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Welcome to New and Unimproved Health Care

Gary Lapon Oct 10, 2013

The centerpiece of Barack Obama's health care law–the state and federal Health Insurance Marketplaces, commonly known as insurance exchanges–came online on October 1.

The long-awaited opening of the "virtual stores" for the uninsured to obtain coverage was overshadowed by the government shutdown that began at the same time. The health care law was a factor in the shutdown–House Republicans refused to set aside their attempts to delay or defund the Affordable Care Act (ACA), causing a stalemate over passing legislation to keep the federal government operating.

When the media reported on the new exchanges at all, it was to document continuing problems with the websites where customers are supposed to enroll. Technical experts say the glitches will be worked out in plenty of time for people to start getting coverage on January 1. But the computer troubles were an unpromising start for a system that has been criticized, by the right and the left, as unnecessarily complicated.

As a result, though, no one is looking at the substance of this central element in the new health care law.

When the media get around to that (if they do) and when the uninsured make it through the online enrollment process, they'll find a system for providing insurance that's nothing like what its right-wing critics claim about it–but that's also not at all the great leap forward its supporters say it is.

From before it became law, the Republicans falsely claimed the ACA was a "socialist" (if only!) takeover of the health care system, aimed at putting the government in charge of decisions about your medical care. New enrollees using the exchanges will be relieved–but probably not surprised–to find that they don't have to go before an online "death panel" to determine if they will be euthanized.

But those who sign up online hoping they will find that "the health care system is being fixed, step by step," as Barack Obama promised, will be disappointed.

The exchanges–like other parts of the ACA, including the individual "mandate" requiring people without insurance to purchase a plan through the exchanges or pay a penalty with their annual taxes–are designed to preserve the role of the private insurance industry, not to guarantee access to affordable, quality health care for everyone. The signs of this underlying priority will be visible at every step of the way.

Much more will emerge over time about the ACA and how it will impact the lives of the millions of people now subject to it. Some of those experiences will be positive–because there are positive aspects to the law.

But at its core, the ACA is a market-based reform that maintains the central role for private corporations in the provision of health care. It will deliver millions of new customers and more than $1 trillion in subsidies to private insurers over the next decade. As for those customers, those who do find insurance through the exchanges will be paying hefty prices for coverage with all kinds of holes and limits. And when all is said and done, the ACA is expected to leave some 30 million people without insurance.

The exchanges are essentially online shopping centers for health insurance plans. Several states, including New York and California, are running their own exchanges, while many others are relying on the federal exchange.

Users can log on, enter their information, and choose between health insurance options at different prices for different levels of coverage. They can also determine their eligibility for Medicaid, the government-run health care program for the poor–and for subsidies to use toward the purchase of insurance from private companies.

Plans come in four tiers, going from bronze, with lower premiums and higher out-of-pocket costs; to silver; to gold; to platinum, which has the highest premiums and lowest out-of-pocket costs.

However, not all states offer much of a choice. In New Hampshire, for example,Anthem Blue Cross Blue Shield is the only insurer participating in the state exchange, though it will offer 11 different plans.

The ACA originally included an expansion of the Medicaid program to everyone earning less than 138 percent of the official poverty line–state governments would be forced to implement the expansion, or lose all Medicaid funding. However, the U.S. Supreme Court ruled that it was unconstitutional to threaten states with losing all their funding if they refused to implement the expansion. Half of the states have essentially opted out of this important aspect of the ACA.

Nevertheless, the Congressional Budget Office predicts Medicaid enrollment will increase by 7 million next year alone, despite the Republican obstructionism. This is arguably the most positive outcome of the ACA–the expansion of premium-free health care with nominal co-pays to millions of poor people.

But Medicaid expansion is also good for business–private companies that run Medicaid managed care plans expect a big surge in revenue as a result. According to USA Today, "For industry titans such as UnitedHealthcare and WellPoint, as well as smaller, Medicaid-focused plans such as Molina, the Medicaid expansion is expected to bring significant enrollment and revenue growth" in the range of hundreds of billions of dollars in coming years.

There are other components of the ACA that are positive reforms–a requirement that health insurance include a minimum level of coverage with free preventive care, and prohibitions on insurers denying coverage due to pre-existing conditions, for example. Young people may remain on their parents' health insurance until age 26, and insurers cannot charge higher premiums for women–who on average access more health care–than for men.

And for the roughly 10 percent of the currently insured who buy health insurance on the private market, they'll find that the cost is less and coverage is better under the ACA.

But weighing against these positives is the mandate–the requirement that individuals who don't have insurance buy coverage from a private insurer or face a tax penalty.

The argument for the mandate is that it will offset increased costs to insurance companies while also reducing premiums for those who need a lot of health care, such as older adults and those with chronic diseases–by bringing healthy, young adults into the system. It's a zero-sum game where the big winner is the insurance industry–the ACA reduces costs for older and sicker people by increasing them for younger and healthier people.

