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Fighting Our Healthcare Woes – A Bipartisan Consensus is Needed

In a predominately two-party political system, finding common ground through compromise has been the hallmark approach on making our nation successful, especially when confronted with wars, national tragedies and economic crisis. That is the beauty about our country, we find ways to come together and resolve our differences – at least until the crisis has been conquered or averted.

A few years ago, I remember sitting in a roundtable meeting with other business executives discussing a particular topic about a local company. The situation consisted of a management team, currently at odds with one another, having difficulties coming together to resolve their differences. At the time, the relationships within the team were toxic, and it appeared this ‘cancer’ was rapidly spreading throughout the organization – beyond the team members. Needless to say, the repercussions were not good for the company, its employees or its clients. How could this situation be quickly remedied? There appeared to be no simple answers.

Except one.

A roundtable member somewhat comically blurted out, “What this company needs to do is invent an old-fashioned crisis!” Instinctively, chuckles from other members ensued, including my own bewildered display of astonishment. But after a few minutes of exchanging amusing remedies to serve as a concocted crisis, the roundtable group began to seriously consider the innate truth within that seemingly preposterous comment – a crisis just might be the cure for this organization to pull together.

Healthcare is an Economic Crisis

It is now time to treat our healthcare woes as a ‘crisis,’ an immediate threat to the livelihood of all Americans – regardless of race, age, gender, and yes, party affiliation. Oh sure, in the past, we have heard our elected officials ‘label’ this problem as a crisis. But labeling is quite different than ‘treating’ it as a major threat to our long-term national well-being. Over time, unfettered healthcare costs have become the outside intruder (or invader) that can single-handedly change our lives with dire consequences, not only for our generation, but for generations that follow. Unlike the roundtable crisis discussed, this crisis does not need to be invented because it is REAL.

Let’s give our healthcare crisis some due respect. It is a uniquely American problem that requires solutions from both parties – not just one. As Republican Gov. John Kasich recently stated on ‘Meet The Press‘, “When you jam something through, just one party over another, it’s not sustainable…We’re talking about lives…We better be careful we’re not losing the soul of our country because we’re playing politics.”

As Republicans take their turn to overhaul almost one-fifth of the U.S. economy for the sake of ‘delivering on their campaign promises,’ they would be well-served – as would all Americans – to find common ground with Democrats. It’s time to break the cycle of each party assuming their approach is the only approach. To date, neither party has proven it has cornered the market of demonstrating brilliance on any given subject. It is extremely dangerous to assume that one party can unilaterally fix an extremely complex problem. Republicans cannot, nor can Democrats. Together, however, we have a fighting chance for a more favorable outcome.

One quote that I often use comes to mind here. Vaclav Havel, a Czechoslovakia writer, philosopher, political dissident and former president of Czechoslovakia, once wrote: “Keep the company of those who seek the truth – run from those who have found it.”

With our current healthcare crisis, we can always use more seekers than those who pretend to have all the answers. It is now time to find common ground.

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Comparing Two Iowa Counties on Health Insurance Tax Credits

Once again, another attempt is being made by the other major political party to fix what ails our national healthcare ‘system.’ But this newest attempt by House Republicans, the American Health Care Act (AHCA), has already been met with opposition by major stakeholders, such as the American Medical Association, American Hospital Association, the insurance industry, in addition to Democrats and uber-conservative Republicans.

Despite the flurry of headlines, summaries, analysis and opinions about what this bill does and does not do, the Congressional Budget Office (CBO) has scored that the cost of this bill would reduce the federal deficit by $337 billion through 2026, however, it would leave 14 million people without insurance in 2018 compared with the ACA.  The CBO just released its’ findings.

To ensure coverage, the Affordable Care Act (ACA) currently subsidizes insurance premiums based on age and income. The ACA also attempts to factor the local cost of insurance into its subsidy. In addition, for those making less than 250% of poverty, cost-sharing assistance is provided to lower the deductibles and copayments for those enrolled in eligible marketplaces. The AHCA, on the other hand, provides tax credits based on age only, and this phases out for individuals with incomes above $75,000.

For any healthcare reform plan to work, there must be a large incentive for young and healthy people to seek coverage to help equalize (or subsidize) the unhealthy population. This is largely known as Health Insurance 101 – mitigating adverse selection risks.

I took great interest in an interactive map (at the county-level) provided by the Kaiser Family Foundation that compares estimated premium tax credits consumers would receive under the ACA in 2020 compared to what they would receive under the AHCA released by House Republican leaders on March 6. The interactive map does not factor in the cost-sharing assistance offered through the ACA, only the premium subsidy (ACA) and tax credits (AHCA).

I wanted to learn just how different subsidies and tax credits were between the ACA and AHCA, based on age and income, comparing a metropolitan county (Polk) to a rural county that I grew up (Appanoose). The results are quite staggering.

