Alan M. Preston, ScD, MHA
Founder & CEO E=(MC)3, Austin, TX
One of the campaign promises of the Trump administration is to repeal and replace the Affordable Care Act (ACA). The nation is largely divided on the issue of repeal and replace. And, as one would imagine, the split is along party lines. The 2,400-page legislation is rather complicated. As with most legislation, the ACA has parts that are helpful and parts that are hurtful. Some of the good or bad of the law depends on whether you benefit or not from the law. Beauty is in the eye of the beholder in this case.
When evaluating the effectiveness of legislation, I first look to see if it will accomplish its objective. Whether I like the objective or not is a separate issue. The name of the legislation is telling and provides a clue to the objective: The Patient Protection and Affordable Care Act.
Patient Protection: who are we protecting the patient from? According to the authors of the legislation, the patients were intended to be protected from insurance companies. What did the insurance companies do that required 2,400 pages of patient protection legislation? There are two major complaints by the authors of the legislation:
- The insurance companies imposed an underwriting technique on individual policies (not group policies sold to employers) called pre-existing condition limitations. The ACA removed this underwriting practice, which increased the price of insurance for everyone. Under the old law, if someone were going to purchase individual medical insurance to protect them from a future financial loss, that person would not be covered for certain previously existing medical issues.
- The legislators that designed the ACA felt the insurance companies charged too much money for too little coverage and made too much profit in the process. Their solution in the ACA was to mandate a robust insurance plan (the four essential metal coverage plans) that covered nearly everything. This forced the people in the marketplace to abandon the purchase of what was characterized as low-end insurance policies. The legislators limited the amount of money an insurance company not only made in profit, it also limited the amount it could spend on administrative expenses. This is an unprecedented mandate to limit both the profit a company can make as well as how much it can spend on administrative activities. As it turns out, most insurance companies over the past ten years have only made an average of three percent to five percent net profit.
When the federal government tries to control the free market, seldom does it turn out well for the consumer. Healthcare premiums have increased, making the ACA anything but affordable. And if one cannot afford one of the mandated insurance products with extremely high deductibles, then the patient is not protected financially.
About half of the country would like see this piece of legislation scrapped. Most of the remaining half are either receiving a premium subsidy or obtaining a real benefit by obtaining insurance for a non-covered pre-existing condition. Regardless, President Trump made a campaign promise to repeal and replace the ACA.
What will the replacement look like and will the replacement reduce the costs of healthcare? One of President Trump’s ideas is to allow insurance companies to compete across state lines in an attempt to make insurance more competitive. Many individuals hear such an idea and claim that competition will reduce costs and make things better. As a general rule I would agree; however, this is an idea I strictly oppose for health insurance. Let me explain.
First, health insurance companies already operate in multiple states to the extent they want to operate in multiple states. Take UnitedHealthcare, as an example. They operate in all states in one or more of their product offerings. They contract with over a million physicians and 6,000 hospitals. Would “federalizing” healthcare insurance companies make them more competitive? It would not.
What is the proper role of the federal government? The U.S. Constitution specifically created the reach of the federal government to be limited and small. Every time legislation attempts to transfer a part of commerce regulated by each state to the federal government; we diminish the States’ rights as guaranteed in the Bill of Rights in the 10th Amendment. Furthermore, I have seldom seen the benefit of a “one-size-fits-all” solution. Mandating that all states have a certain benefit design will certainly increase the cost and limit the 50 state incubators of innovation toward product design.
I hate to be the bearer of bad news; however, healthcare will not be affordable in the future, regardless of what the federal or state governments do. I can assure you that healthcare costs will continue to increase year after year. No politician, Republican or Democrat, will be able to reduce the cost. However, all is not lost.
President Trump’s other idea is to reintroduce Healthcare Savings Accounts (HSAs). HSAs are not insurance products per se; they help consumers with the out-of-pocket medical costs. If I were the architect of the HSAs, this is what I would do: recognize that healthcare will continue to increase and make sure that over time consumers are adequately prepared financially to manage the increase. How do we accomplish this task?
The HSAs have limited contribution levels with too many stipulations. I would remove the maximum amount one can put into an HSA. Let’s face it, deductibles are likely to increase as a way of decreasing healthcare premiums. I would not make it conditional and tie it to a qualified high deductible health plan (HDHP). Co-Insurance, co-payments, deductibles, and limited and uncovered services are all components of insurance that are the financial responsibilities of the consumer. Thus, consumers will continue to see increases in deductibles and out-of-pocket costs. Unlimited contributions to the HSA will prepare consumers for the first dollar coverage and limited and excluded items under their insurance. Also, continue tax-free contributions and allow the consumer to lower their gross taxable income by the amount of any and all contributions. Also, allow employers to lower their taxable income by the amount of matching contributions into the employee’s program. Allow the consumer, at any age, to withdraw an amount of money out of their HSA tax-free for any qualified non-healthcare services. Allow consumers to accumulate an unlimited amount every year with no penalties if they do not experience any healthcare costs. Allow consumers to leave to their beneficiaries, upon death, the balance of their HSA account without any estate tax consequences. Allow the HSAs to be portable and have it attach to the consumer as it is now; however, also have an employer-sponsored insurance product that is portable. The healthcare exchanges already exist; thus, it would not be difficult to allow employees to select an insurance product off the exchange of their choosing as opposed to the employer’s selection.
This last suggestion of allowing the health insurance products to be portable and attach to the employee as opposed to the employer is crucial for many reasons. One is that over time, the employer will no longer dictate to an employee that they must be with insurance company “XYZ” when the employee wants to be on the “ABC” plan. Insurance companies will think and act long term to keep their members healthy. They are likely to pay doctors more money in the form of bonuses for improved outcomes of members as opposed to limiting a doctor’s income to a straight fee-forser vice model. Doctors should be rewarded for the overall health outcomes of the patient as opposed to a fragmented component. Thus, the incentives would be aligned for the employee, the insurance company and the doctor to all try to improve the health of the patient since the patient is likely to stay longer on the health plans that perform for the consumer. Right now, it is not uncommon for an employer to change their insurance carrier every three years. Why would the insurance company worry about the long-term health of a member if they will not benefit financially by investing money to improve their health long term?
Creating a system that has longterm strategies and objectives of improved health, adequate financial savings to manage the increased costs, and aligning the goals and objectives, will go a long way in “protecting” the patient from financial harm when accessing healthcare services. In this, I can support President Trump with his idea of repealing and replacing the ACA.
Healthcare services and delivery of such are complicated. Let’s keep the regulation at the state level and allow the federal government to act as a facilitator by expanding access and financial protection and not by creating burdens of thousands of pages of restrictions that produce little to no value in a thriving marketplace. The healthcare marketplace will thrive if we allow a pathway for consumers to save money in a responsible manner for their first dollar coverage and quit micromanaging every aspect of healthcare. Healthcare should not be federalized.