By Steven Buttice, Founder and President, Living By Your Design, Inc.
In February, Bloomberg News reported “Aetna CEO Mark Bertolini said he has ‘serious concerns’ about whether the ACA health insurance exchanges are sustainable, echoing remarks from other top insurers. Bloomberg adds that Aetna is one of the biggest insurers under ObamaCare and, like its rivals United Health Group, Inc. and Anthem, Inc., has struggled to make a profit in the business.”
Insurance, by definition, offers financial protection to a group or “pool” of people. Actuaries can predict that a certain percentage of this group will have a projected financial expense (or loss) during a specific time period. Since they can’t predict who will experience this loss, they spread the risk among the entire group.
However, these projected costs (or claims) can be inaccurate if people join the pool after they know they will experience financial loss and then drop coverage after the expenses have been incurred. For example: A person contracts Hepatitis C. Medications to treat this disease run over $70,000 in the first three months. If someone contracts Hepatitis C, joins ACA, and then drops their plan 4 or 5 months later, the aforementioned “pool” has invalid assumptions. This is one of the major problems of The Affordable Care Act, often called ObamaCare.
Another problem also makes predicting expenses difficult. Under ACA, people can change plans each year. Thus, if a person is being treated for a serious illness, they can upscale their plan. This would also include pregnant women and people having elective surgery. The following year, or after a baby’s birth, they can scale back their plans to a less expensive plan.
Is this situation being fixed? Can it be fixed? Currently, people can get coverage or change coverage yearly, unless they qualify for a SEP (special enrollment period). One effort to change this flaw was implemented earlier this year. The SEPs have been tightened. Fines for not having coverage are increasing per a set schedule. In 2016 the fine is $695 or 2.5 percent of taxable income. In addition, companies have changed plans, tightened networks and out-of-network coverage. Most companies have tightened their drug coverage as well.
Enrollments and plan changes were substantial in the 2016 open enrollment period from 11/1/15 – 2/1/2016. Some of the changes may have been made to keep premiums down. To do so, the insured raised their deductible, changed company to a smaller network, or went to an HMO (health maintenance organization).
HMOs offer coverage only for in-network providers (other than an emergency). This allows the insurance company to better “manage” care and costs by eliminating duplicate testing and other procedures. Your primary care physician is your navigator of healthcare in these types of plans—they are monitored by the insurance company.
Insurance companies are concerned. The stark reality is that United Health lost $720 million on ACA Exchanges in 2015. Blue Cross also projected losses of over $700 million for 2015. The exchange cannot work if companies are sustaining these types of losses.
To better control their pool of covered people, on January 1st, a major company changed their plans and networks for all people covered under ACA Plans. Another major company pulled some plans off the market. Another company has pulled all possible plan information of all websites.
ACA introduced a number of needed changes. However, the current format is most concerning for its continued viability. There are also two more elephants in the room: tax credits/subsidies and Medicaid.
For more information, contact Living By Your Design, Inc., focusing on the issues of the elderly: legal, financial, free guidance for residential placement, and healthcare issues. Call: 309-285-8088 or visit their website at www.LivingByYourDesignInc.com. They are located at 809 W. Detweiller Drive in Peoria.
Photo credit: Courtney Keating/iStock