During the two recent Congressional Recesses, we’ve seen countless pictures of angry town hall meetings where people with so-called “pre-existing” health “conditions” have expressed their fear that the Republican Congress is working to take away health coverage they gained under Obamacare.
Some of the shouting and finger-pointing are manufactured by the Democrats’ “Resistance Movement” but some of it is genuine fear from people who suffer from debilitating diseases with no possible “cure” but – potentially — years of expensive control.
These are exactly the people Congress wanted to help when they created Obamacare.
The people who are coming to town halls have a point. Their justifiable anxiety (some of it sparked by politicians and the news media) stands in the way of a down-payment on reforming Obamacare in short run and reforming our health care delivery system in the medium to long term.
Their small numbers are magnified because it is an axiom of American democracy that we have a collective responsibility to care for those who cannot care for themselves
Obamacare Redefined “Pre-existing Condition”
These vocal town hall participants are part of the 1 percent of the USA population that incur 23 percent of the cost of health care in the United States.
Numerous studies have demonstrated that 5 percent of the population incurs 50% of the cost of health care in the United States.
Prior to Obamacare many states set up “high risk insurance pools” to help these people who were considered “uninsurable” in the private, non-(employer) group health insurance market because they had a serious and significant “pre-existing condition”.
The pools were narrow in coverage, exorbitantly expensive, limited to a pre-determined number of people regardless of the number who needed this assistance and capped maximum payments.
Other patients with – for example “seasonal allergies” were not considered to be “high risk” but were “rated” by private insurers.
“Rating” meant that the insurance company charged an additional premium for every “rated” condition that specific insured person might ever had symptoms of – even without a diagnosis – or sought treatment for.
The result was that the many of the most seriously ill Americans could not afford health insurance or, as a result, adequate health care.
How “Community Rating” Increases Risk to All
Obamacare changed this by imposed “community rating” regulations which limit insurance companies to considering only age and continuous coverage before application (no gap in insurance greater than 63 days) when determining the premium for that patient or family.
Now, any person between the age of 26 and 64 is charged the same premium – regardless of their individual health or claims experience.
Employer-based health insurance uses “community rating”. Every employee pays the same insurance premium per individual or family covered regardless of age or health. “Pre-existing conditions” can be excluded only if the insured has a 60 day “gap” in coverage.
Medicare uses a similar eligibility formula but their “community rating” is dependent on insured’s income during the previous calendar year – everyone with the same income in that calendar year pays the same Medicare premium.
Generally, employer-based insurance and Medicare “forgive” such a “pre-existing condition” after 12 months of continuous insurance coverage.
Theoretically, if the “community rated” pool is large enough and diverse enough the insurance company can absorb the cost of any single large claim because there are relatively few large claims as a percentage of the total claims paid.
Why Obamacare Insurance Mandate?
This theory is behind the “insurance mandate” in Obamacare. Everyone in the United States must obtain health insurance or pay a fine to enlarge the size of the insurance pool.
But this theory has not played out in practice.
Average estimates are that 5.2 million Americans with incomes over 138% of the Federal Poverty Line (included those turning 26 and no longer covered under their parents) bought Obamacare approved private health insurance policies in 2016.
That is fewer than the 8 million who decided it is cheaper to pay the IRS fine than buy insurance under Obamacare.
Those Americans are “betting” they won’t need health care.
The result is a smaller pool of people who know they are going to file health care claims; older people, people with more health issues – i.e. people with “pre-existing conditions” or “chronic” diseases (for example Type II Diabetes).
Smaller pools and proportionately higher utilization of increasing costly care left insurance companies with little choice but to increase “community rated” premiums for everyone or to exit the Obamacare market entirely.
The result is a pool of beneficiaries in a state of uncertainty exasperated by the uncertainties created by a Republican Congressional effort to “replace” Obamacare with something more “affordable” for more Americans in the private and employer insurance market places.
To Lower Insurance Premiums, Share the Risk
Instead of creating hysteria and fear among those who most need help to pay their health care bills and, in-so-doing, delay relief for 95% of Americans, let’s take a cue from Medicare and create a program tailored to these special cases.
Presently, the poorest older Americans are assured of care through a joint Medicare/Medicaid program.
Why can’t Congress similarly “guarantee” coverage to people under 65 with “pre-existing conditions”?
Instead of paying the Obamacare subsidies to private insurance companies, Congress should create a special category under Medicaid to manage care for at least the 1 percent – if not the 5 percent – of “high risk” patients.
Enrollees in the special group would contribute to the cost of their care according to their ability to pay, just as they do under current Obamacare, in exchange for a guarantee of access to quality care. The government would pay their claims (at Medicare rates) through the Centers for Medicare and Medicaid services.
The risk of a disproportionate number of catastrophic claims would be dramatically reduced for private insurers.
The reduction in risk should lower the cost of insurance premiums by as 25% for the average American.
The less expensive the cost of “peace of mind” health insurance brings the more premiums the insurance companies could sell further sharing the risk.
Equally important, politically, this approach – which addresses the heart of the problem Obamacare set out to “fix” — should be able to attract at least some moderate Democratic support in the United States Senate.
Bi-partisan support for any Obamacare repeal or repair is a pre-requisite to attacking the real problem — the unsustainable cost of health care in America.
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