After providing insurance coverage through federal exchanges during the first two years of the Affordable Care Act (ACA), insurers who participate in the exchanges are this month proposing significant rate hikes to state and federal regulators.
In fact, reports are that exchange providers are asking for 10 to 50 percent rate increases for next year’s plans. The only state that is not asking for rate hikes is Maine. New Mexico, on the other hand, is looking to increase premiums nearly 50 percent.
Opponents of the ACA have claimed that they saw this coming all along. They warned that after the first few years, rates would have to rise in order to cover the costs of care.
Up till now, subsidies have assisted insurers in collecting the necessary revenue to pay claims. But now, court battles over the constitutionality of certain subsidies have the potential to make the problem significantly worse.
If the Supreme Court decides to invalidate the subsidies, even more patients will see their premiums rise. And ultimately, we will all end up paying for these plans — because the legislation has no fail-safe or backup to cover the costs of care.
In general, the healthcare law requires insurers to justify any proposed rate increases, and all rates must be made public before they are finalized this fall.
Insurers argue that increased demand for services and drugs by the newly insured have increased their payouts. Therefore, they need the increased revenue from higher rates to continue to pay claims going forward.
At the same time, the Obama administration claims that the growth of healthcare costs is at an all time low.
So if the growth of healthcare costs is down, why are insurers asking for more money?
The ACA is based on a model of cost-sharing. Enrollees that are younger and healthier are expected to use fewer services and require less care, allowing their their premiums to balance the costs of the older, sicker enrollees.
In order to collect those premiums, “young and healthy” consumers (who are unlikely to use large amounts of healthcare resources) are required by law to enroll in the exchanges or pay a penalty when they file their income taxes.
But from the very beginning of the ACA rollout, the numbers of “young and healthy” enrollees fell far beneath projections. Many in this demographic made an economic decision to pay the penalty rather than purchase expensive insurance with high deductibles that they were unlikely to use.
As it turns out, the majority of exchange enrollees were older people with more extensive medical problems that required higher expenditures for care. Many patients, who were previously uninsured, needed treatment for serious, chronic illnesses that had previously gone undiagnosed and untreated.
In addition, new drugs for have been brought to market in the last two years. And while the ACA regulates healthcare systems, hospitals, and providers, it has no provisions for controlling the costs of new medicines or devices. The pharmaceutical industry remains free to set the price at whatever they like.
For instance, a new drug called Solvaldi can cure Hepatitis C in nearly 90 percent of patients. But it costs insurers $80,000 per patient course.
Drug patents will continue to protect the pharmaceutical industry, and rationing of care (and expensive medications) will ensue.
Over the next several weeks, as premium increases become public knowledge, the federal government will continue to argue that the ACA is working and will attempt to spin the story that increasing rates are simply due to increasing demand for coverage.
In reality, the ACA is not sustainable in its current form. We must address the issues of cost and choice, and we must hold individuals accountable for their own actions, including lifestyle and healthcare choices.
If the legal challenge to federal subsidies is upheld, the framework of the ACA will begin to crumble, and many Americans will see costs rise even further.
From the beginning, many in medicine and healthcare have seen the writing on the wall for this law. And now the time is coming when former House Speaker Nancy Pelosi could get her wish, having said: “We have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”
While, in fact, that “fog of the controversy” remains, it appears that we may have opened Pandora’s Box — and we’re about to find out EXACTLY what’s inside.
Posts by Kevin R. Campbell, M.D.
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