Devastating deductibles

The Affordable Care Act has turned some of the most ostensibly pro-consumer advocates into defenders of any health insurance profit-taking. 

Of soaring healthcare deductibles, Paul Krugman recently wrote, dismissively: “This is a real issue, but it shouldn’t be exaggerated.”  ACA apologist Tim Jost, the most visible self-appointed consumer advocate, wrote “[d]eductibles do create a barrier to care for many in marketplace plans, but it is important to not overestimate how impenetrable that barrier is.”  

{mosads}Yet, contrary to what Professors Krugman and Jost believe, deductibles of as high as $13,200 before even accessing care are “impenetrable” to the average consumer.  If you have no savings, a $2,000 deductible may as well be $2 million.  To his credit, Professor Jonathan Gruber, the ACA’s architect, was at least honest enough to have publicly counted upon the “stupidity of the American voter” in believing that which was harmful to their interests is actually positive.

A Kaiser Family Foundation study this year found a quarter of those with private insurance lacked resources to pay even a mid-range deductible of $1,200 for single coverage (or $2,400 for a family).  And the phenomena of high deductibles has been extended outside of exchange-purchased coverage into employer-supplied health care.  Since 2010, deductibles for the latter have risen almost seven times faster than wages, and almost three times faster than premiums.

Premiums, the only cost toward which ACA tax subsidies are available (for those in the individual market), are but a fraction of health insurance’s real cost.  If you can’t pay your deductible, it wouldn’t matter if premiums were free.  As Republicans traditionally touted high deductibles to control healthcare costs, it’s ironic it took a Democratic law to bring us to this reality.

It might have been different had Democrats not so quickly sold out on a nonprofit public option, or even the public option-lite ACA element of nonprofit cooperatives.  But the co-ops were abandoned by Democrats at their first opportunity – they have only received $2.4 billion in low-interest federal loans, with further appropriations surrendered in the bipartisan 2013 budget deal, and were effectively prevented from marketing.

Ironically, the co-ops did their competitors – traditional insurers – a favor by taking on a disproportionate measure of risk, but there wasn’t sufficient funding to compensate them for that burden.  

We’re left with an ACA exchange market that even insurance giant UnitedHealth Group is now wary of.  Of course, this insurer functions as AARP’s Medicare Advantage profit-center, has a huge share of markets outside of exchanges, and is so ubiquitous it owns a subsidiary that was not only part of the Healthcare.gov website foul-up but, astonishingly, was paid even more money to get that website fixed.  Yet it is clear that, notwithstanding its apologists, the ACA is an uncertain market for many insurers, whose coverage can be illusory – consumers can’t afford deductibles, nor are their preferred doctors or hospitals in absurdly narrow networks.

The small business market has been devastated by the ACA.  Already a market with unaffordable costs where coverage was available, the costly new ACA mandates have not been offset by tax-subsidy utilization through the so-called Small Business Health Options Program (SHOP) market.  Enrollment through the latter is so anemic the federal government and states are reluctant to even share it absent a public records demand.  Avoiding the ACA’s much-vaunted tax subsidies, small businesses have, where they’re still buying health insurance, relied upon brokers, association health plans, or professional employer organizations.

Will we see any acknowledgement of these realities prior to the 2016 election?  It’s doubtful.  The ACA issue has been framed entirely through a partisan lenses – we either must believe it is perfect or irredeemably awful.  The poor consumer is utterly forgotten in this partisan narrative.

Williams, an Olympia, Washington attorney, writes frequently  on national healthcare.