up happened plenty under Bush as well, I saw it personally. The only thing that would astound me would be if it DIDN’T keep happening under Obama.

        I am a huge critic of the PPACA and of government involvement in healthcare and health insurance in general, but it doesn’t help matters any to pass on fake or misrepresented anecdotes to support ones case. Both sides of this debate need to be careful to “keep it real”.

        • http://onhealthtech.blogspot.com Margalit Gur-Arie

          Right. Particularly since there is enough “real” stuff to go around for both sides.

          • doc99

            For Dr. McLaughlin, the damage is real enough.
            The Upper East Side ophthalmologist just got word that Empire Blue Cross Blue Shield has excluded her from its network of doctors to serve patients enrolled in its new individual and small-group medical policies under the Affordable Care Act.
            That means her patients who join the new policies will have to pay entirely out of pocket if they want to keep her as their doctor.
            McLaughlin expects an uproar when patients find they can no longer see their regular doctor.
            “There’s going to be mass confusion come January,” she said.
            It was the second ObamaCare shock for the doc, who had previously gotten a letter from Empire Blue Cross telling her it had canceled its coverage of her own four-person office to comply with ObamaCare.
            http://nypost.com/2013/11/25/obamacare-hits-doctor-with-double-whammy/
            Happy Thanksgiving All.

          • http://onhealthtech.blogspot.com Margalit Gur-Arie

            Yep. This is the real problem, and it has a built in time delay. It should blow up in earnest around the same time people figure out that the affordable premiums come with unaffordable deductibles and very few doctor/hospital choices. Happy Thanksgiving indeed!

  • Thomas D Guastavino

    The ACA will fail not only because its implementation was based on a number of false assumptions, but because it attacked the wrong problem. When will we admit that the main issue with health care funding is not who pays the bills but what will be paid for, how much, and what hoops do we need to jump through to get it. Remember, Medicare (socialized medicine for the elderly) worked very well for over 30 years because it paid well without question. Cost overruns occured because no one anticipated the technology explosion and there were some abuses that could have been easily corrected. Medicare stll exists of course but it is being threatened by reimbursement cuts and more stringent regulation.

    • http://onhealthtech.blogspot.com Margalit Gur-Arie

      I think the ACA did attack one of the right problems, and that could not possibly have been enough, because the “other” problem just got worse as a result. Moreover, it attacked the right problem with the wrong weapons.
      Medicare is a victim of its own success in keeping folks alive for much longer than was anticipated. Medicare tax needs to be increased, and younger, healthier people need to be added to the pool. The bigger and more diverse the pool, the lower the insurance rates become. If we are going to subsidize health insurance for some, I see no reason to funnel a portion of those subsidies into corporate profit margins.

      • Thomas D Guastavino

        If the one “right” problem in the ACA you are refering to is the age 26 coverage, pre-existing conditions, etc. then that was the easy part. It does not take great leadership to give away free stuff. Real leadership comes from figuring out how to pay for it without braking the bank or forcing the providers into virtual servitude. Medicare became a victim of its success because when the technological advances occured we nearly bankrupted ourselves trying to be all things to all people. As a provider it is virtual suicide to not do so given the runaway malpractice environment. As far as increasing the risk pool one good idea I support is to allow patients over the age of say 55 to “buy” into Medicare. Finally, the best way to limit the “corporate greed” you seem to be so concerned about is to maintain and increase competition. Allowing insurers more leeway to compete across state lines would help.

        • http://onhealthtech.blogspot.com Margalit Gur-Arie

          I agree that the preexisting and 26 were the easy part, because nothing was really given away there. The employer market, which is by far the largest market, never had a problem with preexisting conditions (as long as you stayed in it), and insuring 26 years old for a fee (it’s not free), is not really a problem at all.
          And yes, real leadership does come from figuring out how to pay for it, “it” being the expansion of access to everybody, whether poor or middling or rich. One of the tasks here would be to figure out that we are paying too much for collateral things that are not direct medical care. We are paying a fortune for administrative complexity introduced exactly by the fact that we have so many insurers, each with a whole bunch of different plans, different rules and regulations, in addition to government regulations, which are completely out of control. We are paying too much for drugs and devices, and we are paying too much to hospitals (facility fees being just one example). We are probably paying too much for certain invasive specialties as well.

          On the other hand, we are shooting ourselves in the foot by paying too little to primary care and destroying what is most likely the only means to control frivolous spending.

