It has been a hard couple of weeks for Obamacare. The law’s online marketplaces — where people were supposed to be able to easily shop for health insurance — have been suffering from high-profile defections and double-digit premium increases.
Critics of Obamacare have pointed to the recent problems as proof the market is not working, while even the law’s staunchest defenders are arguing that the marketplaces need some fixes. Here are four key challenges to the program and a survey of some possible solutions.
Choice is disappearing
The problem: The insurance co-ops created by the law have mostly gone belly-up. UnitedHealth bowed out of most states where it offered individual plans on the exchanges. Aetna pulled out from 11 states. And smaller carriers, like the start-up Oscar Health, which has been struggling, have reduced their footprint.
Three years in, many established insurers say they are seeing their losses from selling individual plans deepen. Many of the nonprofit Blue Cross plans and other well-regarded insurers, like Geisinger Health, are having trouble. There is something of a herd mentality taking place — if all my competitors are leaving, maybe I should, too.Continue reading the main story
Why it’s a problem: Competition, at least in theory, helps keep premiums low and service high. That’s the whole point of having a market for health insurance. But 17 percent of people eligible for this market might have no choice of carrier next year.
Possible solutions: If the market looks as if it’s growing and stable, some insurers might come back. Both President Obama and Hillary Clinton have also revived the idea of the so-called public option, which would be a government-run plan that would either compete with or be a substitute for a plan offered by a private insurer. It’s politically controversial and hard to make work in practice.
Prices are rising
Why it’s a problem: People who do not receive federal tax credits to help pay for their coverage are particularly hard hit by having to pay higher premiums and could be unable to afford the cost. They are a small minority of people currently in the Obamacare marketplaces, but more than a third of all people buying their own insurance, according to recent estimates. Higher premiums are also bad for taxpayers, since federal dollars help subsidize premiums for middle-income customers.
Possible solutions: Bring down costs instead of raising prices. More and more insurers are choosing to limit the number of doctors and hospitals they will cover in their plans. A lot of the reason that health insurance is so expensive in the United States is that doctors and hospitals charge more here than their counterparts in other countries. So the narrow network strategy may be a smart way to start getting different groups to negotiate down on their prices.
There are downsides to this strategy, of course. One is that it may be hard for patients who have complex health needs to find the care that they need with every plan. The other is that it could create a lot more disruptions in care for people, if they have to switch plans — and all their doctors — every year in order to get a good price on insurance. In the long run, insurers may have to find other ways to lower costs, like keeping customers healthier.
Another, simpler way to bring down prices would be to get more healthy people into the market, so the average insurance customer costs less, or use other tools to absorb the cost of people with complicated and expensive medical conditions. (See below.)
The market is too small
The problem: There are currently about half as many people in the exchanges as the Congressional Budget Office expected.
Why it’s a problem: About 27 million Americans still don’t have insurance, a bad thing by itself in a country where health insurance is often crucial to ensuring access to health care and protection from financial ruin. But too few customers also matter for the functioning of the market. Smaller markets make it hard for insurers to absorb the costs of a few sick patients. In some places — especially big cities — there are still enough people to spread out risk. But in many parts of the country, too few healthy people are signing up to balance the cost of those needing expensive medical care. And it means that, especially if a company is having trouble making money, there’s not a lot of upside to sticking around.
Possible solutions: Change the incentives, so more people who are currently uninsured buy health insurance. Hillary Clinton has talked about giving out more generous subsidies, so insurance costs less and more people can afford to buy it. Many Republican politicians suggest another way to lower prices: eliminating current requirements that insurance cover a wide array of services. Some policy experts, including Uwe Reinhardt, a Princeton health economist, in a recent Vox.com interview, have suggested tightening up the penalties for remaining uninsured, so people can’t wait and buy insurance only after they get sick.
A more controversial way to increase enrollment in the marketplaces would be to make employer coverage less attractive, so that more people who currently have insurance from work switch to buying their own. It was widely expected that this would happen as the law rolled out, but so far it hasn’t.
The rules are complicated
The problem: Some of the tools the federal government relied on to try to protect the insurance companies from large losses, especially in the early years, have not been as effective as the companies had hoped. The current rules ensure that a company doesn’t benefit from having healthier customers than its competitors, but doesn’t help insurers make up the losses when their overall premiums don’t cover their costs.
Why it’s a problem: If the insurers think the marketplace is unfair, or that there’s no way they can ever make money there, they are unlikely to participate. Because the health law relies on private companies to participate, conditions have to be favorable enough to keep them involved.
Possible solutions: The insurers that remain in the market — particularly many Blue Cross plans — have a long list of policy requests that would make their business less risky: by making it harder for sick people to buy coverage for short periods of time, by subsidizing the plans’ losses for very expensive patients, and in some cases by charging higher prices to older customers, who are more likely to be sick. But regulators have been cautious about embracing them, because such moves would shift financial risk to taxpayers and make it harder for people who need health care to get insurance.
The Obama administration has already made a few changes, including making it a little harder for people to sign up for insurance in the middle of the year. It has also signaled to Congress and state legislatures that a “reinsurance” program, which would pay insurers back for the sickest of their patients, would be a good idea.
There is little consensus among experts and advocates about what fixes would have the biggest impact when it comes to stabilizing the markets. The divides are not just partisan, but reflect persistent uncertainty about the most important things going wrong, and the most effective solutions to fix them.Continue reading the main story