Obamacare, if it survives, will represent the most comprehensive overhaul of the American healthcare system since the creation of Medicare in the mid 1960′s. I say, “if it survives” only because, if the system cannot properly facilitate enrollment, if the government cannot enforce its rules, and if the frustration level of the voting public reaches a certain point, Congress may decide to defund it. Additionally, new legal challenges have surfaced which appear credible enough to proceed.
In this article, we’ll take a look at the health insurance exchanges, the levels of coverage, some premium examples, and what could happen if any of the new lawsuits succeed.
Despite numerous differences between supporters and opponents, Obamacare does contain some common ground. The establishment of health insurance exchanges are one example. The exchanges will allow a comparison of premiums on plans with very similar coverage on one website. This should enhance transparency and increase competition which, absent other factors, would have a suppressing effect on premiums. However, many of these “other factors” are significant. Therefore, unless you qualify for a subsidy, it’s unlikely your premiums will decrease.
All states were required to establish a healthcare exchange or opt out, in which case its citizens would be compelled to use the federal exchange. According to one source, 17 states have created their own exchange (includes the District of Columbia), 7 will use a “partnership marketplace,” and 27 will use the federal exchange. This conflicts with a recent LA Times article which reported, “36 states have decided against opening exchanges for now.” Whatever the exact number actually is, before a health insurance plan can be listed on an exchange, it must meet minimum federal requirements for qualified health plans.
States who have created an exchange will retain some discretion over minimum coverage requirements (MCR) and premiums. These states can also decide which policies are allowed on its exchange and which will be excluded. In addition, states with their own exchanges will be able to set higher MCRs and negotiate premium limits with insurers. In short, these states will have some control over their health insurance marketplace.
The Cost of Healthcare.gov: Was It a Good Investment?
In theory, exchanges are a good idea. However, only if they function as intended. Thus far the results have been mostly disappointing. As technology problems persist, fingers of blame have become common. Here’s an important question to ponder. How much did it cost to build the website, healthcare.gov, and was it money well spent? This is a very difficult question to answer. Why? Because when the government awards a contract to a private company, it often lasts for several years and contains a total or maximum capital outlay. In this case, GCI Federal, considered to be the primary contractor for the website, entered into an agreement with the government three years prior to the enactment of Obamacare. Since the contract does not list a specific fee for the website, it’s very difficult to know how much of GCI’s income was tied directly to the website’s development. Even so, that hasn’t stopped some from estimating. According to various reports I’ve read, a conservative estimate is around $70 million. Perhaps a more realistic figure is somewhere between $125 million and $150 million. Is this money well spent? To answer this, we must determine a reasonable hourly rate for website development. According to a poll initiated in October 2012 by Freelancejam.com, 48% of website developers charge between $25 and $99 per hour. Based on a rate of $100 per hour, and a total outlay of $125 million, 1.25 million man-hours would have been spent developing healthcare.gov. If there were 100 people working on this project, each person would have invested 12,500 hours. Using a 50 hour work week, it would’ve taken 250 weeks, or 4.8 years from start to finish. Obviously, this was not the case. However, these figures do help bring perspective on the amount of money Congress has allocated to a project which has yet to function as intended. It seems clear that we did not receive a good return on our investment (ROI). In fact, it appears Congress has wasted a great deal of taxpayer money once again! Now let’s turn our attention to the coverage provisions of this law.
Coverage Levels & Minimum Benefits
There are four main levels of coverage each with its own minimum standards. In addition, every insurance plan sold in the Marketplace must offer 10 essential health benefits (EHB). Here is a list of the various plans and the approximate percentage of EHBs they are expected to pay: Bronze (60%); Silver (70%); Gold (80%); and Platinum (90%). There is also a catastrophic plan available for those under age 30.
Here are the 10 Essential Health Benefits.
