What if the uninsured don’t buy Obamacare?

Now that consumers can generally make an efficient health insurance purchase at Healthcare.gov and most of the state-run exchanges, we can finally get to the real question.

Are the healthy uninsured going to buy it?

The big health insurance changes Obamacare made to the individual and small group market were arguably done in order to get everyone, sick and healthy, covered in a more equitable system.

To be clear, no one I know of wants to go back to the prior health insurance market that excluded people from being covered because of pre-existing conditions.

But what if most of the uninsured literally don’t buy Obamacare?

Then people will question whether or not all of this change was worth it. Why did those who were in the old individual and small group market have to accept all of the expensive changes, narrower networks, higher deductibles, and fewer choices if the uninsured largely don’t want it?

Are we moving away from a system where only the healthy could buy health insurance to a system where only the sick want to buy it? 

As I have reported on this blog before, many working class and middle class subsidy eligible people will find health insurance premiums on the exchanges, after federal subsidies, at about 10% of their after-tax income. The average standard silver plan deductible is almost $2,600 and the average bronze deductible is $4,300 according to Avalere Health.

More than two-thirds of silver plans sharply reduce the number of hospitals in their provider networks over typical employer plans according to a McKinsey study. That means most of the second lowest cost silver plans — the plan the subsidy is tied to — will be a narrow network plan.

It therefore becomes a difficult decision deciding whether to buy or not buy a health insurance policy.

A recent Washington Post article, “Health Law Provides a Comfort to Those at Risk,” told one side of the story. It recounted the relief a number of people had to finally be able to buy a health plan because they could not any longer be excluded.

One fellow intended to have gall bladder surgery as soon as his coverage was effective this month. Another needs surgery for endometriosis. Another women, with high blood pressure and a congenital heart defect, signed up as soon as she could. Another lady making $11,000 a year, with a health history that put her into debt, was able to get into Medicaid and be covered for the first time in eleven years.

About the same time, there was an article at Kaiser Health News, “One Texan Weighs Obamacare Options: High Deductible Vs. ‘Huge Fear’.” It describes a 43 year-old woman who is healthy and spent only about $1,500 for minor health care services last year. The best deal she found on the federal health insurance exchange would cost her $178 a month and would have a $5,000 deductible.

She hasn’t bought a policy yet.

She was quoted as saying, “I don’t smoke, I’m relatively healthy, so I was pretty insulted when I saw this [the price]. I was extremely angry actually. I felt hoodwinked by the insurance companies: ‘Oh, here’s this wonderful insurance plan but by the way you need to come up with $6,000 out-of-pocket first before we pay anything.’”

Listening to people defend Obamacare, I get the sense that they think this was the only way we could have done health insurance reform.

I will suggest that the Obamacare architects put most of their emphasis on deciding for consumers that they should have a mandate rich health plan. That in turn drove the cost up, which in turn drove the deductibles up and narrowed the provider networks.

An entrepreneur might have taken a different approach.

In business, this is often referred to as a market driven approach rather than a product driven approach.

A product driven approach is one where the developer tells you what is good for you because they know better. It generally does not lead to a successful business venture.

The market driven approach starts by asking what people really want and then figuring out how to deliver it.

In this case, the entrepreneur might have gone to the woman in Texas — really lots of people in her category — and asked what she wanted. Then the entrepreneur would have recognized that the federal government was willing to pay something toward the premium in the form of the subsidy.

What kind of deductible would she consider reasonable? What kind of premium would she be willing to pay for a plan with her preferred deductible? What kind of first dollar benefits would she value? What kind of catastrophic benefit would make sense?

Then, with her premium, the federal premium, the deductible she considers reasonable, and the first dollar benefits she would value, what kind of plan could we build for her — and the many healthy people who think like her?

That plan would not have the long list of Obamacare mandates. It would not be “as good.” It might even be considered “substandard” by many. But she would value it, particularly because she could afford it, and she would likely buy it.

Would having these kinds of choices lead to anti-selection? They could. But the health insurance industry has a long track record of offering policies people have liked and clearly wanted to keep because they offered lots of choice and variety. After all, Medicare Advantage and Medicare Part D offer lots of attractive choices in a regulated market and they work.

Obamacare is in trouble. The person who needs gall bladder surgery this month bought it. The person who is healthy felt “hoodwinked.”

