Health Insurance Exchanges: Money for Nothing and the Care’s Not Free?

Health Insurance Exchanges: Money for Nothing and the Care’s Not Free?

Robert Berra
CSO, ReviveHealth

Open enrollment is here and millions of Americans are going to be checking out their state exchanges to enroll in health benefits programs. Headlines from across the country proclaim that Obamacare has finally made it possible for the average American to receive affordable health care coverage – coverage that was only once available to the working insured. Plans for as low as $100-$250 per month (even more affordable than originally projected) now bring health insurance coverage within reach of most of the currently uninsured.

“So please, sign up and see if in addition you can also qualify for a government subsidy to help offset the cost of even these low-cost plans.”

The elephant in the room, and what no one is saying, is that these low-cost plans provide very little first-dollar coverage – beyond very basic preventive care. And, should illness or injury occur, families are going to find that they’ve paid a lot of money each month for insurance premiums that provide almost no benefits until deductibles are met.  Those out-of-pocket costs are astronomically high and unaffordable to the people health care reform was intended to help.

For instance, in Tennessee, the monthly premium costs for one of the lowest plans is in the $260-per-month range. That sounds great, right? Well, not when you look a little deeper at the numbers. The deductible and out-of-pocket costs for these plans are incredibly high —$7,000 for an individual and over $22,000 for a family. And, once the deductible is met, you still have to pay 20 percent of incurred in-network charges (higher if you go out of network, if there is any coverage at all).

In California, where there is a larger population than Tennessee, in theory the insurers should be able to spread the risk over more people and lower costs for everyone.  For a family of three, the Bronze plan will cost between $680-$800 per month.  However, with qualifying tax credits the monthly premium costs drop to $350-$500 per month. And, just as in Tennessee, the deductible and out-of-pocket costs are staggering – $6,300 annually for an individual, and $12,700 for a family.

Unlike what our country’s leaders would like us to believe, focusing on monthly premiums is a terrible barometer of overall cost to the consumer. Data supports the fact that there are not a lot of families in the U.S. who can afford the true costs of these so-called low-cost, affordable benefits plans.

Other losers in this equation may also be the hospitals and health systems who are supposed to have benefitted from having more insured patients, rather than treating a percentage of those with no ability to pay for their care. Instead, they will be faced with trying to collect large deductibles and out-of-pocket costs from many people who have no means to pay for their deductibles. On paper, these patients are “insured,” however, from a collection standpoint, they may as well not be.  Add to that the problem of payment recovery from patients who fail to pay their premiums, and hospitals could easily find themselves with even fatter bad debt accounts for treating the newly “insured.” 

It would seem that, as of now, health plans are in the catbird seat. They will be collecting premiums on plans that beyond preventive services will basically pay for very little.

Notwithstanding the political vitriol that goes along with any conversation around health reform these days, without bias, simply look at the math. An objective analysis of the numbers makes it very hard to see how this is going to help consumers and health care service providers. The changes that just started in earnest on October 1 are also a potential disaster for taxpayers and the government as subsidies to support lower-income families who qualify for tax credits will be supporting benefits plans that pay for very little.

Of course, in the short run, health plans are well positioned to reap the rewards of reform. Interesting to think how supporters of Obamacare will feel about this.