Except this is a complete pipe dream. I have direct, first-hand information on the topic --- from a high-placed executive working for an insurance company that is a certified participating provider in more than one of these exchanges --- and I am about to reveal why this system is just going to be another kick in the teeth for people who are hoping to finally purchase health insurance.
I'll give you the quick summary now: you won't be able to afford the insurance policies offered on the exchanges. Hardly anybody will, even with the subsidies provided by the government. Without a public option competing against these private insurance companies, the exchanges will barely make a tiny dent in the problem of covering millions of uninsured Americans. Period.
I will apologize in advance, this is complicated shit, and I will try to distill it down to its essence as best I can.
The framework for these exchanges is that the providers can offer different levels of coverage. They are grouped by what's called "actuarial value" into tiers: bronze, silver, gold, and platinum. There is one different type of coverage level, but it's not really relevant to this discussion.
Understanding actuarial value is key to this situation, so I will start you off by linking to the government's definition of it here, which I recommend reviewing. But this really doesn't tell you much, because that simplistic definition means one thing to you, and another thing entirely to the accountants. To you it's about your out-of-pocket costs; to an accountant, it's about how much money you will cost the insurance company in medical claims, and how they need to price your policy in order to make a profit.
Pricing for any type of insurance policy requires an actuarial analysis (fancy way of saying "looking at statistics") of how much you are going to cost the insurance company in claims. For health insurance, that process starts with estimating --- on average, for your height/weight/age/gender/marital status/smoking behavior/medical history --- what the projected dollar amount of your health care claims will be.
As it stands now, companies ask you for that information up front. They use that to determine how they should price your policy, so that --- given 1000 people exactly like you, paying the same amount for your policies --- they will receive more in premiums from you than they pay out in claims. They can also take that information and deny you a policy outright if they think you're too big a risk. They have a computer model that they use (one of the standard algorithms used by every health insurance company in existence) that takes in all of your demographic and health information, and either spits out a price, or spits out a denial.
But part of the equation is removed with the health insurance exchanges: the policy is a guaranteed contract --- the insurance company can't deny you coverage. Another complicating matter is that the policies that providers sell on the exchanges can only take into account a customer's age and smoking status when determining premiums. They can't adjust their premiums based on family history or pre-existing conditions like they do now. So the 40-year-old female who is healthy as a horse and has no history of any costly health conditions gets the same price as the 40-year-old male who is currently being treated for leukemia and has a family history of heart disease.
For insurance companies, this is a nightmare. Their entire pricing model has to get tossed out the window, and a new one put in its place. How are they building the new one?
By assuming that everyone purchasing insurance is going to be unhealthy and otherwise uninsurable --- and pricing the policies accordingly.
I have a direct quote from the executive that I won't use here, to protect their identity and my rear end. But the crux of their comment was, the assumption that these exchanges will have policies priced lower than current existing policies with identical coverage benefits is desperately misinformed and, in fact, patently false.
And despite my reluctance to use that specific quote, let me assure you: this is straight from the horse's mouth.
This individual went on to explain that a policy offered on the exchange will be priced significantly higher than the exact same policy bought outside the exchange. Why? First, because they can't deny applicants through the exchange with pre-existing conditions; second, because their actuarial model for pricing the policy on the exchanges makes the assumption that everyone is sick; and third, by building in the assumption that each customer will be getting the federal subsidy for their purchase, and cranking the price up to soak up some of those dollars. Oh, and the exchanges are also charging a set fee to the insurance companies for each customer they end up covering. So that cost is built into the policy price too.
Finally, every insurance company buys what they call "re-insurance" from a different company. It's essentially passing on the cost of huge claims to a different carrier. If you require $100,000 in surgery and rehabilitation after a serious car accident, your health insurance company pays those bills, and the re-insurance policy they hold pays a large portion of it back to your health insurance company. The cost of the premiums your health insurance company pays for the re-insurance policy is another cost passed on to the policy holders in the exchange; mainly because the health insurance companies figure that every customer will require care that will cause a re-insurance claim to kick in.
"Oh, hold it, mister;" you think to yourself, "this is just one insurance company. You don't know how the other insurance companies will price their policies." They all do it the exact same way --- using the same standard algorithms used by every other health insurance company. Each provider tweaks the software for their specific use, but the end result will be nearly identical for any given policy, since the statistical information they are using is all identical. And since the actuarial value (remember that?) for these bronze/silver/gold/platinum coverage levels is set by the rules of the exchange at a fixed amount, the policy pricing is going to come in within 2-3% of each other. So you will have a bunch of insurance companies "competing" for your business with policies offering nearly identical coverage at nearly identical exorbitant prices.
To borrow an analogy first coined by the wise, shy and and ever-soft-spoken orator Lewis Black: customers using the exchanges will have a choice between several bowls of shit --- the only difference will be the smell.
To borrow an analogy first coined by the wise, shy and and ever-soft-spoken orator Lewis Black: customers using the exchanges will have a choice between several bowls of shit --- the only difference will be the smell.
Remember: if an insurance company can't make money on you, then they don't want you as a customer. But if you purchase through the exchange, they can't turn you down, and they can't drop you. You're their customer as long as you continue to pay your premiums. So they want to discourage sick people with poor lifestyles from buying their product. They will do that by pricing their policy out of reach of most people.
See, that's the other thing that accountants know that you don't: rich people tend to be healthier and engage in less risky behavior. So if you can afford their outrageously-priced policy, there's a better chance you'll cost the insurance company less in claims than if you can't.
Twisted shit, isn't it. Made me sick to my stomach to hear this. But now you know. And you can watch this entire operation turn into another big-corporations-fuck-the-little-guys fiasco just as big as the foreclosure mess.
The health insurance exchanges created by the Affordable Care Act will not come anywhere close to solving the problem, that's just reality. They will likely pull less than a million people into the health insurance market, and even that number may be high. Which means we are facing another huge battle over how to rectify the situation of still having over 50 million people uninsured in this country.
We're facing another kook-burger parade of ignorant, anti-government nut-jobs screaming about death panels and socialized medicine, and another year or two when nothing gets done in Congress while advocacy groups and industry lobbyists negotiate another lengthy, loophole-ridden bill that will get us just a few inches closer to universal coverage while wasting huge amounts of political capital.
Meanwhile, 18,000 people on average will lose their lives every year while waiting for this shit to be sorted out, still unable to afford the medical care and treatment they need.
We've tried negotiating, we've tried compromise, and it has failed. Congress isn't going to fix this situation, that has been proven beyond any doubt --- the solution arrived at by that ignorant cadre of influence peddlers is a catastrophe. This country needs a leader who will unilaterally fix this situation. It needs one badly. It's dying for one, in fact.
Very literally, dying.
