Reflections on Obamacare: Part II - Plans


Obamacare asserts that each and everyone of us is entitled to equal and comprehensive healthcare.  Delivering on this promise is another matter.  Although PPACA is demanding about what treatment is to be a covered charge—annual exams, routine maternity, mental health, and so on, it is less so about how and where benefits are to be paid.  Anthem Blue Cross Blue Shield offers a good example of what this means for individuals and families.

Aside from a $50 copay for the first two primary care physician’s visits per year, the first thing which confronts an insured with Anthem Blue Cross Blue Shield’s Bronze Pathway HMO 5000/40% is a $5,000 deductible. After that he or she is responsible for $1600 (40%) of the next $4000 of covered charges in a calendar year. This levy applies to everything, including prescription drugs.

Look back on your health care needs. How many times in the last ten, fifteen, or twenty years has the medical expense (dental care does not count) for you, or a family member exceeded $5,000? When it does, how often does the expense not go above $9,000? Set this against a premium which is $3,100 a year for a 32 year old non-smoking Carson City resident. If at age 55 he (or she) had a singular event costing $50,000, he (or she) would receive $43,400 in benefits for which between age 20 and 55 he (or she) would have paid in something on the order of $115,000.

Anthem offers more generous plans. Its Silver Pathway PPO 2250/20% has a lower deductible and a lower co-insurance payment. It also has a co-pay program for prescription drugs, and primary care physician visits. On the one hand, co-pay benefits are not subject to the plan deductible, but on the other, they do not count towards the plan’s $6,600 annual out-of-pocket limit for covered charges.

Our 32 year old non-smoking Carson City resident would pay $3650 a year for this plan. In essence he (or she) pays $550 or so a year to lower his (or her) deductible by $2750, and stretch his (or her) co-insurance limit out to $24,000. If at age 55 he (or she) had a singular event costing $50,000, he (or she) would receive the same $43,400 in benefits for which between age 20 and 55 he (or she) would have paid in something on the order of $135,000. But then again, he (or she) would more likely than not have received some other benefits in the interim.

Anthem places some subtle differences between its HMOs and PPOs. Use of a primary care physician is encouraged, it is not yet mandated in either case. With a PPO the use of only a single clinic or multi-specialty practice is not required as it is with an HMO. Neither plan will pay for non-emergency out-of-network benefits.

The insurer offers sixteen Off Marketplace plans to individuals and families. Eleven HMO plans and no PPO plans are offered in the “Marketplace” through the Nevada Link Exchange. Premium subsidies for lower income individuals and families are offered only with the Exchange based plans. These plans use dedicated Pathway X networks instead of the Pathway networks which cover off-market plans. What this means in terms of access to care is not made clear on Anthem’s web site.

PPACA requires annual open enrollment periods. For all individual and family plans, off marketplace, and on the exchange plans are for open enrollment to run from 1st October to 15th December this year for 2016 participants. As well as enrolling, a covered individual or family may change plans at will during this period. The party may change insurers and/or (or) plans and switch between an off-marketplace (“private”) and an exchange plan.

The message this sends individuals is; wait until something happens to buy high cost insurance. The message it sends all insurers in this market is; cut back on generous plans (as in no more out-of-network benefits), and load the premiums of low cost (Bronze) plans to cover the certainty of adverse selection in the more generous ones. Also trim the number and quality of plans offered on the exchange, as Anthem does, where subsidized, high-cost insureds are sure to collect. Adverse selection on an exchange is further aggravated by mandatory reductions in deductibles for participants qualifying for subsidies.

The open enrollment provisions of Obamacare are a divisive free-for-all. As a result individuals, families, and non-union employees of small employers (99 employees or less) get second class cover. Union employees and employees of large employers still can get first class benefits.

The subsidies, plan changes, and tax preferences of Obamacare for lower income individuals and families do nothing to reduce costs. The price of the insurance provided is unchanged, and paying for all or part of any subsidy or tax preference must be shifted onto tax payers shoulders.

In principal health insurance enrollment for an uninsured party is limited to the National open enrollment period. In practice this limit may be dodged when the party or his (or her) spouse or significant other can find temporary employment offering medical benefits.

Obamacare is not particularly user friendly or economic. Insurance similar to the Bronze plan described above, purchased in Santa Cruz County, California, in the pre-Obamacare, dysfunctional insurance market of 2012 would have cost this 32 year old only $2,200 for a year.

Obamacare needs to be replaced. Considering the deeply rooted nature of its problems: new mandates, increased taxes, added bureaucracy, loss of plan choice, loss of congressional control, there’s no fixing it.

Michael Goldeen is a Group Benefit Broker with 45 years of experience selling employee benefit plans, and is an active member of the Libertarian Party of Nevada and resident of Carson City.