The Coming Obamacare Backlash

A story, "On Health Exchanges, Premiums May Be Low but Other Costs Can Be High," appeared yesterday in the New York Times written by Robert Pear, the Gray Lady's longtime health care policy reporter. In it you will find an excellent synopsis of the fundamental failing of the Affordable Care Act: It is not affordable. Once people and the media get past the abominable failure of HealthCare.gov and realize that the $300-$600 per month policies purchased on the new exchanges carry with them deductibles on average of $5,000 for an individual and $10,000 for a couple there will a significant political backlash. Republicans in Congress will benefit.

Here's how Pear explains it:

Until now, it was almost impossible for people using the federal health care website to see the deductible amounts, which consumers pay before coverage kicks in. But federal officials finally relented last week and added a “window shopping” feature that displays data on deductibles. 

For policies offered in the federal exchange, as in many states, the annual deductible often tops $5,000 for an individual and $10,000 for a couple. 

Insurers devised the new policies on the assumption that consumers would pick a plan based mainly on price, as reflected in the premium. But insurance plans with lower premiums generally have higher deductibles. 

In El Paso, Tex., for example, for a husband and wife both age 35, one of the cheapest plans on the federal exchange, offered by Blue Cross and Blue Shield, has a premium less than $300 a month, but the annual deductible is more than $12,000. For a 45-year-old couple seeking insurance on the federal exchange in Saginaw, Mich., a policy with a premium of $515 a month has a deductible of $10,000. 

In Santa Cruz, Calif., where the exchange is run by the state, Robert Aaron, a self-employed 56-year-old engineer, said he was looking for a low-cost plan. The best one he could find had a premium of $488 a month. But the annual deductible was $5,000, and that, he said, “sounds really high.” 

By contrast, according to the Kaiser Family Foundation, the average deductible in employer-sponsored health plans is $1,135. 

“Deductibles for many plans in the insurance exchanges are pretty high,” said Stan Dorn, a health policy expert at the Urban Institute. “These plans are more generous than what’s prevalent in the current individual insurance market, but significantly less generous than most employer-sponsored insurance.”

The Obamacare plans might be more generous than what is currently offered on the individual market (though far less so than the average employer-provided plan), but if you are a young, healthy person you would normally never wade into the individual private insurance market to purchase health coverage. Now you are going to have to. How many young adults working part-time have an extra $300 a month to drop on health insurance or have $5,000 sitting in a savings account to pay off that high deductible? A low percentage I would guess.

Apologists for Obamacare like Paul Krugman will argue that subsidies exist for both premiums and deductibles, but according to Pear only about one of three people are qualifying so far for those subsidies:

Plans in the marketplace are separated into four categories — bronze, silver, gold and platinum — indicating the generosity of coverage, or the share of costs paid by insurance for an average enrollee. 

Many people buying insurance on the federal and state exchanges are expected to qualify for subsidies. But in the first month, for reasons that are not clear, only 30 percent qualified. The others must pay the full premium and will be subject to the full deductible.

Most people don't know what is going on. I talk to my coworkers -- informed Democrats who are politically engaged and who keep up on the news -- and the level of their knowledge about the Affordable Care Act is superficial. I photocopied the Pear article and handed it out. Over the next few months it will become more apparent that the grand achievement of Obamacare is to shunt an enormous number of people into a failed, costly health care system. The insurance companies will see their bottom lines engorged, but the complexity of the coverage and the high deductibles will prevent people from seeking medical attention.

Maybe after a period of time the wrinkles in the Affordable Care Act will be ironed out and more people will qualify for premium support and the federal government will be able to exercise control over rising health care costs. But bear in mind the baseline that we are beginning with -- a $300 premium with a $5,000 deductible for an individual -- is already out of reach for most people. Prices will not decrease. The system won't work. There is not that much disposable income available in the general populous. People will be angry when forced to pay and they will vote Republican, a party that has been nothing if not consistent in its denunciation of Obamacare.

(A good source of information on Obamacare is the Naked Capitalism blog. One of the bloggers regularly featured, Lambert Strether, called attention months ago to the exorbitantly high deductibles of the average Obamacare plan. Ever since, I've been telling people about it. And the response I usually get is a blank stare of incredulity.)