Today we start with Act I - Some Ideas Are Better Left Unsaid (How We Got Here). Here we discuss how the nation has already had elements of the ACA and how we knew what was going to happen.
So without further adieu, I present Part I of the examination and solution for the ACA.
Act I - Some Ideas Are Better Left Unsaid (How We Got Here)
In a Washington Post column written by Steven Pearlstein entitled “Donald Trump is about to face a rude awakening over Obamacare”, an argument is made that says a President Trump will have problems in repealing and replacing the Affordable Care Act. I believe if we keep thinking with the same ideas that have gotten us to this point then yes, repeal and replace will be difficult. If we open our minds and look at new potential alternatives then repeal and replace can be an extremely viable option.
As currently constructed, the Affordable Care Act is a guaranteed failure. Why? Because Guaranteed Issue with liberal Pre-Existing Conditions clauses make rate structuring a very difficult proposition. If you want to know why your renewal increases are so high, it is simple. When you have guaranteed issue with no actuarial science used in building proper rate structures you end up chasing the prior years utilization losses. What I mean by that is, if you aren’t charging enough premium to cover the utilization costs of that year, there are going to be huge deficits being created meaning the filed rates for the coming year will have to be enough to help recoup those losses from the prior year. This creates a scenario where you never catch up with prior year losses and the system collapses under its own weight. The only answer would be to get it right the first time but the problem with that is, in a guaranteed issue system the “correct” rate would be so expensive no one could afford it. We are witnessing this in the 4 “Reform States”. These states are NY, NJ, MA and NM. We will refer to these 4 states often in this column as they are the standard bearers for government intrusion into healthcare and they are also the 4 most expensive healthcare markets in the country.
To better understand the failures of the Affordable Care Act, we must look at the 4 Reform States as they are the inspiration and business model for the Affordable Care Act. NJ led the way for government run/controlled healthcare when they passed PL 92-162 or “The Creation of the NJ Small Employer Health Board”. This billed passed in 1992 and was enacted 1 January 1993 making NJ the first state in the nation to create a system of quasi-socialist medicine. What they did was keep private carriers but the carriers had to file their rates both new and renewal with the state’s Department of Banking and Insurance, they had to offer plans that met the requirements of the 5 State Mandated Plans. What the state mandated plans rule means is carriers wishing to offer product in NJ have to meet 5 regulated plan descriptions. In 1993, the 5 plans were Catastrophic Care, HMO, EPO, POS and PPO. On top of the 5 mandated plans, carriers had to ensure that their plans covered a government approved schedule of benefits. Add in MA’s RomneyCare individual mandate and you have the Affordable Care Act. So you can see the wheels of the Affordable Care Act have been set in motion for nearly a quarter century.
So we have talked about NJ’s reform market being the blueprint for the ACA’s medal plans, let us now talk about the individual mandate. Governor Mitt Romney of Massachusetts was the politician who introduced our nation to the individual mandate.
The individual mandate supposedly ensures that everyone has skin in the game. What it is also supposed to do is use the premiums collected from the young healthy individuals to pay for the utilization costs borne by older less healthy individuals. This is where politics and ideology come in to play, sadly. While the individual mandate has indeed increased participation, it has come at a high cost to individual taxpayers as well as state and federal government budgets. Taxes have been raised to meet the needs of those under the FPL (Federal Poverty Level) limits and budgets have been strained at the state level with Medicaid expansion as well at the federal level with income based subsidies.
The fact is, the only thing keeping the federal subsidies afloat is the U.S government has no problem printing monopoly money and calling it legal tender. At its current path and pace, the only option remaining for the Affordable Care Act is catastrophic failure.
#affordablecareact #donaldjtrump #healthinsurancesolutions
I'm not surprised that NJ is one of the states that pays the highest healthcare premiums! I hope this gets worked out in a way that my daughter can afford this.
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