          And now we are paying insurers to take more customers on, based on some crazy definition of risk and premiums, and part of what we pay them (taxpayer money) in subsidies is directly going to profits. Insurance stocks are skyrocketing. If we just opened Medicare to anybody that wanted to buy into it, and subsidized (a discount really) only those people who bought Medicare and were poor enough, we could have saved a bundle. If Medicare got bigger and was allowed to negotiate with suppliers, we would have saved another bundle. Administrative simplification would yield one more bundle. Keep adding bundles and pretty soon we have real money.

          Free market competition should occur at the provider level, not middleman level. It adds no value and it creates a lot of perverse incentives if our market is the insurance market, across states lines or otherwise. You can see the effects of this competition now on the exchanges, where “narrow network” products are proliferating to create the illusion of lower costs. This is where “servitude” of providers is being created: you either accept ten cents on the dollar or you’re out of my network. That’s how insurers compete. I am not sure this is what you really want to see.

          • Thomas D Guastavino

            If I read your post correctly it appears that you advocate a single payer but would maintain competition amongst the providers. As a provider I can tell you this would be a disaster. Already the number of providers willing to accept Medicaid, and increasingly Medicare, is threatened due to plummeting reimbursements and more burdensome regulations. Although it is still not easy, it is still easier to bring pressure to bear to change a decision made by a private insurance carrier then it is Medicare.
            However, I would more happy to support a single payer system, the moment we as providers are allowed to unionize.

          • http://onhealthtech.blogspot.com Margalit Gur-Arie

            You will have to “unionize”, or at the very least negotiate prices together. It cannot be a unilateral decision of the “take it or leave it” type. I would think that it will most likely have to be by state, or even more granular than that. Hospitals in Maryland are already operating this way to a large extent.

          • Thomas D Guastavino

            Interesting…..Can we go on strike for tort reform or hours worked? If our malpractice rates go up can we call for a strike to get a raise? What about Hospitals, Physical therapists, or nurses. Do they organize too? Would drug and medical device makers have to get government approval before doing research to guarantee they get paid? I could go on.

          • http://onhealthtech.blogspot.com Margalit Gur-Arie

            You can go on strike today if you wanted to. Nurses do have unions today in the US. Drug and medical device makers do have to get government approval before they market or sell even one pill today. I could go on.

          • Thomas D Guastavino

            Some Nurses are unionized, some are not. Physical therapists. Hospitals, physician assistants, nurse practitioners, CRNAs, Etc. …Etc. are not. Under a single payer I seriously doubt that the drug and medical device makers would spend one red cent on R&D without some reassurement from the governement that they will be paid first. As far as physicians going on strike, well, that is already happening in the form of furthur restrictions on Medicaid and now Medicare patient acceptance that looks like is only going to get worse under the ACA. Also, the effect of the wave of physician retirement is going to be considerable, all because the ACA attacked the wrong problem.

  • Tiredoc

    Ah, yet another post obfuscating the point. Obamacare certainly does standardize health insurance, I’ll give you that. The dramatic increase in cost doesn’t really have anything to do with all of that.

    The reason for the 300% increase in premiums for 30 year olds is that insurance companies are prevented from charging 60 year olds more than 3 times what they charge 30 year olds. The purpose of this is to massively subsidize insurance by overpaying for 30 year olds, thereby maintaining a progressive tax model in insurance cost.

    Just run the subsidy calculator, and it’s obvious. Obamacare wants healthcare to be a progressive tax, capped at 9.5% of income. It doesn’t matter how old you are, your premium is based on what you make.

    Argue about the merits of the coverage package if you want, but the economics of the ridiculous premiums are about hiding the true subsidy. Obamacare could’ve have passed with the truth, which is that subsidizing people with pre-existing conditions needs $30,000 per year per person in government subsidies in order to get customers. Bankruptcy is a cheaper option.

  • doc99

    Severing the Doctor Patient Relationship – Collateral Damage
    Fox News Anchor Loses His Doctor
    http://therightscoop.com/fox-news-anchor-loses-doctor-because-of-obamacare/

    Surely, there’s a better way.

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    That’s because individual insurance is the wrong paradigm for medical services. This should be a national budget item. Every year we all contribute a percent of our earnings to the pool. Every year, most of us will use much less than what we contributed, some of us will use more and a few will use a lot more. In years to come, things will change, and light users may become heavy users and vice versa. Some will die and others will be born. We adjust the budget (i.e. our contribution) as we go. There should be enough in there for excellent medical care for all. Those who have discretionary income and a taste for finer things, can also buy more luxury accommodations and elective stuff through an insurance model, if they choose to, or by direct cash payment.
    The only obstacle to this most efficient system is our need to overcome the pettiness of obsessing over how many dollars exactly is each person contributing to the effort, and how it correlates to their usage. If you think about it, it’s really not that important in the large scheme of things.