A chart created by Justin Wolfers and shared by Jonathan Cohn made the rounds this week identifying the 3 percent of Americans who would be “potential losers” under Obamacare. As with too many things we see in health policy and health journalism, the chart is far too simple.
In particular, the portion of the chart labeled “80% unaffected” ignores that while the 80% might be unaffected in the short term, over a longer time period, some significant portion of those with employer plans will be affected. One reason for this is described in Avik Roy’s recent article. A significant number of employer plans will lose “grandfather” status and have to be changed.
While Roy estimates that this totals more than 93 million people, there are some important problems in his assessment. For example, he appears to assume that because about 50 percent of plans will have to change, 50 percent of employees will be impacted. But, plans vary in size. If there are two plans, one with 1,000 employees that does not meet the new ACA requirements and one with 10,000 employees that does, then 50 percent of plans having to change means only 9 percent of employees are affected.
For another, (and this has not been well discussed with respect to the individual market either) people’s plans change all the time. Few individual plans or employer plans stay the same over any 2 year period. To say people or employers will be “forced” to change their plans because of Obamacare without recognizing at the same time that they are often “forced” to change their plan regularly now because of cost, network, benefits, contracting and other changes is more than a little disingenuous.
But, even taking into account that some of that “80% unaffected” will truly be unaffected fails to consider one of the most important, yet lesser known, parts of the ACA—the “Cadillac” tax. The “Cadillac” tax is a 40 percent excise tax that will fall on insurers or self-funded plan sponsors for health plans premiums that exceed an annual limit–$10,200 for individual coverage and $27,500 for self and spouse or family coverage.
While the “Cadillac” tax begins in 2018, its impacts are already affecting some of those in the “80% unaffected”. As detailed last month in Health Affairs, about one-sixth of employer plans will be impacted by the tax in 2018, and many have already started adjusting their plans to make sure they fall under the premium level and avoid the tax. By 2028, some 75 percent of current employer plans could be impacted. Because it is large and generous health plans that are likely to be subject to the tax, it would not be surprising at all to see that this part of the ACA is the one that leads to the greatest number of people affected and the largest population of “potential losers”.
Some health policy experts, however, would argue that this element of ACA is the biggest “winner” in Obamacare. The generous subsidy that the current system provides to largely healthy employees at large employers and the fact that this subsidy gets larger as the employee’s income grows may be the most important change in health policy. The current regressive subsidy leads its relatively healthy, high income beneficiaries to overinsure in myriad ways, driving up costs throughout the health system. By reducing this subsidy, ACA may reduce that incentive and provide some critical “skin in the game” for this important group of health care consumers, benefitting everyone by reducing cost pressures.
So, really, the only honest answer to the question of who is a “winner” and a “loser” under Obamacare is truly this: “It’s complicated.”
You make some great points, Allan. Let me respond to a few.
First, I would caution against reading too much into comparing cross-national costs. The are a host of challenges to doing so, beginning with comparative levels of development, purchasing power parity, and continuing on to the quality of services delivered.
But, you make a valid point. In economics insurance is expected to have two types of effects–called moral hazards–that increase costs. One is that it simply reduces the direct price of care to the consumer, so we use more. The second is that it may indirectly lead to behavioral changes where we take less care of our own health, because the consequences of illness are moderated. there may be other effects, too–it may give greater monopoly pricing power to providers which they exploit to raise prices even higher.
Less obvious than those effects, of course, are that insurance provides benefits. It reduces our overall level of financial risk; it may guarantee access to some life saving care that we would not otherwise receive. It harnesses the power of the insurance company in negotiating price discounts and quality improvements that individual consumers might not be able to negotiate.
So, it’s complex in many ways. There are many changes that are attempting to address these issues. For example, ACA includes a requirement that many preventive services be available for free. So, while insurance may lead you to neglect your health, insurers may provide strong incentives then to keep you active. An insurer, for example, could pay you to exercise or subsidize your gym membership or provide a rebate if you stayed healthier. They can link payments to providers in a way that pays more for care or consumer behaviors that are effective and improve health. This “value based” approach is not without its own controversies, since it means insurers and providers want and need to know more about your own health behaviors.
Complex scientific and policy questions like this are what make multidisciplinary studies of health so interesting, and why HHD programs like Health Policy and Administration, Biobehavioral Health, Nutritional Science and Kinesiology can be a great way of understanding multiple dimensions of the problem. Thanks for your indeas!
sorry, I meant to say that India’s health care system was uncoupled from insurance. I also wanted to ask if you would say what I said above is fairly accurate? and if so, what changes could be implemented to address these problems?
I think understanding the full impact of obamacare is extremely difficult and I don’t have the motivation to really go through the hours of research required at this time. However, I do want to raise the question about the efficacy of a health insurance based system. I recently read in bloomberg that the average cost of heart surgery in India was $1,583 while it cost $106,385 in the United States. The article goes on to elaborate that India’s health care system is uncoupled from health care. Based on this, I don’t see how the ACA would serve to benefit us if the costs of these procedures are allowed to be so high when it is clear that other groups do it for 70 times less. It seems like the costs of the bill will rise as long as hospitals are devoid of a free market atmosphere due to health insurance. I was also shown another article by Sanjay Gupta that followed the progression of his uncle who maintained a very healthy lifestyle without health insurance, but let himself go after he went on medicaid and began developing health problems. As shown by our top medical school statistics, our nation is concerned more with treating disease rather than preventing disease. Our health epidemic is widespread and without drastic changes to other health practices, I fear the ACA will only be a very temporary and ineffective band aid.