Is the U.S. Ready for Obamacare?

Econintersect:  Retiring Sen. Max Baucus (D,MT) raised eyebrows recently when he announced his assessment that the implementation of the 2010 PPACA (Patient Protection and Affordable Care Act) was not going well.  Baucus made his views known in questioning of Health and Human Services (HHS) Secretary Kathleen Sebelius.  Baucus, one of the key architects of the 2010 act (commonly referred to as Obamacare), questioned the implementation schedule for the insurance exchanges.

In the Senate hearing, in testimony to the House Ways & Means Committee and in a statement made afterward to Mary Agnes Carey of Kaiser Health News, Sebelius reiterated that the exchanges will be up and running this fall (for enrollment) and will be delivering coverage in January 2014.  The entire idea of the exchanges is that consumers will drive efficiency in the health insurance delivery system, via so-called consumer-driven health plans (CDHP).

What About the Public?

The biggest problems may not arise from the insurance exchanges being operational but with the lack of preparation of the public to interact effectively with the new system.  A new study by Aflac finds that 72% of workers have not heard of the phrase “consumer-driven health care.”  Of those who had, 38% said that although they have heard of the phrase, they don’t understand it very well or at all. The clear majority of workers (76%) said they are not very or not at all knowledgeable about federal and state health care exchanges.

PPACA Targets are Inexperienced with CDHC

The recent history suggests that the implementation of CDHC with such programs as HSAs (Health Savings Accounts) and HRAs (Health Reimbursement Accounts) combined with high deductible insurance does not relate to the youthful and lower income cohort that is the target of PPACA.

Employee Benefit Research Institute (EBRI) has a recent study that assesses the history of CDHC.  There has been growth, although slow, in the use of CDHC.  Gillian Roberts, Employee Benefit News, wrote about the EBRI study:

In 2012, 36% of employers with 500 or more workers offered a plan with either HRA or HSA eligibility and 16% of that population signed on. About 25 million individuals had a CDHP last year, or more than 14% of the private insurance market.

Why is the experience in the U.S. population with CDHC is largely outside the uninsured cohort that is one of the targets of Obamacare?  The uninsured are largely young and/or lower income.  From Paul Fronstein, director of EBRI’s Health Research and Education Program (via Employee Benefit News):

“The study found that people who enroll in CDHPs do typically seem to be in better health, with higher education and higher incomes than those with traditional coverage.”

No Training/Education Plan

Most of the 76% with little or no knowledge of the PPACA insurance exchanges (Aflac study) are looking to their employers.  From an article by Tristan Lejeune, Employee Benefit Advisor:

A full three-quarters of the workforce think their employer will educate them about changes to their health care coverage as a result of reform, but only 13% of employers say educating employees about health care reform is important to their organization.

And the Aflac study found 54% of workers would prefer not to have more control over their insurance options, citing a lack of time and information to manage it effectively, and 72% have never even heard the phrase “consumer-driven health care.”

Agency Problem?

In an article at Employee Benefit Advisor aimed at insurance suppliers, Mark Gaunya suggests some of the responsibility for resolution of the confusion may lie with agency.  He suggests that if such businesses approach the coming changes with a long-term business-building approach the outcomes will be positively effected:

‘Obamacare’ is forcing everyone in our business to answer the question: Do I look at my business like an ATM machine or an investment? I make no judgments about your choice and will just leave you with this thought — if you have an ATM mindset and you are servicing the individual and small group markets, time is short and the tsunami is coming. Seek higher ground as soon as possible.

Wealth Transfer Scheme

Gaunya projects that individuals and small groups will see their premiums increase by 50 -200% in most markets across the country.  He suggests those increases, combined with higher taxes and assessments on insurers to the tune of over $14 billion in 2014 and $18 billion in 2018, will constitute the largest wealth transfer in American history.  That may be an overstatement but there will be winners and losers in the PPACA implementation.

Many Weak Links, Including State and Local Governments

It appears that federal government preparation may not be the weakest link in the implementation of PPACA.  Weaker links seem to reside with employers, the public and the general area of insurance agency.  A further complication may come from state and local governments transferring  an additional group of lower pay, temporary and part-time employees into Obamacare.  From the Washington Post:

In a quest to save money, political leaders in Washington state are exploring a proposal that would shift some government workers out of their current health plans and onto the insurance exchange developed under President Barack Obama’s health care law.

Lawmakers believe the change, which could affect thousands of part-time state employees and education workers, would save the state $120 million over the next two years. It would consequently push more health care costs onto the federal government because many of the low-income workers would likely qualify for federal subsidies.

Sen. Baucus’ concern may have validity but far beyond the funded scope of the HHS implementation.  Can a horse die of dehydration because it refuses to consider the water he is led to?

John Lounsbury

Sources:

• Sebelius Gets Grilling In Senate Committee Hearing (Kaiser Health News, 17 April 2013)

• 2013 Executive Summary (Aflac Research Now Workforces Report,  April 2013)

• CDHP enrollees not younger than traditional plan members (Gillian Roberts, Employee Advisor News, 29 April 2013)

• The tsunami is coming — are you prepared? (Mark S. Gaunya, Employee Benefit Advisor, 29 April 2013)

• Governments may push workers out of employer health care and into health exchange (Associated Press, Washington Post, 24 April 2013)