At its core, what’s wrong with Obamacare? It is a product driven not market driven enterprise.

Until the people who run Obamacare start listening to the people who aren’t buying it, Obamacare won’t work.

Robert Laszewski is president, Health Policy and Strategy Associates and blogs at Health Care Policy and Marketplace Review.

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

    There are three approaches “in business”, not just two: product driven, market driven and sales driven. Unfortunately, over the last half century, the “entrepreneurs” of the insurance business chose the third option, i.e. whatever they can sell, at whatever price the market can bear.

    This approach may be successful for a while, but sooner or later it backfires, and right now it would be backfiring on those health insurance “entrepreneurs”, if government wouldn’t have stepped in to save them with massive subsidies and legislation that forces people to buy these overpriced and underpowered products.This is what Obamacare is about.

    If we just wanted to extend access to health care to our most vulnerable fellow citizens, there would have been no need for such massive upheaval.

    If we wanted to actually provide high quality health care to all, at lower costs, we would have put all insurance “entrepreneurs” out of their peculiar business.

    • Thomas D Guastavino

      And replace the “entrepreneurs” with what?

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

        Well, as you probably know, opinions vary. From the extreme libertarian right, which suggests that we replace them with absolutely nothing, to the extreme socialist left, which suggests that we replace them with government, with the latter ensuring low quality for all, and the former ensuring low quality for most. Both options will surely cut costs and prices to a fraction of what they are now.
        I am more inclined to support something in the middle, where the only constraint I would have is that profit is not proportional to price and volume, and the function is largely that of a third party administrator.

        • Thomas D Guastavino

          Two questions:
          1) If “profit” is not proportional to price and volume what would it be proportional to?
          2) How would such a “third party administrator” work ?

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

            1) Profit (or rather revenue) is proportional to work done by the administrator entity (e.g. pushing paper and money), not to the value of services rendered by others (e.g. doctors).
            2) People will contribute a certain amount to the health care (or rather sickness) fund, and the administrator will draw from the fund to pay for whatever doctors order or do for fund members, without playing God or doctor in its spare time. And since the health of the nation is a public good, the nation will decide how much it wants to spend on this public good, just like it decides how much to spend on highways and bridges. And since that amount is likely a finite amount, the price of goods and services will be negotiated in good faith between the nation and its doctors/hospitals and other suppliers. And when those negotiations are said and done, the administrator will execute our wishes for a fixed fee.
            If the nation is wealthy, doctors will get rich (not the middlemen). If the nation is poor, doctors will be less well off, but won’t have to support the same levels of “entrepreneurs” profits with their own labor.

          • Thomas D Guastavino

            So the role of “administrator” in your health care scenario would be played by…….?

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

            Any company that is willing and able to bid for this service. One thing is certain: the CEO won’t be making enough to have multiple accounts in the Caymans.

          • Thomas D Guastavino

            A “bidder” implies that there must be a “seller” The seller here would be…..?

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

            The American people.
            Not a seller. A buyer of services.

          • Thomas D Guastavino

            So the american people will be the ones who will ask for “bids” and the lowest bidder will become the “administrator”. Do the American people act individually or collectively?

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

            The American people are a free people, so they can decide for themselves how to transact business.
            The American people are also very smart people, and they may just figure out that if they band together, they can negotiate better prices for what is important to them.
            And since the American people are good and charitable people, they will likely make provisions for their less fortunate neighbor.

          • Thomas D Guastavino

            So what is the role of this “administrator” that will “execute our wishes for a fixed fee”? If the American people are so smart and free then why is the government trying to take over health care? If there are truly going to be negotiations for our services does that mean we have the right to pick which patients we choose to treat?

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

            The role of the Administrator is to process bills, transfer cash and issue receipts.
            The American people are being hoodwinked by powerful financial interests, and physicians are best positioned to better inform the public (see my post from today) about these issues.
            Of course you can pick which patients you want to treat, unless you choose to work in an emergency room, which is by definition for emergencies, where nobody gets to pick anything.

            Dr. Guastavino, let’s quit beating around the bush. I want a universal health care system, just like the one they have in Switzerland or Germany or any number of places, where physicians are mostly in private practice, and the country is not Communist or even remotely Socialist. Certainly the bankers in Zurich, or the industrial magnates on the banks of the Rhine wouldn’t define themselves as bleeding heart liberals.

