They Are Starting To Get It

Here is a column that apparently gets it. They make some decent points, my comments as usual are in red.

Are Health Insurance Subsidies Enough for Low-Income Patients?

Medicaid expansion and health insurance subsidies have brought millions coverage, but they may not be enough for low-income patients to secure access to care.

May 08, 2017 - Despite financial penalties designed to prompt consumers to keep their health insurance, current efforts to subsidize care for low-income individuals may not be enough to incentivize patients, according to a recent study by economists at MIT and Harvard.

Of course they aren't. You have hinted and insinuated that health care is a right and should be free. You are no longer allowed to act surprised when folks take you up on that offer.

The study measured data from Massachusetts’ subsidized insurance program called CommCare.    Established in 2006, the program offers heavily-subsidized private plans to non-elderly adults below 300 percent of the poverty level who do not have access to insurance through an employer or another public program.

And it has been a boondoggle ever since, damned near bankrupting the state of Massachusetts.

For this program, public subsidies are essential, and leave enrollees with an average premium of $70 per month.  The average full premium is $422 per month.

Which means the Massachusetts taxpayer is eating $352 of premium per member. That is surely unsustainable for any long period of time. 

The Massachusetts plan does mandate coverage and is enforced by financial penalties if not followed.

Frankly, I think the state would rather have the penalty dollars than the coverage premiums. The premium dollars go to Harvard Pilgrim, the penalty dollars end up in the state treasury. Seems like a sweet deal for politicians.

However, patients who receive less money from the program are significantly more likely to opt out of health insurance coverage.   “As subsidies decline, insurance take-up falls rapidly, dropping about 25 percent for each $40 increase in monthly enrollee premiums,”the study found.

Of course, if you are below the 150% FPL, you are truly living day or sad to say, you have made life choices that say you have other priorities over buying health insurance. This gets exacerbated when these same people know they can show up in an ER and get covered under Charity Care. In my Medicare AEP retail location, I hear it all the time. "Why do I need your coverage when I can get it free at the ER?" Of course you get disheartened hearing such things but that is reality for some folks out there. Bottom line, any financial commitment laid upon someone who does not want to accept it, you will see nothing from it.

The average low-income enrollee was only willing to pay three to four times below what their medical costs would be with no assistance from insurance.  For an individual who has expenses of $100 per month, or $1200 per year, that means they would only be willing to pay insurance premiums of about $350 a year.

I am not sure it is even that high. I have seen Obamacare plans die for less premium than that.

“Further data indicated that if enrollee premiums were 25 percent of insurers’ average costs, at most half of potential enrollees would buy insurance, and even premiums subsidized down to 10 percent of average costs would still leave at least 20 percent uninsured,” said the study.

Yeah, that sounds about right. 

The report came to two important conclusions. First, enrollment was “highly sensitive” to premiums.  With each increase in premiums, by relation to the poverty level, enrollment dropped by 25 percent.

Correct, the more you ask, the less you will receive. You are dealing with a portion of the population who while maybe wishing to do good has to make life choices. Now some of those choices may well be made from positions of responsibility and frankly, some may be made from positions of irresponsibility. In either case, the more you ask from these folks the less you are likely to receive.

For those 150 percent or below the federal poverty level, the least expensive plans are free.  This level of subsidy indicated a 94 percent enrollment rate by eligible individuals.

This is interesting because I can almost guarantee you that a decent portion of that uninsured 6% is saying "why sign up when I can get charity care?" Yes, they risk the mandate penalty but they may also be thinking "You can't draw blood from a stone" and so they live consequence free. 

With an increase of $39 per month, for those just above the 150 percent poverty level, enrollment drops to 70 percent. The study notes that this occurs even though the subsidy still covers 90 percent of the premium.

Again, it goes back to the priorities thing we talked about prior.

The study did take into consideration those who have, or may have recently found out about a chronic condition.  Those rates of take-up were predictably higher.

Of course because in the real world it is called Adverse Selection and the carriers call it "buying a claim". Of course people with a chronic condition will take coverage.

The second important finding in the study showed that with progressive increases in premiums, that lower-cost enrollees disproportionately dropped out.  This was despite the mandate and penalties.

If you are that far below the FPL threshold you may not be making a large enough income so collecting that mandate penalty may be a tall order. They don't don't have it in wages and thus do not have it in a tax refund either. Where does Uncle Sam get it then?

This resulted in an insured pool of higher-claim enrollees, and higher premium rates for all those in the pool regardless of health status.

Ahhh but you miss the point. The MLR doesn't take individual claims into their calculations. The MLR is based off the entire pool of a product. For instance, the MLR and subsequent renewal rates will be based off of everyone in a Harvard Pilgrim HMO plan. They do not break it down to say the $20 copay or the $40 copay. Just the HMO plan is pooled in its entirety.

The researchers offer potential explanations for this decrease in enrollment, even with substantial subsidies.   The most prominent culprit for low-income individuals to skip coverage was access to care that required no insurance or participant payment, such as community clinics and dental buses.  The researchers pegged this availability of free care to account almost entirely for low-income individuals to drop coverage altogether.

See above, I make this very point.

By interpreting data on the value of insurance to low-income individuals, it became apparent that many would rather be uninsured than pay 20-35 percent (or more) for costs of care, even though it was substantially below costs incurred by payers. 

Again, this is a combination of triaging priorities and feeling "healthcare is a right and it should be free". You teach folks that, this is what you get.

“More generally, our results suggest a fundamental challenge in enrolling low-income people into health insurance markets, even with an insurance mandate: take-up is low not simply because of adverse selection but because people are not willing to pay the (gross) cost of coverage they impose on the insurer.”

“Even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.”

I would go higher. I am of the belief this number would be over 85%. If carriers charged what they needed to charge to cover all of the utilization costs based on an 85% MLR, the rates would be astronomical. This is why the solutions offered by the Robert W. Kulessa Agency make sense and would provide real relief while limiting government exposure or involvement.

The study concluded there existed two potential justifications for subsidies: “as an offset to the ‘tax’ that uncompensated care imposes on formal insurance, or as a means of redistribution to low-income households.”

It can not POSSIBLY be to help cover claims from uncovered individuals as the penalty is such a spit in the bucket that the thought is even laughable. No, this is a windfall profit for the state government. It helps wit their whole redistributionist ideal. The funny thing is, you are taking from the poor to give to the poor. Robin Hood would be scratching his head right now.

The alternative of reducing or removing subsidies entirely would lead to a mass exodus of coverage by low and even middle income individuals, the researchers asserted.   There exists abundant evidence that low-income individuals value health insurance below the cost they impose on the insurance company.

Of course as they do not understand that claims have real world effects and utilization actually effects rates. Individuals who are below a certain FPL threshold have been cared for by the government for so long that it their having any skin in the game seems foreign to them.

In conclusion, the study suggests a healthcare system that does not involve subsidies may be the solution to extending participation rates and coverage, particularly to those lower-income individuals.

Yes, if you did an unsubsidized plan with full underwriting, a decent portion of the population would instantly see lower rates and thus you would see higher participation numbers. This is because the younger and the healthier (of all ages) would be able to use those factors in creating rate structures that would actually benefit them and the carriers would be able to predict utilization costs for that year which would significantly lessen those absurd renewal increases.