Why the ACA and any Republican plan doesn’t and won’t work

So if you turn on the news this week (or any week), you hear about the Republicans’ American Healthcare Act and whether or not the Republicans and President Trump will ever get it passed.

There is a lot of serious back and forth about the pros and cons of each plan (for a pretty good comparison of the ACA and the plan currently being offered, see this L.A. Times article by Noam Levy and Kyle Kim 4/26/2017) and it seems the fate of the Republic rests once again in the hands of Congress.

As an insurance professional who has sold health insurance for the last 25 years, I have only one response:

Who Cares?

You might think I should care. After all, my livelihood comes from selling and servicing group health plans for small and medium-sized businesses. If the system collapses or we go to a single-payer system, my company would go up in smoke.

Well, if you are going to put it that way, I guess I care – a little. But not about which plan they pick or what amendments are in or out. That’s because, no matter which way they go, we are doomed.

We are doomed because we are not attempting to fix the real problem. Like the old saying about re-arranging the deck chairs on the Titanic, we are really busy fixing the wrong things.

Yes, it is important that we concern ourselves with the number of uninsured and pre-existing conditions. I am not saying those things don’t matter at all.

What I am saying is that the real problem is not being addressed at all. Very simply, that is what we in the industry call the “cost of care.”

The “cost of care” is the money that you and your insurance company pay to others for your medical services and prescriptions drugs. Hospitals, Pharmaceutical Companies, Medical Device Manufacturers, Physicians, Therapists and everyone else who works in the healthcare field fall into this category.

When you hear thrown around that health care is 1/6 of the economy, this is what they mean. It means that most of the money that we pay in premiums does not stay with the insurance company. In fact, approximately 80-90% of it is paid out annually.

So why is this a problem? Because the ACA and the AHA are primarily about INSURANCE reform. They tell insurance companies what they can cover and how to do their business. The ACA has MLRs (medical loss ratios) that say an insurance company MUST pay out 80 or 85% of their premiums. This is ostensibly to keep greedy insurance companies from making too much money. The fact that it drives UP costs and reduces an insurance company’s incentive to drive down costs is irrelevant, I guess.

The pros and cons of MLRs are a different blog, but suffice to say they make it easy for you to see what the cost of care actually is. If, for example, an insurance company charges you $400 per month, then ON AVERAGE it pays out $320 to $340 in claims. So just for fun, take out that $60-80 per month the insurance company “keeps” and look at the what’s left. That is the what the claims on your plan cost. That is what goes out to the Hospitals and Providers we talked about before. Does anyone feel like that number is way too high? Would you think we solved the problem if we got rid of the insurance company and paid the providers directly?

So, when we in the industry talk about the cost of care, we are focusing in on the fact that even without insurance companies, the cost of the care alone is astronomical and rising fast. So why aren’t we all talking about that?

Because no one wants to, that’s why. Providers don’t want more scrutiny on their bottom lines. In fact, you always hear those in the medical profession talking about the insurance companies squeezing them and paying less. They don’t want you to know that if an insurance company would actually drive down the cost of care, your premiums would in fact go down. Instead they want you to worry that if the insurance company negotiates too hard, your quality of care will suffer. They want you to think that the insurance company controls costs to increase its profits. Maybe they would if they could, but the laws prevent that now.

Politicians want easy targets like insurance companies. They don’t want to take on your doctor or favorite hospital. Although they will take on a pharmaceutical company once in a while, at least until the next election cycle.
People want lower prices, but they have a hard time blaming those in the medical community for the high costs and don’t want to question their commitment to helping others (nor should we).

So, we don’t discuss the real problem. We don’t ask why an ER visit is around $950. Or an MRI $600 to $1600. Or a particular drug $1000 per month. It is easier to blame insurance companies for the premiums they charge and be outraged by government’s inability to fix the problem.

So, our answer is to use tax dollars to subsidize premiums so people can afford to buy insurance that is too expensive rather than address why it is too expensive in the first place.

Look around the internet and you will find some people talking about this, but I assure you nothing the politicians of either party are doing even remotely addresses the cost of care.

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