What Is/Isn’t Driving the Obamacare Premium Increases

It is understandable that a 22% rise in the premiums offered on the exchanges has brought the topic of Obamacare back in to the political spotlight. But there is a lot more to this story than we are hearing from critics on both the right and the left.

First of all, it is important to note that – as Kevin Drum pointed out – the latest increase simply means that premiums have caught up to the projections originally made by the CBO.

Obamacare premiums

As painful as this is, all that’s happening is that after being underpriced for years, Obamacare premiums are finally catching up to the original estimates from the Congressional Budget Office…The good news is that these prices hikes truly should help to stabilize the market and prevent more insurers from abandoning Obamacare. It might even prod a few new ones to enter the market.

It is also true that, as premiums go up, federal subsidies for those who purchase private insurance on the exchanges also increase.

With all that said, there is no denying the fact that we still have a serious problem with the costs of our health care. A lot of liberals tend to be singularly focused on the idea that it is health insurers who are the problem. What is often left out of that discussion is that Obamacare placed limits on their profits with the medical loss ratios.

The Affordable Care Act (ACA) includes several provisions that change the way private health insurance is regulated in an effort to provide better value to consumers and increase transparency. One such provision – the Medical Loss Ratio (or MLR) requirement – limits the portion of premium dollars health insurers may spend on administration, marketing, and profits. Under health care reform, health insurers must publicly report the portion of premium dollars spent on health care and quality improvement and other activities in each state they operate. Insurers failing to meet the applicable MLR standard must pay rebates to consumers beginning in 2012.

Insurance companies that cover individuals and small businesses are required to spend at least 80% of their premium income on health care claims and quality improvement while those that offer large group plans must spend at least 85 percent. Anything beyond that must be returned to their customers at the end of the year.

So while it is emotionally satisfying to blame these recent increases on insurers, that is not what is happening. It is beyond time that we begin to talk about the actual cost of health care rather than simply focus on the insurers.

Along those lines, the big goals of Obamacare were to provide coverage to the uninsured and include reforms for insurers on problems like the denial of coverage to those with a pre-existing condition. Because there wasn’t a lot of evidence of what would work to actually control costs, a whole series of things were included to test what might work. Michael Grunwald wrote about one such idea that is about to launch in January.

The experiment the administration will announce today, a program called Comprehensive Primary Care Plus, is intended to shake up the way 20,000 doctors and clinicians treat more than 25 million patients when it goes into effect in January 2017. In a sharp departure from the current “fee-for-service” system, which offers reimbursements per visit or procedure, providers who volunteer to participate will received fixed monthly fees for every patient and bonuses for meeting various quality goals. When their patients stay healthier and require less-expensive care, many primary care doctors will also share in the savings to Medicare, Medicaid or private insurers.

In some ways, this could provide the rest of us with the kind of care the wealthy are turning to with something called concierge medicine.

This is practiced by doctors who step outside the traditional health insurance system. In most cases, they give their patients same day or next day service. They talk to their patients by phone and email. If their patients have to go to the emergency room, they are likely to meet them there. They serve as agents for their patients in dealing with the rest of the system: ordering tests, getting appointments with specialists, etc.

As that writer goes on the point out, where there have been enough patients utilizing concierge medicine to study, there have been major cost savings as well as better health outcomes.

We also know that a big driver of rising health care premiums and expenditures is the cost of prescription medications. That’s where the cover article in the new issue of the Washington Monthly by Alicia Mundy comes in. According to her research, the president has the ability to tackle this problem without going to Congress. It all goes back to legislation passed 36 years ago – the Bayh-Dole Act – which “empowers the executive branch to get pharmaceutical companies to reduce prices on drugs invented with the help of federal research funds.” You’ll want to read that one!

Perhaps that’s enough health care wonkiness for today. But this is a complex topic that requires a good bit of that before we go marching in with that one solution that is going to fix everything. For conservatives, they simply want to repeal Obamacare and for too many liberals it’s all about the big bad insurance companies.

President Obama and the Democrats have already shifted the trajectory of this ocean liner by at least 2 degrees. How that will unfold over the long term is still a work in progress. In the meantime, we need to note all the ripples that change is creating and continue to pursue options for improvement.

Nancy LeTourneau

Nancy LeTourneau is a contributing writer for the Washington Monthly. Follow her on Twitter @Smartypants60 .