An overview of reasoning surrounding changes to the health care system brought by the ACA and their effect on health insurance premiums or: Why is my health insurance so g-d- expensive?
Possibly now it’s time, or past time, to take a straightforward and logical look at health insurance. We’ve heard MM and PR tell us their beliefs over and over on the television but we have yet to hear their reasons, their logic, their research. It’s almost, and I am a-gasp to say this, as if they’re saying what comes to their mind first in a knee jerk reaction. Does this mean they’re wrong in everything they say? No it does not. Does it mean that we should, as a civilized nation, try to work out our thoughts on the issues based on good old fashioned American reasoning and innovation? That’s how the colonists decided to separate from Britain and how America changed the world, so let’s try to continue that tradition today.
Healthcare is expensive, it’s always been expensive and it keeps getting more expensive. It’s not an industry of luxury cars and to deprive someone of the product can mean that person dying of a disease that they in no way brought upon themselves. It’s a fascinating and scientific discovery driven industry and why is it that we’re now seeing the price inflate more than before, and what specifically are the causes? The Affordable Care Act (ACA) triggered changes in the system that seem to have amplified the rising costs, but which parts of the ACA in particular? Are MM and the President right in that the whole system is broken? We can’t know unless we look at that system, there are a lot of little things that can keep a car from starting, but only a few reasons to scrap the engine.
Before we get into looking at the ACA, I want to say that there’s a larger debate about whether or not a single payers system or medicaid for all system would work better for the US or if the US should be paying for healthcare at all, but I want to put that debate aside for now, I want to look specifically at the what I see as the real problem: Health insurance is maddeningly expensive, and moreso under the ACA.
Why is that? Can we fix it? Were we better off before?
As with any type of business, there are two main determining factors for price (and hundreds of nuanced factors but let’s avoid getting lost in those for now) which are: Costs and Competition. Higher costs of doing business drive up the prices, while increased competition drive them back down. Ideally and theoretically, that’s how a market corrects itself. So, without looking at rhetoric or ideology, I want to look at the four main parts of the ACA specifically through the lenses of Costs and Competition. Those four parts being the introduction of the online marketplace, the protection of people with pre-existing conditions, the introduction of an individual mandate, and the allowance of people to stay on their parents’ insurance until 26.
1. The introduction of the Online Marketplace.
The biggest way in which the ACA affected the level of competition between insurers was with the introduction of the Online Marketplace. This marketplace allows people to easily compare various insurers and coverage against each other, theoretically increasing competition. Insurers are not charged for this service and they had little to no costs incurred from their compliance with the marketplace, which leads me to believe that the only possible effect of this is increased competition which could only work to lower prices. Therefore I don’t think this is the cause of any price increase.
2. The ACA keeps insurers from declining health insurance to those with pre-existing conditions.
When the ACA instituted the rule that Insurance companies can’t deny coverage or charge more for people with preexisting conditions the cost of doing business for insurers increased dramatically. This, to me, is the most major change to the health care system that the ACA brought. It changed the very basis of health insurance, the previous health insurance prices assumed a certain ratio of high and low risk customers (read: high to low cost customers), now that ratio has changed dramatically and it stands to reason that the cost of insuring people would increase similarly, meaning then that the cost of insurance would increase.
To maintain the pre-ACA ration of high to low risk customers and mitigate the inevitable rising costs that a change in that ratio would incur, the ACA instituted the next two sections, individual mandates and the allowance of defendants to stay on their parents’ healthcare until 26.
3. The ACA created the Individual Mandate and accompanying tax penalty.
To offset the influx of persons with pre-existing conditions (meaning higher costs) the ACA sought to attract healthier (lower cost) customers by penalizing people for not having health insurance. Unfortunately, the tax penalty hasn’t driven in enough healthy insurance customers to offset the rising costs of health care. Fortunately this could be an easy fix, adjusting the tax penalty (raising the cost or making health insurance mandatory) or finding another incentive to push healthy people into buying insurance with the intent of mitigating the additional costs incurred with the influx higher risk individuals who can now buy insurance.
4. Changing the maximum age for staying on parents’ healthcare to 26.
The uninsured rate for young individuals (19–34) has dropped from 28% in 2013 to 18% in 2016 which means (presumably) that because of this aspect of the ACA, more younger and healthier people are insured than before. That being said, the uninsured rates for 35–45 year olds has dropped far less dramatically and the ratio of high to low risk people on insurance remains dissimilar to how it was before. Again, it seems that the incentive to buy insurance once someone reaches 26 isn’t great enough to keep healthy people from being uninsured.
These are the four main tennants of the Affordable Care Act, the four biggest changes to our healthcare system in decades and the four changes we should keep in mind while debating whether or not to repeal and replace and what to replace it all with. Today most of the ACA is wildly popular, the two major complaints are that we’re paying more now than ever before, and that the Individual Mandate seems to be an expansion of the federal government. These are both valid complaints, and opinions worth expressing and diving into. I will save the possible expansion of federal powers for another pamphlet, but it seems clear to this American that the ACA has disrupted the American healthcare system for better and for worse, and it would behoove us to analyze its effects and its policies more closely before giving in to hype driven knee jerk reactions we hear in the news.
It’s much easier to fight a battle when you can see what you’re fighting against.
