The problem with 2,400 pages of legislation is not in what politicians promise the legislation will do, but what it does in reality, including the creation of nearly 40,000 pages of regulations affecting our health care. And the reality with the Affordable Care Act (ACA), as we’re witnessing nearly daily in financial media, is devastating. And not just for the economy and the middle class (as we discussed last week) but for our healthcare system itself. When you dramatically alter the third-party payment system and place federal mandates on available health-care insurance plans, the whole health care delivery system is adversely affected. To believe otherwise is naiveté.
The ACA (Obamacare) was sold to us on the basis that there were 40 million Americans without health insurance and that the Act would rectify the apparent inequity. That actually is the first broken promise of Obamacare. The Congressional Budget Office (CBO) admits that after 10 years of implementation, Obamacare “will still leave 31 million uninsured.” And we’ll have spent $1.93 trillion failing to achieve the primary objective of the Act! And that new dollar figure from the CBO is still likely an underestimate since they’ve revised the figure upward three times already.
One of the byproducts of a third-party (insurance company) payment system for health care is that the consumer or patient is considerably removed from the cost of services. The ACA increases this gap by requiring “free preventive services,” restricting deductibles, and proscribing lifetime benefit limits. Currently, over 36% of health insurance plans have higher out of pocket limits than allowed by the ACA. The Act also places new restrictions on Health Savings Accounts that have allowed 24 million Americans to be more attentive to pricing since they paid for services themselves. These provisions will remove the consumer from the cost of service even more, which has an escalating effect on healthcare costs.
“We will keep this promise to the American people. If you like your health care plan, you can keep your health care plan. Period. No one will take it away,” we heard daily from the president while pitching his plan. This is the second major broken promise of the ACA. The new requirements imposed on employer sponsored insurance (ESI) plans will make the costs increase significantly for employers. Many employers will discontinue their plans altogether, forcing employees to the state exchanges to buy their insurance for themselves.
In June, McKinsey & Company released results of a study where they found, “Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014. Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.” This contrasts sharply with CBO estimates of 7% of employees losing their current ESI, and the president’s promise that none would.
Those who will be able to retain their current plan will see significant changes. According to the National Business Group on Health, 30% of all companies with ESIs are considering dropping coverage for retirees and over 50% are considering dropping spousal coverage. And it’s not just the private sector, as local governments are looking at the same solutions. The mayor of Chicago, Obama’s former Chief of Staff, Rahm Emanuel, is planning to drop 30,000 city retirees off of the city’s ESI and push them into the exchanges to buy their own. He projects a savings of $108 million per year.
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