As a 27-year-old earning $20,000 and living in Polk county in 2020, the ACA is estimated to provide a $2,360 subsidy while the AHCA would provide a $2,000 tax credit. Living at this same age (and income) in Appanoose county, the ACA would provide an even greater subsidy of $4,440 vs. $2,000 (AHCA). At this younger age, and presumably healthy, this individual would have a greater incentive to seek insurance coverage through the marketplace under the ACA compared to the new version that would replace it. We don’t know if the replacement plan will generate lower-premium health plans for the public to purchase – this is pure speculation at this point.

Below are summaries of how people compare based on age, income and location (Polk and Appanoose counties). The subsidies and tax credits in red indicate that this amount is less than the opposing plan at that same age (ACA or AHCA). Generally speaking, the comparisons suggest that older people with lower-income (and live in higher-premium areas) receive larger tax credits under the ACA than they would under the AHCA replacement plan. This first chart is for those who earn $20,000, $30,000 and $40,000 annually.

This next chart compares people who earn $50,000, $75,000 and $100,000.

As I have written numerous times in the past, this second attempt to fix healthcare will be meaningless unless we focus on the true drivers of cost, which includes waste, lack of transparency and the exceedingly poor health of our population.

With that said, what are we really trying to solve?

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Three Big Obstacles to Selling Health Insurance Across State Lines

Having relatively easy-to-fix solutions for our health insurance woes is the preferred track that most of us would like to embrace. Many remedies, in fact, make a great deal of sense when we apply the consumer-market approach. But when it comes to healthcare and health insurance, any semblance of operating in an efficient consumer market is nothing more than a mirage.

When gaining political support to sell concepts that are otherwise difficult and complicated for many of us to absorb, the typical American approach is to offer ideas and solutions in understandable sound bites. In healthcare, as we know, simplicity can be a virtue.

In addition to offering high-deductible plans coupled with health savings accounts, another Republican-backed initiative is to allow insurance to be “sold across state lines” in the non-group and small group insurance markets. Proponents believe that deregulation of state insurance markets will allow insurers to offer a wider variety of products across state lines thus avoiding state mandates and other cumbersome rules. They feel this will give consumers access to lower-cost options that are better tailored to meet their needs. From this, basic insurance policies would be sold that provide catastrophic coverage with limited benefits for certain services, such as maternity care or mental health services. Additionally, cross-state sales allow insurers to create regional or national health insurance markets, creating larger risk pools to distribute the financial risk. This would be advantageous to smaller states and healthcare markets.

Sounds simple, but there is a catch. Actually, at least three BIG catches.

It is important to know that federal law already permits the sale of health insurance across state lines, thanks to Section 1333 of the Affordable Care Act (ACA). However, due to regulations and restrictions, no insurer currently offers an insurance product under the ACA due to the many issues discussed below. Here are three notable concerns about selling insurance across state lines that would be problematic to implement.

  1. Controlling Health Costs – Removing benefit mandates and other regulations are two of the many factors affecting the premiums we all pay. However, the major portion of premiums consist of the healthcare expenses we incur at the hospital, doctor and pharmacy – usually 80 to 85 percent of the total premium. Factors not affected by cross-state sales include healthcare practice patterns, provider supply and market power, price levels of care and consumer demand in local markets. These important (and costly) factors would still be included within the premiums.

2. Risk Adjustments – Lightly-regulated states will have low-cost consumers who buy inexpensive coverage, and high-cost consumers who buy more generous coverage from states with more extensive benefits and consumer protections. From this, low-cost consumers will pay lower premiums, while high-cost consumers will pay higher premiums, primarily because there would be a lack of low-cost consumers in the pool to spread the financial risk. Such activity, if not thoughtfully addressed, would destabilize the insurance market and push states to loosen regulations to stay competitive. From this, health plans issued in lightly-regulated states may fail to provide adequate financial and consumer protection.

3. Establishing Provider Networks – Healthcare (like politics) is local. Because of this, any insurer who wishes to sell products in a new state would need to set up provider networks, much like establishing a health maintenance organization (HMO) or preferred provider organization (PPO). Doing this requires a great deal of time, effort and financial investment by the insurers. This significant barrier to new market entry may prove to be too large of an investment for most insurance companies. In addition, out-of-state insurers may only capture a small market of consumers within a state, which limits the insurers’ ability to negotiate with healthcare providers and create an adequate risk pool to distribute costs across individuals and employer groups. Only when carriers have a significant market share of insureds are they able to negotiate deeper provider discounts and thereby lower premium costs.

Will having a different federal policy allowing cross-state sales be successful? Limited evidence suggests that, even with deregulation in the insurance markets, it will take more than selling insurance across state lines to meaningfully impact health premiums.

Lest we forget, insurance is merely a tool used to pay for high healthcare costs, but does not automatically control the healthcare consumed by you and me. Healthcare providers and other forces, such as cost-shifting from government to private payers, also have a pronounced impact on the premiums we all eventually pay.

So much for this easy-to-fix solution.

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