The mandate to buy insurance is to be enforced via penalties on those who remain uninsured. In 2014, the penalty will be $95 per adult and half that for a child, capped at $285 per family, or 1 percent of income after the tax-filing threshold, whichever is greater. This penalty will increase each year, reaching $695 per person and a family cap of $2,085, or 2.5 percent of income, by 2016.

So an uninsured individual making $30,000 a year would pay an annual penalty of $300 in 2014, rising to $750 by 2016, while an uninsured couple making $60,000 would pay $400 in 2014 and $1,390 in 2016.

The penalties attached to the ACA are clearly regressive. According to Health Affairs, nearly 60 percent of the approximately 30 million people who will remain uninsured under the ACA–and therefore subject to a penalty–are low-income. More than 16 percent of the uninsured will be Black, though African Americans are less than 13 percent of the population.

Faced with these penalties, the CBO estimates that some 9 million people will purchase health insurance on the exchange next year. This is expected to reach 26 million by 2018–enough to cut the percentage of the population without insurance in half, according to the estimates touted by the Obama administration as proof of the ACA's concrete advances.

What Obama and other supporters of the law don't say is that the newly insured will also be new customers for the private insurance industry, buying plans with premium payments that will flow into the bank accounts of private companies. And that's not all. The insurance industry stands to gain enormous sums directly from the government, in the form of a subsidies system created by the ACA.

In order to help the uninsured pay for plans on the exchanges, the federal government is offering subsidies to those earning between 100 percent and 400 percent of the federal poverty level–this year, that's $11,490 to $45,960 a year for individuals and $23,550 to $94,200 for a family of four.

According to the CBO's estimates, four out of five enrollees will qualify for a subsidy–those who qualify will receive an average of $5,290 in 2014. Obviously, this will make insurance relatively more affordable–although many individuals will still pay hundreds of dollars per month for premiums, and everyone will be stuck with out-of-pocket deductibles that can rise into the thousands of dollars before insurance kicks in.

The subsidies will be paid directly to the private health insurance companies selling their plans on the exchanges. The CBO estimates that subsidies will surpass $1 trillion in the first 10 years after the exchanges kick in.

All this revolves around the mandate for individuals to buy insurance or face a penalty. But corporations get to play by different rules.

Under intense pressure from lobbyists, the Obama administration decided to delay the so-called "employer mandate" for at least a year. This mandate would require companies with 50 or more full-time workers to offer affordable health insurance to their employees, or get hit with a penalty themselves. As reported this summer:

The administration had estimated that the federal government would receive about $10 billion in penalties from companies that didn't abide by the employer mandate. Then there's the money that at least some companies would have spent to conform, but won't have to now–which is money in the bank, at least for another year.

If there were any doubts left about the business-friendly character of the ACA, you only have to look at the big gains in stock prices for health insurance companies after the ACA passed–in anticipation of increased profits from an influx of customers and subsidies. According to Barrons, "The Morgan Stanley Health Care Payor Index has jumped 73 percent during the past two years, with Aetna (AET) up 64 percent and UnitedHealth Group up 45 percent. At $41.59, shares of HCA Holdings (HCA), the nation's largest hospital operator, have more than doubled over that same span."

The ACA is incredibly complicated, and the Republican lies, misdirection and hyperbole, willingly echoed in the right-wing media, have made it all even more confusing. To make matters worse, the ACA impacts people in similar situations differently based on where they live.

Let's take, as an example, a family of three earning $12,000 per year. Because their income places them well below the federal poverty level, in states that have accepted the ACA Medicaid expansion, they would qualify for Medicaid and have access to health care at little or no cost.

However, if they live in a Republican state that rejected the expansion, such as Alabama, they will not qualify for Medicaid. In Alabama, a family of three must have income under $4,500 to qualify for Medicaid. But because they earn less than 100 percent of the federal poverty level, a family earning $12,000 a year is too poor to qualify for subsidies on the exchange. They will be exempt from paying a penalty, but will almost certainly remain uninsured.

The Republican opposition to Medicaid expansion is particularly cruel given that the states refusing to implement it, including most of the former Confederacy, are home to disproportionate numbers of the poor and nonwhite uninsured. According to the New York Times:

The 26 states that have rejected the Medicaid expansion are home to about half of the country's population, but about 68 percent of poor, uninsured Blacks and single mothers. About 60 percent of the country's uninsured working poor are in those states. Among those excluded are about 435,000 cashiers, 341,000 cooks and 253,000 nurses' aides.

According to the Times, as a result of state-level Republican obstructionism, the ACA "will leave out two-thirds of the poor Blacks and single mothers, and more than half of the low-wage workers who do not have insurance."

That the Republicans would throw these people under the bus to score political points is yet more evidence of the party's racism, free-market fanaticism and cynical disregard for those at the bottom of society.

But it's important to understand as well that Republican state officials are able to weasel through these loopholes because of fundamental problems with the way the ACA was written.

