Repealing and Replacing the ACA

The House of Representatives recently passed legislation to repeal and replace the ACA. That much-maligned bill now goes to the Senate. The Senate claims they want their own bill and once that is completed, both houses meet to compromise and submit a bill to the President.

Basically, the bill tries to fix what’s wrong with the affordable care act which is now unaffordable and losing insurance carriers almost daily.

The most important part of fixing the affordable care act is that Congress has to be on the same plans we are on. Otherwise, the problem will never be fixed. With Congress on the same plan as you and I; if it isn’t working they will finds a way to fix it. The same goes for social security and Medicare. Congress should not pass laws that exempt them.

The belief in the open market system of good and healthy competition is what is driving the bill in the house. They try to remove the items that is costing too much money and replace it with an open market system that lowers premiums and deductibles. They didn’t go far enough even though they claim there will be a part 2 and 3 to fix it.

What’s wrong with the affordable care act? First of all, everyone has to have the same benefits and everyone pays for it. If you don’t need maternity or pediatric dental and vision, you still pay for that in your premium because all benefits must be the same. What this did was spread the cost for these services over the entire population while raising everyone’s premiums and deductibles and max out of pocket. The idea that everyone pay for these benefits includes the young healthy adults paying higher premiums than necessary to offset the costs for older and sicker Americans. The plan never worked because those young, healthy adults chose not to buy insurance but rather pay the modest fine and not buy insurance. That threw the system for a loop which led to higher premiums and higher deductibles and max out of pocket. That’s part of the reason why the system is dying and needs replacement.

Lack of participation by the young raised premiums for everyone and put us in the position we now face.

Let’s look at what is wrong with this picture. Health insurance premiums keep rising because the cost of healthcare keeps rising. To fix this we all have to be creative and look at the problem from the outside in. The basic problem is no one wants to do that thus we will get something not as bad as we currently have but far from ideal.

I’ve written about this in previous blogs that to lower premiums you have to reduce the cost of healthcare.

That means starting with tort reform. Without it, you can never fix the problem. Since Congress is made up of mostly lawyers, this may not happen. However, if resolved in a reasonable fashion, affordable insurance premiums can become a reality. Then you address defensive medicine which is a bi-product of tort reform; which means helping the medical profession to stop order tests not needed so they won’t be sued for malpractice. This practice is costing billions of dollars annually.

Then you need to address drug costs. This is a major problem that raises the cost of health insurance because of run-a-way drug costs that have increased much faster than inflation. Congress is beholding to Big Pharma but that has to stop so Americans can have lower cost of medications. Why do Americans pay more for drugs than any other nation? It seems like we are paying for drugs for the rest of the world. Why should we? The President recently mentioned drug costs so perhaps this will be addressed?

Fix the standard benefits to allow for different types of policies to be sold to meet the needs of those buying the insurance. Meaning, maternity is not needed by everyone and you should have a choice of buying it or not. Same with pediatric dental and vision.

Then make catastrophic coverage available to everyone, not just the young. Today there are special low priced catastrophic plans for those under 30. That needs to be expanded to include older Americans as well.  Also increasing the HSA limits helps everyone. Allows you to save the money to cover your deductible and max out of pocket while deducting it from your income tax thus paying your out of pocket medical costs with pre-tax dollars. If premiums remain high only those with wealth will be able to fund the HSA.

I’ve recently seen some Senators promote association health insurance. We had that in Nevada for 25 years and it worked so well. The Las Vegas Chamber of Commerce offered flat rates not based on age so everyone could buy a policy and pay the same rate. Those rates did adjust based on your health so those with pre-existing conditions paid more for coverage. The cost was still less than buying directly from the company. Yet the plan flourished for many years and reduced the cost of health insurance. It can work again and should be part of any new health insurance.

Setting up High Risk Pools in states that accept it is a significant way to lower health insurance premiums. This is especially true if the federal government subsidizes it for a specific period of time. The logic is those with significant pre-existing conditions will go to the high risk pool where the differential in premium cost will be borne by the high risk pool and take these people out of the general insurance pool. Who pays the extra premiums needs to be clarified but my guess is the pool will pay most of the differential in premiums. With the high risk individuals out of the standard pool means the premiums for the rest of the pool will be lower.

We do need more competition and with some of the changes listed above perhaps more insurance companies will want to participate. Those carriers on the exchange are getting hit with humongous claims versus premiums collected so no wonder they are leaving the local markets.

The issue of buying plans over state lines is out there and I cannot see the initial benefit. In 2017, in Nevada all carriers discontinued nationwide coverage. So how will buying a plan in Utah for example help me get coverage in Nevada?

This sounds good but I don’t see the benefit yet? Needs some explanation or clarification.

To sum it up we have a long way to go before we have a viable alternative to the affordable care act. It can’t come soon enough for this broker.

 

Len Barend, broker

The Barend Agency Inc. len@insurance4unevada.com 702-250-2200

 

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