1. Ambulatory patient services;
2. Emergency services;
4. Maternity and newborn care;
5. Mental health and substance use disorder services, including behavioral health treatment;
6. Prescription drugs;
7. Rehabilitative and habilitative services and devices;
8. Laboratory services;
9. Preventive and wellness services and chronic disease management; and
10. Pediatric services, including oral and vision care.
With the upgrade in services (in many cases), and considering that insurer’s can no longer deny coverage, how much will this cost? Your actual monthly premium will be based on the following factors: where you live, your age, the plan you select, and whether you qualify for premium subsidies. Let’s take a closer look at the future of health insurance premiums in America.
The Future of Premiums?
When President Obama first introduced Obamacare, he stated that it would help reduce medical costs and premiums. Has it done so? Will it do so in the future? To find out, I posed this question to a couple of experts in the field: “Do you believe health insurance premiums will go higher, remain about the same, or decline?” Here’s what they had to say:
“Overall, the majority of people will be shocked at the premium increases.”
Former LSU basketball standout and owner of the Ricky Blanton Insurance Agency, Baton Rouge, Louisiana
“When you factor in all of Obamacare’s rules, regulations, and taxes, premiums will definitely be heading higher.”
Owner, NFP, Benefits Solution Group, Baton Rouge, Louisiana
Another issue we have discovered is a shortage of qualified health insurance agents. Here’s why. Before an agent is allowed to sell insurance through the Marketplace (i.e.; exchange), they must register, complete special training, and adhere to privacy, security and other state and federal requirements. There are other hurdles to overcome, as one might expect, with any new and complex federal program the size and scope of Obamacare. Many agents have been reluctant to recertify because consumers can deal directly with an insurance company through the Marketplace. Hence, many agents have simply dropped out. With fewer agents and significantly higher demand, you may find it more difficult to locate a qualified agent.
Let’s look at a few premium samples to give you an idea of what a policy might cost. This information includes data from plans in the Federally-Facilitated and State-Partnership Marketplaces. The data was pulled from the Health Insurance Oversight System (HIOS) for Federally-Facilitated states, and from the System for Electronic and Rate Form Filing (SERFF) for the partnership states. It is current as of September 27, 2013 and is subject to change.
The following table illustrates the average monthly premium for each coverage level. Some individuals will qualify for a premium subsidy which will reduce their cost. However, the rates in the table do not reflect any subsidies.
For a personalized quote, you should contact a registered health insurance agent at 888-959-3788 or go to www.usbenefitsolutions.com. This assumes the website is operating properly.
Obamacare’s Legal Troubles
It seems Obamacare is on trial again. As the Patient Protection and Affordable Care Act states, subsidies for qualified individuals are available for those who purchase insurance “through an exchange established by the state.” However, because many states did not create their own health care exchange and residents of these states will have to purchase insurance through the federal exchange, will subsidies be available for them? This “glitch,” which went completely unnoticed prior to its passage, has become the smoking gun among those who oppose Obamacare. Last year the IRS attempted to solve this problem by redefining “exchange” to include a “federally facilitated exchange.” However, that didn’t stop opponents who filed lawsuits in at least four jurisdictions. On October 22, 2013, in the U.S. District Court for The District of Columbia, Judge Paul Friedman, rejected a motion for dismissal from the Obama administration. In essence, Judge Friedman, a Clinton appointee, has allowed the lawsuit to proceed. Each lawsuit is requesting that the administration strictly abide by the language contained in the law. Moreover, as long as Republicans control the House, a legislative fix is unlikely. What could happen if even one of the lawsuits were to succeed? It’s probable that Obamacare would be temporarily suspended. Then the case would likely end up in the U.S. Court of Appeals. The next stop would be the Supreme Court. Obamacare opponents believe if it reaches the Supreme Court, the vote would be 5-4 in their favor. If this transpires, Obamacare would probably be unplugged. Of course, some legal scholars believe that will never happen.
Will the website get beyond its technology problems? Will Americans be able to afford the higher premiums? Will any of the lawsuits emerge successful? Will the rollout issues drag out until the November 2014 Congressional election? Will taxes be raised even more to pay for this program? Remember, Social Security, Medicare, Medicare Part D, and a host of other major government programs have ended up costing the taxpayer much more than first anticipated. Will the Patient Protection and Affordable Care Act prove to be unaffordable? There are certainly more questions than answers at this point. Stay tuned for more!