Category: Living in Society

Late last Thursday the electronic payment to Coventry Health Care cleared our bank account, indicating we have new health insurance coverage effective Jan. 1, 2014, purchased on the exchange created by the Patient Protection and Affordable Care Act. With that action, our household budget changed from health insurance costs that were 38.0 percent of annual expenses to 9.8 percent. The budget decrease was due solely to the federal tax credit for which we qualified, as the new policy cost more than the current plan. As vice president Joe Biden said to president Obama when the bill was signed into law, “this is a big fucking deal.” It is bigger than just one household budget.

Iowa is a place where a large majority of people already had health insurance before the ACA became law. As of Dec. 11, only 757 individual Iowans had signed up for a plan on the new exchange. Iowa’s target for enrollments was only 6,970. Here’s what seems most noteworthy moving forward.

The fact that Iowa’s largest insurer, Wellmark Blue Cross and Blue Shield, decided to opt out of the exchange in 2014 was significant. Since the law was enacted, Wellmark has been bringing their individual policies into compliance, removing the lifetime limits, and increasing the amount of covered preventive care, and taking substantial rate increases as they did. In a brilliant public relations move, they attributed their 2014 rate increase solely to the requirements of the new health care law. (That rate increase was very low at 6.8 percent). For 2015, Wellmark is likely to enter the exchange, and take another significant rate increase, again blaming the ACA requirements.Why is that important?

As a large business with substantial financial reserves, Wellmark will have used the time between 2010 when the law was enacted until October 2014 when the next open enrollment period begins to study the law and its effects on their business and competition to make a smooth transition. But also to maximize market share and profits. Here’s how.

In a marketplace people can shop for things, but they also can compare prices and the value proposition. It’s consumer behavior 101. Prices include the cost of delivery for the service and a gross margin (the difference between the selling price and cost of delivery). Today, almost all of the 30 health plans for which I was eligible were significantly more expensive than my current Wellmark policy, with a lot of variation in coverage. Whatever changes Wellmark has to make to finish the compliance process and enter the market, they will be positioned to sell a similar or better insurance policy for a lower price without substantial changes in their gross margin. This will enable them to pick up increased market share.

What almost no one is talking or writing about is the November report from the White House that describes how the underlying expense of providing health care is coming down already, as a part of the reforms of the ACA. These three bullet points from the report tell the story.

• Health care spending growth is the lowest on record.
• Health care price inflation is at its lowest rate in 50 years.
• Recent slow growth in health care spending has substantially
  improved the long-term Federal budget outlook (Medicare and Medicaid costs are coming down).

What does that mean for companies like Wellmark? Because of the new law and its impact upon underlying costs, they have a generational opportunity to make a bigger profit from their policy holders. This opportunity is made better by the ability to review their competitors’ pricing in the public health insurance marketplace. Wellmark will also benefit by watching what marketplace adjustments are made as the first year unfolds and how their competitors handle them. Thank goodness for the 80-20 rule that requires individual insurance policies to spend at least 80 percent of the premium dollars on health care. If I am missing something, please let me know by commenting on this post, but 2015 should be a very good year for Wellmark.

What about for the rest of us? Like always, I intend to stay away from the doctor as much as I can, taking an annual exam, and a colonoscopy that is covered by my new plan without any copay or expense on my part. (Fingers crossed on the outcome). Other than that, I’ll go on living with one less worry than I had before Obamacare came into reality.

~ Written for Blog for Iowa

LAKE MACBRIDE— On Dec. 15, 2013 the person from the health insurance exchange with whom I spoke on Nov. 20 called back to say the website was fixed so that I could modify the income on our application. I deleted my old application, refiled, and we were qualified for a family policy on the exchange, with 30 different offerings to consider. We picked one, and are waiting for the payment to clear the bank to be assured that we are signed up. We canceled our current policy in anticipation of the new one. What changed? We can’t afford to turn down the tax credit which makes the policy affordable.

That is not to say the change was a perfect deal. The new policy cost is 28.5 percent more expensive than our current one would have been, and the coverage is less, with a higher deductible and maximum out of pocket. Without the government tax credit, we would have kept our current coverage for another year until Wellmark recalculated the cost of full compliance with the Affordable Care Act and raised their premium accordingly. Then we would participate in open enrollment to weigh our options.

In addition, the tax credit is based upon our projected income. If we generate more income than planned, we are required to report it, and that could trigger a change in our tax credit eligibility. Let’s say we are super successful and generate a lot of income in 2014. We will be stuck with a policy not as good as what we had, and paying more. Is it possible one of us could secure employment for a company with health insurance benefits? It is possible, but unlikely in the current low wage-no benefit job environment.

The saving grace is there is open enrollment each year in the health insurance exchange. I don’t like the idea of switching insurance companies every year, but at our age, we are filling the gap before Medicare kicks in at age 65. When one has lived as many years as we have, taking a one-year chance on a policy compliant with the Affordable Care Act is a controlled experiment in managing our health care costs, one with little downside if we pay attention to our income vis á vis the tax credit. The policy we picked includes our current doctors and health care providers, so operationally there is no change in care.

What bothers me about the situation is the benefit is more to the insurance providers than to citizens. We will pay more to an insurance company we would not normally have picked, with most of the money coming from the U.S. government.

This is the first time in my life outside the military to have participated in a government program, and I don’t like it. Why? It is a first step toward an inevitable dependency on government programs like Social Security and Medicare, and I have always tried to make my own way. When considering the points of entry I’ve had into the workplace— after military service, after graduate school, after a long career in transportation— there has never been an opportunity for a job that would have led to a different result. In the post-Reagan era the perquisites of working for a company have one-by-one been eliminated or diminished.

With the decision about health care made, this will be the last in the series of posts. It’s time to go on living, reminded again of how much we are on our own in a turbulent world. At least we have the quiet of winter and the solace it can provide to comfort us.