The ACA does not ensure universal access to health insurance and affordable health care. Some 30 million people will remain uninsured years after its implementation, and health care will remain a commodity, not a right, with private companies having a sickening amount of power over whether people get the medical treatment they need or not.

This is best illustrated by looking at what insurance plans will be like for those with incomes between 100 and 400 percent of the federal poverty level–people who will therefore qualify for a subsidy when they buy health insurance on the exchanges.

A single adult living in Los Angeles, California making $30,000 per year would qualify for a subsidy of $276. They would still end up spending $210 a month for a Silver plan–one of the middle-tier levels of coverage.

That silver plan comes with an annual deductible of $2,000, which means paying that amount out of pocket for many services–including surgery, ER visits, giving birth and mental health services–before insurance kicks in. If they require a lot of care, total out-of-pocket expenses could reach the capped maximum of $6,400.

Add the subsidized premium payment to out-of-pocket expenses, and a person making $30,000 a year could end up spending as much as $8,920 in one year. That's a worst-case scenario–but the minimum, if they access enough medical care to cover the deductible and full coverage kicks in, would be $4,512.

That's the middle-tier plan. Alternatively, a lower-tier Bronze plan costs less–$151 a month, after the subsidy–but it has a much higher annual deductible of $5,000, which applies to almost all non-preventive care. Out-of-pocket costs are still capped at $6,400, but if the insured happens to get sick and need their insurance, they could end up paying much more with a Bronze plan than with a Silver plan.

So a Silver plan is most likely a better deal for all but the healthiest people. But $210 a month is a lot of money for someone earning just $30,000 in an expensive city like Los Angeles.

Those earning less than 250 percent of the federal poverty level may qualify for additional "cost-sharing assistance" from the government to help pay these burdensome out-of-pocket costs.

For example, a family of four earning $35,325 a year–which is 150 percent of the federal poverty level–would pay a maximum of $118 per month for health insurance, and would have to buy a Silver plan to qualify for cost-sharing assistance. Instead of covering 70 percent of their costs, like a normal Silver plan, government assistance would drop the deductible from $2,000 to $250, and drop the out-of-pocket limit from $5,500 to $2,000.

But even with premium subsidies and cost-sharing assistance, that low-income family of four could pay as much as $3,400 a year on insurance and out-of-pocket costs–nearly 10 percent of their income. That's obviously a hardship for families barely making ends meet.

The obvious effect of high out-of-pocket costs will be to cause many people to avoid seeking care in order to save money–and take the risk of their condition worsening down the line. A recent survey by HealthPocket found that over 40 percent of people would go to the doctor less if they had a co-payment of more than $50 for each visit. Co-payments for non-preventive visits to a doctor under California's Bronze plan are $60 after the first three in a given year.

What does all this mean for real people?

Randi Jones Hensley, who lives in Texas, is still deciding whether to sign up–or bite the bullet and take the tax penalty. As she said:

For my spouse and me, the Affordable Care Act is far from "affordable." We're already operating on a pretty tight budget, with rent, bills, outrageous student loan payments, etc. So adding an expense of a few hundred dollars to our already stretched monthly budget is going to leave us with nothing.

We've been without health insurance for several years, and of course, we would love to have access to health care, but it's hard to imagine paying so much extra money a month when it's really unclear what the coverage will be like and how much co-pays are going to cost us. And with so much of our money going to insurance every month, how are we supposed to put anything aside for the future?

For Hensley and millions like her, the ACA is not a sustainable solution to the health care crisis in the U.S.–which spends far more on health care than any other nation, despite the lack of coverage and access.

While the Republicans rant about the ACA being a government takeover of health care, that's far from the truth. Principally drafted by a former insurance company executive, the law creates a marginally improved regulatory framework for insurance, but maintains the central role of private, for-profit health insurance.

In fact, the framework of the ACA, focused around the exchanges, is based on the health care law championed by 2012 Republican presidential candidate Mitt Romney when he was governor of Massachusetts. Romneycare's mandate to purchase health insurancewas itself based on a plan devised by the right-wing Heritage Foundation–which had been promoted by Newt Gingrich in 1993 in opposition to the Clinton administration's failed attempt at health care reform.

Nevertheless, Republicans have made opposition to the ACA a major focus of their propaganda in recent years, despite the fact that it is a fundamentally business-friendly reform. No doubt one central reason is that Republicans fear the ACA could become perceived as a popular success, like Social Security or Medicare–and earn their Democratic rivals prestige and popularity over the long term.

So the Republican attitude has been total rejection. But the fact that the maniacs of the GOP are determined to deny the poorest of the poor Medicaid coverage and to wreck whatever positive effects might come from the ACA shouldn't blind us to the much bigger problem with the law–that it puts the interests of the health care industry before people who need health care.

Health care is a basic human need, and the only way to ensure this need is met is to make it a basic human right, accessed through a single-payer system in which the government assures that everyone has access to health care.

The ACA will do nothing of the sort. Instead, it will make the health care industry ever richer, while people's needs go unmet.

First published at

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