With the dust from the November elections settled
and the blur of the holidays behind us, Americans are finally starting to focus
on the gritty details of the new healthcare law.
Most people are at least vaguely aware that the
core component of ObamaCare is the “individual mandate”: The requirement that
every American have health insurance coverage by January of 2014. What is less
understood, however, is the vehicle by which this mandate is proposed to occur
– Namely, the state “healthcare insurance exchanges”.
The very term “exchange” is confusing and a
misnomer, as it wrongly implies some sort of swap meet or barter system which
it is not. In reality, the “exchanges” were
conceived to be a sort of open marketplace where people can shop for, compare
and choose a suitable insurance plan that best fits their individual or family
healthcare needs.
The exchanges, we were told, will be replete with
a panoply of different options that will be pre-screened to assure that they
meet the basic requirements set by the federal government. It all sounds like the
platform for a delightful afternoon of window shopping amongst a multitude of
different insurance plans, picking and choosing the one that you think will
suit you and your loved ones best. Lots
of “shopping”, “comparing”, “choosing” and “options” will occur in the
wonderful new world of health insurance exchanges.
The law calls for the exchanges to be up and
running by October 1st of this year. Apparently, the ringmasters in
Washington believe that this will provide adequate time for people to educate
themselves about their options, shop for, and purchase an appropriate plan
prior to the mandate taking effect in 2014.
States were given the choice of setting up their
own exchanges, partnering with the federal government to create an exchange, or
deferring the entire thing to the federal government.
It turns out that state governors took those 3
choices seriously – And the majority of them have said they want no part
creating or running their state’s exchange.
If a state decides to take on the task itself,
the state is fully responsible for the set up and administration of the program.
This includes the provision of adequate customer service, information
technology systems for the coordination of healthcare data, and daily
administration of the exchange. Tens of
thousands of helpers -- termed “navigators” -- will need to be hired to assist
consumers who are likely to be overwhelmed by the exchanges and their myriad
choices. California alone plans to hire
and train 21,000 new employees to act as navigators. These and other
administrative costs will fall directly to the state if they opt to set up the
exchange on their own.
Given the states’ complete lack of input in
determining the requirements for the exchanges on the one hand -- and their
obligation to enforce the rules and fund the entire implementation and administration
on the other -- it is not a surprise that many would choose to opt out.
Furthermore, although there is initially some
federal funding (read “tax dollars”) set aside to help states with expenses
associated with the exchanges, full financial responsibility transfers to the
states after a year. In other words,
states that assume responsibility for running their own exchanges must devise a
source of revenue (read “tax dollars”) for running them by 2015. The federal
government has been unable to provide any reasonable prediction regarding the
cost to implement and operate the exchanges– A detail that makes fiscally
responsible governors more than a tad uncomfortable.
As conservatives predicted, the wildly unpopular
healthcare reform bill is a huge unfunded tax liability, and that reality is
becoming clearer by the minute. Faced now with the option of establishing
exchanges in their states, the majority of governors have therefore chosen to
take a pass.
Unfortunately, in what may be the most egregious
insult of Obama’s administration, the Democrats force-fed us a massive healthcare
reform plan that is entirely predicated on insurance “exchanges”, that they offered
to -- but are neither prepared nor capable of --creating.
As of this writing, 23 states have declared that
they will not set up their own state-based exchanges, deferring to the federal
government to do it; 19 will handle the task themselves; 6 have opted for a
federal-state partnership; and 3 are still undecided.
The federal government is therefore left with the
daunting task of creating online insurance marketplaces for two-thirds of the
country.
Apparently, it did not occur to authors of the
bill that states might actually take the option to abdicate responsibility for
the exchanges to the federal government. Since it is simply not conceivable
that the government will be able to design and implement exchanges in as many
as 32 states between now and October, we are left to wonder what portions of
their grand plan we will be required to following until this is accomplished.
Even if the exchanges become an eventual
reality in all states, great questions remain.
With the ability to “shop”, “compare” and
“choose” from the advertised host of different “options”, what’s not to like
about the exchanges? For one, the price
tag.
The cost of premiums for insurance purchased on
the exchanges is expected to significantly exceed the cost of insurance prior
to ObamaCare.
The Department of Health and Human Services has
determined a generous, comprehensive list of health benefits that must be
covered in order for a plan to be “qualified”. ObamaCare classifies four tiers
of qualified insurance – Platinum, Gold, Silver and Bronze – which refer to the
portion of healthcare costs that are covered under that plan. Platinum plans will be designed to cover 90%
of the actuarial value of HHS’s required “essential health benefits”, while
Bronze plans will cover only 60%.
The IRS itself predicts that the cheapest health insurance plan available
under ObamaCare in 2016 will cost a family of four $20,000 a year. The $20,000
per year price tag would be for a “Bronze” plan, the lowest level qualified
option to avoid paying a penalty.
The extend to which one is eligible for federal
subsidies to purchase one of these plans – and the amount of the penalty for
failing to comply with the mandate – will be determined by one’s adjusted
income reported to the IRS in 2013.
The penalty (determined by the Supreme Court to
be a tax) for not having healthcare insurance, starts at $95 per person and
increases to $695 per person or 2.5% of income, whichever is greater. H&R Block estimates that an individual
earning $50,000 in taxable income would pay a $400 fine for failure to have
insurance, while a family of four with a household income of $100,000 would
face an $800 penalty. Much of the
Affordable Care Act is being implemented through the tax code, and these fines
would be deducted from any tax refunds that are due.
That dwindling but fortunate group who continue
to get their healthcare insurance through their employers (and therefore not
via the “exchanges”) are likely to see their salaries drop as employers have to
pay more to provide a “qualified” plan for their workers.
And so it goes. The overwhelming structural flaws
in the ill-conceived healthcare reform law are about to be revealed on a
massive scale. A critical component of the healthcare law – the insurance
exchanges – are shaping up to be the unmitigated disaster that could easily have
been predicted. Given the massive impact that the Affordable Care Act will have
on Americans and our economy, it is unconscionable that Congress did not
anticipate and account for the likely unwillingness of states to create the
exchanges upon which the rest of the bill is reliant.
Furthermore, even if the government is ultimately
able to get the exchanges up and running, they will clearly saddle consumers with higher premiums and questionable
choice. States will undoubtedly be obligated to significant increased costs and
administrative nightmares.
Suddenly, “shopping” for healthcare insurance at
one of the new “exchanges” begins to sound less like the idyllic marketplace experience
that Nancy Pelosi has described. It
appears more akin to the Russians “shopping” for bread -- If one can call standing in an endless
line with the entirely uncertain promise of eventually obtaining a stale and
overpriced crust, “shopping”.
