Enough Is Enough

Last November, Lee Kamps wrote a piece for the Observer titled We Are The United States Of America in which he said we're all Americans and so (he concluded in roundabout way) we should all get behind our newly elected president and other representatives. Obviously the piece was written before the election and anyone who has read just about anything Mister Kamps has written understands he wrote it because he believed his candidate, Clinton, would win. If you have any doubt of that, read some of his past Observer pieces. For example, last February, he wrote that Republicans, especially Trumps, are Xenophobic. In August, it was Republicans, especially Trump, are only pandering to our fears. My personal favorite came in October when he wrote that electing Trump would guarantee that we would have another Watergate.

The election was just a few short days after the Observer published his article so it was fresh in mind when Trump shocked the world and the Republicans took control of the Senate in addition to retaining control of the House. Consequently, one morning over coffee my wife and I were joking about it and then got into a discussion about how long it would take Mister Kamps to stop singing Kumbaya, my lord, and return to slamming Trump and the the bad old Republicans. Finally, a wager was agreed upon. The loser had to start responding to the left wing spin, innuendo, half-truths and lies that he incorporates into his articles.

I lost. I could argue about that but it would only sound like sour grapes, kinda like all the nonsense we are now hearing from the radical left about the election. I could make excuses, kinda like all the nonsense we are now hearing from the radical left about the election, but there are few things worse than a sore loser and I believe that people should have enough integrity to stand by their word. And I believe that what I believe starts with me. Besides, happy wife, happy life. Therefore, I will be responding to Mister Kamps starting with his piece from the January Observer in which he provided a lot of spin about the ACA and how bad Republicans are for wanting to replace it.

First, to understand why the ACA never had a chance of being successful and to understand why a lot of what is said about it is only spin, you have to understand the basics of insurance. If you do, please bear with me for a moment. After some insurance basics, I will address the impact of the ACA on insurance, directly address what Mister Kamps said and then give an example of how a replacement for the ACA would benefit everyone.

For those who don't have a lot of knowledge about insurance, it is nothing more than spreading risk. That's it. That's the whole purpose of insurance. Here's a real simple example. A woman is concerned that, due to the cost, if she needs medical care, she won't be able to afford it. So she finds a number of like minded people and forms a pool. (In insurance jargon, it's called a risk pool.) Each person in the pool, say a thousand total, throws in $10/month. That's $120,000/year. As long as $120,000 covers the medical costs of everybody in the pool, everything is great. If not, the people in the pool have to pony up more money or the pool goes under. 

That's the basic idea, but for insurance companies a couple of other things come into play. Federal laws require insurance to be regulated at the state level. Therefore, each state has its own insurance commissioner (or similar position) who has to approve what is sold within the state. Consequently, an insurance policy is tailored to a state's requirements and, therefore, is only sold in that state, which limits the potential risk pool to people within that state. That, in turn, limits the size of the pool which increases costs because the bigger the pool the more the risk can be spread and the more economies of scale the company can achieve to spread their overhead costs.

Another big issue for insurance companies is that they have to decide what to charge before they know what it will cost them and before they enter into an agreement with you. Then they have to honor that price for the term of the agreement, which is usually a year. Insurance companies have some people called actuaries who are experts at estimating what the cost will be. Actuaries have data bases that contain years and years worth of data they use to model a pool and are usually quite accurate in their cost predictions. They better be. If the price is too high, they lose business to a competitor which decreases the size of the risk pool which, in turn, drives up their cost and they lose money. If the price they set is too low, it won't cover their cost and they lose money. If the actuary is too far off, he needs to quickly update his resume and if he's way, way too low, it can put the company out of business. (By the way, for any of you who are still trying to decide what you want to be when you grow up, actuaries are among the highest paid people in the country).

One last thing to understand about insurance companies is deductibles and co-pays. Companies put deductibles and co-pays on policies for two reasons. First, they want the policy holder to have some skin in the game. The theory is that the policy holder will spend the money in the pool more wisely if they have to spend some of their own money at the same time. Second, it reduces premiums by sharing some of the costs with the people who are actually using the money in the pool. 

In regard to how the ACA impacted insurance, first, much of the actuarial data was inaccurate because the ACA imposed requirements that had not previously existed. For example, insurance companies were required to cover people with pre-existing conditions. A person with a pre-existing condition can easily incur a million dollars worth of medical bills. Think about what that would do to our pool of a thousand people paying $10/month. They would have to do one of three things and none of them is attractive. First, they could fold the pool and the individual would be on his own for that million dollars. Second, to cover that cost, each of the thousand members could immediately pony up a thousand dollars and raise rates to cover another occurrence. Third, they could borrow the money, and to cover it and guard against another occurrence their monthly payment goes from $10 to something over $170. 

