The ACA's true cost drivers are being ignored

The Affordable Care Act is causing quite a stir these days, but aside from bugs bedeviling the health insurance exchanges, that's about all we're hearing about healthcare reform. 

One of the most visible examples was Chad Terhune's article in the Los Angeles Times over the weekend discussing how many Californians will see premium increases under the ACA. It's gotten far more media play than a study published earlier this month indicating 1 percent of the patients in the healthcare system account for more than 20 percent of its overall costs.

Terhune interviewed several people who recently learned their insurance premiums were going up. Orange County resident Jennifer Harris said her $98-a-month policy with Health Net was being canceled, and the cheapest alternative would cost $238 a month.

I got in touch with Harris at the Santa Ana, Calif. office where she practices law, and she told me a premium on the Covered California health insurance exchange is actually more than $400 a month. The amount mentioned in the article was what Health Net offered in a brochure accompanying the cancellation letter she received.

Terhune noted in passing that Harris was three months pregnant. What he did not mention is whether Harris' individual policy covered maternity benefits--something often omitted by carriers to keep individual plan premiums low.

Harris told me her current coverage has a $6,500 out-of-pocket maximum, and that her insurance will cover about half of her maternity costs until she hits her deductible. Based on what it costs to deliver a child in a hospital in California these days, I am presuming she would pay at least $6,000 out of pocket.

Under the ACA, Harris' maternity benefits are automatically covered. She'd be paying 30 percent of the negotiated rate for a hospital stay. That would probably be $3,000 to $3,500, but significantly less if she could find some reliable cost data and shop around her provider network. In other words, the change in policy benefits would cover much, and possibly all, of her extra premiums.

"There are pluses, and there are minuses," Terhune told me about Harris' switch in coverage. His article, however, focused only on the minuses, and they were repeated on Monday's cable news shows, often in dire tones.

I'd have searched for some coverage about healthcare's priciest 1 percent, but that would have been a waste of time.

My favorite observation in Terhune's article came from Pam Kehaly, president of Blue Cross of California, a WellPoint subsidiary. Terhune relayed that she received a letter from an enrollee who stated "I was all for Obamacare until I found out I was paying for it."

Since Kehaly's annual salary would cover the monthly premium differential for about 8,000 Jennifer Harrises, I believe that disgruntled policyholder is financing a bit more than just the ACA. That negative (unless you happen to be Kehaly) also wasn't mentioned in Terhune's article.

Meanwhile, Harris has a variety of financial concerns someone earning about $950,000 a year less than the head of the California Blues--or about $2.5 million less than Health Net's CEO--has to ponder. She is trying to juggle student loan payments for college and law school, possibly moving her family into a larger place to live, and saving for retirement and college for her own children. She and her husband earn about $5,000 a year too much to qualify for premium subsidies (based on a family of three, which they will become next spring). Harris acknowledged there's a possibility the time demands of raising a family or some business expense will cut into her household income and make her qualify for subsidies down the line, but that's a worry for the future.

"My major concern is that I don't think (the increase is) fair, and I think there are a lot of other financial considerations not being looked at," she said.

I agree.

What can happen is that while the media should report about people experiencing premium increases, it could also spend a little more time on what is driving those skyrocketing costs. That includes the huge salaries of both payer and provider execs, the fact price transparency is all but absent from the healthcare delivery system and the disproportionate sums spent on just a tiny minority of the population.

If the 1 percent versus 99 percent income debate can command so much of the public's attention, healthcare's similarly lopsided financial ledgers can as well. Someone just needs to give that story a fighting chance. - Ron (@FierceHealth)

Related Articles:
1 percent of patients drive 21 percent of costs 

 

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