Friday, November 8, 2013

Five things ACA supporters are just learning (Part I of III)

… that ACA opponents knew from the beginning.  That’s why we were ACA opponents in the first place (duh).

See the full article here.  

“1. Premiums will go up for many people.”

Tell me, those of you who paid attention in Econ 101, what happens when you simultaneously:

1) Increase costs of suppliers (forcing insurance companies to cover more services and more people)
2) Increase risks to suppliers (forcing insurance companies to cover those with pre-existing conditions)

Guess what?  Suppliers will grab additional revenue from wherever they can.  In this case: you, the esteemed policy-holder.

Now, I know I’m oversimplifying a bit for the sake of brevity and clarity, but nothing I omitted changes the underlying principles of how market participants respond to market changes.

Having said that, I know that in our current healthcare marketplace, insurance companies essentially function as the gate-keepers to at least half-way decent care.  I also know that these same insurance companies have regularly abused the pre-existing condition disqualifier.  If you have a cold when you attempt to sign up for insurance, oh look!  You have a pre-existing condition and are not covered for anything.  I’m exaggerating, but not by much.

Normally I’m in favor of free market solutions, but when abuse of the little guy is so rampant and widespread, I think we need to do something via government channels.  To address the pre-existing condition issue, assuming no other health reform was taking place, I would have supported simultaneous:

1) Limits on what is considered a pre-existing condition such that any given insurance company could deny someone coverage.

2) When a person applies for insurance, a decision will be made whether to cover them or not within 72 hours.  If that person is denied based on one of the allowable pre-existing conditions, the insurance company issuing the denial has 72 hours to both notify that individual’s state Department of Health and Human Services (or whatever it’s called in their state) AND send a denial letter to that individual either electronically or by mail so they have evidence of being denied coverage.

3) Such individuals are covered through a federal or state-run subsidized risk pool which would hopefully provide better reimbursement than Medicaid.  Such a risk pool would be funded by ….

4) A tax levied on all health insurance companies operating in that state (or at a national level – either way).  The amount would be determined annually by actuaries and would use a company’s premium revenue less claim payouts as a tax base.  Additional reductions to the tax base are allowable for claims paid for any individuals who could have been denied coverage based on the list determined in step #1.

This approach would ideally accomplish:

1) Limitations on pre-existing condition denial abuse by insurance companies (step #1).

2) Incentives for the insurance companies to nevertheless absorb the cost of people with pre-existing conditions (step #4).

3) For those companies who would rather someone else pick up the tab – fine.  But they are going to give the applicant a quick decision (step #2), help pay for it (step #4), and timely provide the necessary documentation to allow that applicant to get coverage (step #2).

4) Coverage for anyone who applies for it (step #2 or #3).

5) Incentives to keep premiums from rising too much (step #4 and the lack of “minimum essential coverage” guidelines) and incentives to keep collections from insurance companies reasonable (step #4).  Any funding shortfalls would have to be made up the next year.

Let me know if I missed anything.

To be continued ….

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