Under the ACA, insurance companies also had to stop “discriminating” against women; they had to charge women the same price as men. The fact is, women's health care, on average, costs more than men's so women were charged a higher premium. It was no different than rates based on age. The older you get, on average, the more health care costs you are incur so premiums are based on age and are higher the older you get. (That did not change under the ACA. Saying women were discriminated against was just some spin to help sell the ACA to women. Otherwise there would have been one rate for everyone regardless of age.) Be that as it may, the additional cost of women had to be covered so it was spread over men's premiums. 

Those are just my two favorite reasons, of many, many, why insurance premiums had to go up due to the ACA. And they did. Healthpocket1 looked at how rates were affected by the ACA. Following is the rate increase they found in three representative age groups the first year the ACA was in effect. And, by the way, that wasn't the increase for only those who got their coverage through the ACA exchange; it was the increase for everybody whether on or off the exchange. 

Average increase in health insurance premium when ACA was implemented - Healthpocket

Age 23

Age 30

Age 63

Women

44.9%

35.1%

37.5%

Men

78.2%

73.4%

22.7%

Using 2017 numbers, there are about 320 million people in this country and, as the ACA supporters tell us, about 20 million benefited from the ACA. However, of those 20 million, only 12.7 million, less than 4% of the population, got their insurance through the exchange. (The rest of the 20 million were added to the Medicaid rolls due to reduced requirements, and about 20 million are still uninsured.) So, if all of those 12.7 million people were actually helped, the ACA benefited about 4% of the population while raising the premiums for close to 70% of the population. In addition, Medicare payments were reduced by $800 billion, which impacted many Medicare beneficiaries. (Speaking of spin, supporters of the ACA said that reducing Medicare payments was a benefit. Think about that. How could taking $800 billion from any program benefit it? According to ACA supporters, it was a benefit because it extended the life of the Medicare Trust Fund by paying less out of it. If that's a benefit, they should just stop paying any claims. Then the Trust Fund would last forever.) 

Unfortunately, the ACA did not really help all those 12.7 million people. It actually hurt many of them. In 2016, about a fourth of the people who bought insurance through the exchange bought Bronze policies, which carry the lowest premiums. In many cases, people bought Bronze simply because it is less expensive than paying the penalty for not having insurance. In many cases, people bought Bronze because it was all they could afford. However, even the Obamacare website admits that a Bronze policy only pays for about 60% of the cost the policy holder may incur. According to Healthpocket research, following are the average nonsmoker Bronze rates and deductibles/co-pays for 2017. 

Healthpocket Averages for nonsmokers in Bronze Tier

Individual Age Profile

2017 Average Premium

2016 Average Premium

Increase

30 year-old

$311.17

$257.68

21%

40 year-old

$350.23

$289.88

21%

50 year-old

$489.54

$405.28

21%

60 year-old

$743.52

$615.15

21%

Cost-Sharing Averages for nonsmokers in Bronze Tier

Cost-Sharing Category

2017 Avg for Individuals

2017 Avg. for Families

Deductible (Medical)

$6,092

$12,393

Max Out-of-Pocket Costs

$6,904

$13,810

If the policy holder cannot afford to pay the $6,000 deductible before they can use the policy, they don't really have insurance regardless of how much taxpayers subsidize premiums. All they are doing, both the low income policy holders and the taxpayers who are subsidizing the premiums, is throwing money into a pool to subsidize the rates for the people who can afford the deductible. It is no more than the poor, in addition to the taxpayer, subsidizing the people who the have money to take care of themselves. 

Since the actuarial data was not real good, the insurance companies, in effect, took an educated guess when they initially set their rates. On average, their guess was too low and rates have been going up ever since, just not as much as the first year. For example, as the chart above shows, overall Bronze rates went up 21% for 2017. But let's zero in on Ohio. 

Remember that by law, insurance is regulated at the state level. Because of that, insurance companies have to look at each state separately. Each is a separate risk pool and for each risk pool they either have to at least cover their costs or go out of business. (They might lose money for a year or two hoping to recover it, but sooner or later it's one or the other.) Ohio, like the rest of the country has seen a combination of the two. For example, in Ohio, Humana raised rates 45.11% for 2017. Other companies cut their loses and dropped out of Ohio or went out of business. Medical Mutual announced a premium decrease for some policies but they did it by discontinuing their PPO and pulling out of unprofitable markets. Last year they offered plans in all 88 counties; for 2017 they are down to 31. For all of Ohio, there are only ten companies left in the exchange. In 20 counties there is just one plan being offered. In 2016, every county had at least four plans available. “If you like your insurance, you can keep your insurance.” Ahem, ahem, as long as you have and like the only plan offered in your county. 

