The subsidized private health insurance exchanges created by the new health care law are going to do a very poor job of providing affordable health care to the low income Americans they are meant to serve, according to a new draft report to the Connecticut General Assembly from the Sustinet Health Partnership Board of Directors. From the report (PDF):
However, we were troubled by the limits on ACA subsidies for adults with incomes above 138 percent FPL, who fall outside the legislation’s increase in required Medicaid eligibility. Subsidies for coverage in the exchange will leave these adults facing significant costs […]
Considerable evidence suggests that cost-sharing imposed on low-income households can deter enrollment into coverage and prevent utilization of essential services, with potentially significant adverse effects on patient health. We were thus concerned about the impact of cost-sharing on two groups: 16,000 HUSKY parents with incomes between 138 and 185 percent FPL, who today receive comprehensive benefits and are not charged premiums or copayments; and 41,000 other low-income adults with incomes between 138 and 200 FPL, many of whom will be unable to afford what they will be charged in the exchange.
While the new law uses a mandate to require low income individuals to spend their money to buy something labeled “health insurance”, the small subsidies, lack of tough cost control, and the allowed level of cost sharing will make getting necessary health care unaffordable.
Fortunately, thanks to an amendment from Sen. Marie Cantwell (D-WA), states can instead created a “basic health plan” program for these people. The state would get 95% of the money the government would otherwise use on subsidies to finance this program. The Board is recommending Connecticut pursue this alternative. From the report (PDF):
To be clear, we would not recommend implementing the Basic Health option if the state provided no more than the minimum level of coverage required by federal law. Rather, the purpose of our proposed BH implementation is two-fold: to preserve, for populations covered by current law, HUSKY’s existing affordability and comprehensiveness of coverage, so that, from the member’s perspective, benefits would be exactly what Medicaid now provides; and to extend that same level of assistance to other low-income, uninsured adults.
One disadvantage of providing HUSKY rather than subsidies in the exchange is that provider payment rates are now much lower in HUSKY than in the kind of commercial coverage likely to be offered in the exchange. While we believe that, for this particular population, access to care is typically impaired more by cost-sharing than by HUSKY’s provider participation limits, the BH option allows a modest improvement of provider payment rates at no cost to the General Fund. According to Dr. Gruber’s modeling, federal BH payments will exceed HUSKY costs for low-income adults by at least 7 to 13 percent. Accordingly, as the state uses BH to extend HUSKY, in its current configuration of covered benefits, cost-sharing rules, and consumer safeguards, to adults with incomes up to 200 percent FPL, the excess of federal BH payments over baseline HUSKY costs should be used to raise reimbursement rates for adults with incomes above 138 percent FPL.
Not only would this approach make coverage and care more affordable for low-income adults, it would also save money for the state General Fund.
This report demonstrates what a horrible deal the system of subsidized, loosely-regulated private health insurance exchanges is for both the uninsured and the taxpayers. Using a public health insurance program, the state of Connecticut will be able to provide low income Americans a higher level of coverage at lower personal cost and it will still have a lower overall price tag for the government.
The only entities for whom the design of private exchanges is a good deal are the drug companies, hospitals, and private insurance companies. The exchanges assure customers for the unnecessary private insurance middlemen. Loose regulation of the exchanges prevents the government from using the market power of a large pool to negotiate with the drug companies and hospitals for lower prices, and so they get higher reimbursement fees.
Hopefully, Connecticut will adopt the suggestion to use a publicly run insurance version of the Basic Health Program and other states will follow their lead.