The New American Coverage Crisis

Prior to January 1, 2014, the usually accepted estimate of the number of uninsured people in this country will be 48 million, or about 15 percent of the population.  But on that day, the number will jump to 64 million as almost 16 million people are lost from the insurance roles.  Overnight, 20 percent of the American population will be uninsured, and the Affordable Care Act will be to blame.  This is bad news not just for the newly uninsured, but also for any health care provider who wants to stay in business.  But the worse news is that there are two more waves of this to come.

So why are so many plans being cancelled when the ACA was passed as a way to bring coverage to 30 million people?  Because in seeking that coverage level, the law mandated that every insurance plan in the country meet four requirements: 1) Offer a certain package of benefits that it may not have offered before; 2) eliminate limits on pre-existing conditions; 3) eliminate limits on lifetime caps; and 4) apply a maximum community rating provision of three to one.  16 million individual health plans across the nation do not meet these requirements, and must be flat-out cancelled on the first of the year in order to keep in compliance with the new ACA mandates.

But it’s not actually the 16 million cancellations themselves that are the issue with the impending jump in number of the unemployed.  The real issue is the cost of replacing these cancelled plans.  Taken individually, any one of the four ACA mandates above would have raised the cost of a health plan, but all four going into effect at one time sends costs through the roof.  As I wrote in an earlier article, if the issues that led to the country’s cost crisis aren’t fixed, then it is impossible for the ACA as it’s written to fix anything.

Although the newly uninsured still have options, these options are costly, both in terms of money and value.  People have the choice of buying a more expensive plan from their current insurer that meets the ACA requirements or they can buy a plan off of their state exchanges.  However, the plans off of the exchanges aren’t the deals they’re being made out to be, even with the government subsidies.  What’s often not being advertised is that the exchange plans are high deductible health plans.  When a person’s deductible increases from $500 to $6,500 a year, the $250 a month plan that was bought through the exchange actual averages closer to $800 a month.  Consider also that regulations were changed from mandating that insurers allow 90 days to cancel plans for non-payment of premiums down to 30 days, so you can get cancelled in March because you went broke meeting your deductible in January.  You’re paying a of money to your insurance company before they even kick in a dime towards a doctor’s bill.  To add to this problem is what a buyer gets for their money through the exchanges.  Many of the exchange plans are only being accepted at community-level health facilities because of the plans’ low reimbursement rates and high risk pools.  If you need advanced care at a world-class facility that costs more money, you just may be out of luck.

(And I never in my career thought I’d be saying this, but let’s show a little love for the insurance companies, shall we?  The high costs aren’t their fault.  They are mandated to make their plans comply with the law.  And if you think they are simply taking advantage of the law to jack the rates up, think again, because every state in this country has a government authority that approves insurance companies’ rates before they’re passed to the consumer.)

To be honest, on New Year’s Day the real number will be less than 16 million, but not by much. By the time the enrollment period ends in March, about 300,000 people are expected to have been signed up for insurance through Medicaid, and an equal number will have insurance through the exchanges. In addition, some people will be able to afford pricier plans from their current health insurers.  These aren’t encouraging numbers, and simply because people cannot afford the new health plans.  Consider how only 50,000 of the reportedly 975,000 applications for health insurance plans submitted have so far been sold.  The high costs of the plans are almost certainly the prevailing factor for why only 1 in 20 applications have resulted in a sale.  With these persistent cost issues at play, there may not be 64 million uninsured people in the country on New Year’s Day, but we’ll be very lucky not to have only 60 million.

The individual mandate is just the cause of this first wave of the new insurance coverage crisis.   The second wave will begin in 2015 as the employer mandate makes it too expensive for businesses to keep their employer-sponsored plans.  The third wave begins the year after that, as the average annual increase of health care continues to rise at its 8% to 12% rate, making insurance increasingly cost prohibitive for millions more.  And the third wave will continue indefinitely, year after year, until the root issues that caused health care costs to go up are addressed.

By Matt Haarington

Staff Writer