So let's look at some of Mister Kamps glowing statements about the ACA.

Mister Kamps: “...through the health insurance exchanges can get a health insurance policy for $75.00 per month or less thanks to premium subsidies.”

Fact: That's spin, with “can” being the key word. They can but they don't because the $75 policy is worthless. Besides not paying for much of anything, the deductible is so high that the policy holder couldn't afford to use it even if it did.

Mister Kamps: “...the rate of increase in health insurance premiums has slowed.” 

Fact: Yes, it has slowed compared to the giant initial increase but, for example, as indicated in the table from Healthpocket, Bronze rates increased an average of 21% for 2017 and that's not chicken feed, especially for the people who are paying 21% more for something they can't use due to the deductible.

Mister Kamps: “Very few people have that kind of disposable income and will simply go uninsured.”

Fact: Mister Kamps was talking about paying a full premium up front and getting the subsidy later, which he thinks might happen. It is doubtful that it will. Besides, what does it matter? Using the Healthpocket numbers, if they can't afford the $311.17 premium, they certainly can't afford the $6,092 deductible so the can't use the insurance even if the premium was zero due to the subsidy. 

Mister Kamps: (Due to the ACA) “employment in the health care sector has increased substantially.”

Fact: Part of that is debatable, but let's forget that. Instead, let's extrapolate that logic. If the ACA increased demand for health care, replacing it with something people can afford to use should increase health care employment even more. 

The ACA did help some people, but very few. The majority of people were actually hurt by it. And the sad fact is that many of the people who were hurt by it are the ones who can afford it the least. Sadder yet is the fact that many of the people who can least afford health care still don't have it and, due to the deductibles, are actually subsidizing the people who can afford it. But the saddest part of all is that the far left political zealots have chosen to make the ACA a political issue and feed us a lot of spin, innuendo, half-truths and lies in a weak attempt to convince us they have provided something great to the American public so we should be sure and vote for them. But in reality it's not a political issue. It's a health care issue and we should all want something that benefits the people of this country. All of them. Regardless of which side of the aisle it comes from. And what we really want is to see the health care issues resolved.

There are many ways to resolve those issues and I certainly hope our elected officials have smarter people than me looking at what works best. But here is just one example of what could be done. 

One of the biggest problems with the ACA was the giant increase in premiums it caused and one of the biggest reasons for that increase is the ACA required insurance companies to cover people with pre-existing conditions.

Prior to the ACA, many states operated what were called high risk pools. In Ohio, for example, the Department of Insurance contracted with Medical Mutual to run a high risk pool. People who had pre-existing condition could get insurance through the high risk pool, which benefited everyone. It kept the high cost people out of the pools the insurance companies covered, which kept rates down for the majority of people. The state and federal governments chipped in to pay a portion of the cost of the high risk person depending upon a person's circumstances. The ACA did away with those pools and many of those people are now paying more under the ACA than they did in the high risk pool. 

The good news about the high risk pools is they were run by the state. Since insurance is regulated at the state level, the state can dictate what they want the insurance company to do or not let them sell their products in that state. If a state is unreasonable, the company will pull out. But companies certainly want to do business in a state if they can make a profit and will comply as long as it's not too unreasonable. Just for example, the state could easily dictate that a certain portion of a companies profits have to go into the high-risk pool. 

The bad news about the high risk pools is also that they were run by the state. Only 35 states choice implemented them and not all were well run and not everyone who needed it got coverage.

While those problems existed, they are not insurmountable problems. And if they were overcome, everyone would be better off than what we have today under the ACA. Besides, if you don't like how it's run, it's a lot easier to change the state government than the federal government. 

That's just one example of something that can be done to benefit EVERYBODY. And please note that never once did I use the word Republican or Democrat or conservative or liberal or, as Mister Kamp likes to say, progressive. There are certainly places for those words, but not when it comes to health care. 

1HealthPocket compares health plans and provides research about insurance. They provide the information free to the public. Their latest research on ACA Premiums and out-of-pocket costs for 2017 can be found at:https://www.healthpocket.com/healthcare-research/infostat/2017-obamacare-premiums-deductibles#.WHAQT1x-4xE