          • Thomas D Guastavino

            You may be surprised to know that I have no intrinsic objection to universal health care because the problem as we see it is not who pays the bills but how much we are paid and what hoops we have to jump through to get it. Part of the reason the period from the mid 60s to the late 90s was called the “Golden Age of Medicine” was that Medicare, essentially universal health care the the elderly. paid our bills without question.
            Current policy clearly demonstrates that once the government gets universal control of health care they will become incredibly abuse to the providers. Therefore, we would be happy to support universal health care the moment we are allowed to even the playing field and allowed to collectively bargain. How the public would be served if physicians were to go on strike I am not sure but we see no alternative.

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

            I am glad to hear that. It’s determined by collective bargaining, but their incomes are relatively lower. They get as much health care as their doctors prescribe (at least the Swiss do), and many have private insurance on top of that for fancier stuff, and they pick and choose their doctors. Malpractice is much rarer than it is here. Those are not cheap systems, and they are also facing raising costs due to aging populations and technology, but these are more dignified systems for all involved.

          • Thomas D Guastavino

            Fair enough. I can only hope that those who are pushing for universal health care here will be honest with the american people as to what to expect.

  • Suzi Q 38

    The young and healthy without insurance will feel little need to buy it.
    They will wait until they need it.

  • Thomas D Guastavino

    It is becoming more and more clear that Obamacare is designed to fail.

  • Anthony D

    Get ready for even higher healthcare costs.

    A new survey of health insurance brokers shows that commercial insurance rates are going to rise “significantly” in 2014.

    The research team at investment bank Morgan Stanley surveyed 131 brokers, finding that December 2013 rates are rising in excess of 6% in the small group market, and 9% in the individual market.

    Among the states seeing the highest annualized rate hikes (for the full 2013 year) in the individual market are Connecticut, which is averaging a 37% increase; Florida (42%); Illinois (33%); Michigan (39%); and Minnesota (35%).

    Among the states with the biggest annualized spike in the small group rates are Delaware, which is averaging a 35% increase; Michigan (30%); and Minnesota (50%).

    Federal Reserve Board Member Jeffrey Lacker said that the FRB is closely watching what impact the higher costs could have on the economy. Lacker said that he expects a “lot of turmoil” in the healthcare industry, and that the Fed will be monitoring how Obamacare unfolds.

    In a speech he said “I think the Affordable Care Act is
    something that we are watching very closely because it’s something that could well have a substantial economic impact.”

    In other words: You can’t hit the average middle class family for $2,000 or $3,000 in additional healthcare costs and not expect some macroeconomic impacts.

  • querywoman

    The Republicans would never have accepted a plan that didn’t benefit private insurance. Oh yeah, it’s better to give insurance companies $6000 a year than to raise taxes for less.
    Obamacare isn’t even applicable to most lower income and middle middle class.
    We shall see how it plays out.

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

    It won’t fly here, because those who make profits from health care here won’t allow it. The Swiss system is not cheap by any measure, but it’s more equitable, and sum total (tax + OOP) is less than what we pay, probably by the amount extracted here for profit, empire building and executive compensation – just a few GDP percentage points, that’s all.

  • querywoman

    I have researched the complicated issue of pretax credits to enable lower income people to buy ACA insurance.
    A lot of the policies average $500 month, which I assume is for one person. And they start reimbursement after a $5000 deductible.
    With the government subsidizing the premium, the insured will still have to pay about $50 per month for the policy.
    Now, if the individual’s income is about $22,000 annually, that’s $600 year for a policy that will still impose a $5000 deductible before it ever starts paying.
    Who benefits off this? It’s obvious the insurance companies do. The tax credit will be part of the annual income tax filing. That creates more work for the IRS.
    Conservatives don’t want to raise taxes and have national health care. So instead we have a system with a $450 subsidy paid to the insurance company by the federal government and a $50 “fine” to the taxpayer/insured for having health insurance.

  • querywoman

    In the urban area where I live, the concierge docs get paid lots of dough, about $400 per month. They can do this with all the medical competition and the upper class here.

  • querywoman

    Or going for direct care. The hospitals still have to take emergencies.
    For a lot of the uninsured who only need occasional care, popping in a minor emergency center makes a lot of sense.
    Most dollars gladly dish up the $4/$10 meds to the insured and the uninsured. It makes patient compliance go up. Doctors also know the most about these older drugs.

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