A pair of premium-stabilizing programs is expiring. Companies selling individual health plans on Obamacare’s insurance marketplaces must grapple with the impending expiration of two of the law’s key early-stage programs, likely foretelling premium increases in 2017, as PricewaterhouseCoopers points out in a new regulatory brief. The Affordable Care Act included a trio of provisions meant to counteract insurance marketplace uncertainty in its nascent years. Collectively dubbed “the 3 Rs,” risk adjustment, reinsurance, and risk corridors were intended to act as shock absorbers for a newly reformed individual health insurance market in which participating firms were, essentially, shooting in the dark when setting premium levels and gaming out how sick and costly new enrollees would be.
IT WAS DURING the financial crisis that Andrew Lo had his epiphany: The way to save health care from ever-rising costs is by bringing in the banks. Specifically, by packaging drug development costs into securities to be bought and sold by Wall Street—the very, um, mortgage-bundling technique that blew up the economy in 2007. “The reason the financial crisis happened is not because securitization didn’t work. It happened because it worked way too well,” says Lo, a professor of financial engineering at MIT. Securitization injected a huge pool of money into mortgages—what if you could inject that pool of money into a worthwhile cause and, ahem, do it responsibly?
As consumers get savvier about shopping for health care, some are finding a curious trend: More hospitals, imaging centers, outpatient surgery centers and pharmacy chains will give them deep discounts if they pay cash instead of using insurance. When Nancy Surdoval, a retired lawyer, needed a knee X-ray last year, Boulder Community Hospital in Colorado said it would cost her $600, out of pocket, using her high-deductible insurance, or just $70 if she paid cash upfront. When she needed an MRI to investigate further, she was offered a similar choice—she could pay $1,100, out of pocket, using her insurance, or $600 if she self-paid in cash. Rather than feel good about the savings, Ms. Surdoval got angry at her carrier, Blue Cross Blue Shield of Arizona. “I’m paying $530 a month in premiums and I get charged more than someone who just walks in off the street?” says Ms. Surdoval, who divides her time between Boulder and Tucson. “I thought insurance companies negotiated good deals for us. Now things are totally upside down.”
Economic reality is catching up with the Affordable Care Act, aka Obamacare, according to two recent reports. The problem is that while acts of Congress can be repealed, the basic laws of economics cannot. In this case, the law in question is one that most students are taught on the first day of economics class: There is no such thing as a free lunch. Someone always pays. Obamacare is proving no different. First, people with employer-based health insurance are paying in the form of lower salaries because of the extension of coverage to dependent children through age 25. "We find evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year," states a January-dated report from the National Bureau of Economic Research. That's $1,200 per year that employees would have received if it not for the implementation of Obamacare, according to the report.
Readers, a pop quiz: The proportion of U.S. health care paid by tax funds is (a) less than 30 percent, (b) about half or (c) more than 60 percent. If you picked “more than 60 percent,” you’re right — but you’re also pretty unusual. “Many perceive that the U.S. health care financing system is predominantly private, in contrast to the universal tax-funded health care systems in nations such as Canada, France or the United Kingdom,” David Himmelstein and Steffie Woolhandler write in a new analysis of U.S. health spending in the American Journal of Public Health. They find that 64.3 percent of U.S. health expenditures are government-financed. And they project the tax-supported proportion will rise to 67.1 percent over the coming decade as the baby boom generation ages and retires — nearly as high as Canada’s 70 percent.