Changes in the market for health insurance

The employer-based insurance market has been stable for the last few years, but public exchanges less so. Physicians’ fees may be affected.

By Jeff Atkinson | Reform Recap | Winter 2019

 

Open Enrollment. Workplace of a doctor. Stethoscope on wooden desk.

Most Americans receive health insurance through employer-sponsored programs. That market has been stable in recent years. For the last six years, the increase in the cost of employer-sponsored insurance has been “relatively modest” according to the 2017 Employer Health Benefits Survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust.

In 2017, the typical annual premium increase was 3 percent, and the average premium for family coverage was $18,764. Although the total cost of insurance has remained stable, more of the cost has shifted to workers. In 2012, workers paid 14 percent of the cost of family coverage; in 2017, workers paid 32 percent of the cost.

Generally, people covered by small companies pay more to cover their families than people covered by large companies. The difference is $1,550 per year according to the Kaiser survey. The cost difference results from the proportion of premiums paid by employers and from the deductibles that are paid by employees and their families.

Insurance exchanges

President Trump did not succeed in repealing the Affordable Care Act (ACA), often referred to as “Obamacare.” President Trump and Republicans, however, have pursued multiple policies that undermine the ACA, including the insurance exchanges that offer health coverage for people who do not have access to health insurance through employers, Medicaid or Medicare.

Under the ACA, a penalty was assessed against people who didn’t acquire health insurance. President Trump has directed that penalties no longer will be assessed. The tax penalties, which were upheld by the U.S. Supreme Court in 2012, served as incentive for all people to obtain insurance. That broadened the risk pool and helped reduce the cost of insurance per person.

When people are no longer mandated to acquire insurance, some people will not—particularly if they view themselves as healthy and less likely to need insurance. That leaves sicker people in the insurance pool, and the cost of insurance per person goes up.

Increases in premiums

Health care premiums for policies on the exchanges are increasing. The Congressional Budget Office estimates average increases of 15 percent for 2019, and a Kaiser Foundation survey shows increases in a range of 7 to 36 percent, depending on the market.

Under the ACA, persons with income of less than 400 percent of the poverty level were partially protected from increases in the cost of health insurance by subsidies to help pay for insurance. (In 2018, 400 percent of the federal poverty level for a family of four in the 48 contiguous states was $100,400.)

Many Republicans would like to eliminate or reduce subsidies. If that were to happen, insurance would become more unaffordable for persons with moderate to middle income, and the number of people without insurance likely would increase.

Extension of short-term policies

Where Americans get their health insurance

The Trump administration says it can hold down insurance costs and promote choice in the health insurance market by encouraging use of short-term policies. The trouble is short-term policies often will not cover the care a patient needs.

Short-term policies traditionally were intended for short-term use, such as by people between jobs or early retirees waiting for Medicare coverage. Some in the Trump administration favor more open-ended use of short-term policies as well as reducing the requirements of what health insurance must cover. Gone would be the “essential health benefits” required under the ACA.

Many short-term policies, for example, do not cover prescription drugs, mental health, substance abuse, maternity care or preventive care. Short-term policies also may have dollar limits on the amount of coverage, including lifetime limits or limits during the period of the policy.

In addition, there are Republican proposals to eliminate the requirement (at least for some policies) that insurance companies cannot discriminate on the basis of preexisting conditions when issuing or pricing policies. A person with a preexisting condition may be excluded from the market or find that coverage is unaffordable.

The same could happen to people who work in occupations considered by an insurance company to be risky. Prior to the ACA, occupations that were considered by some insurers to be a basis for declining coverage included iron worker, professional athlete, meat packer, taxi cab driver and security guard. Recreational activities that could result in denial of coverage included scuba diving, rock climbing, skydiving and mountain biking.

Impact on fees for physicians

As the market for short-term or alternative policies grows, the impact is likely to be felt by physicians as well as patients. Physicians (as well as patients) may find that the insurance company is not willing to pay for a service, even if the service is medically necessary.

In addition, the same insurance companies that are trying to hold down costs by issuing discount insurance policies to patients also may try to squeeze physicians by having physicians sign network provider agreements at reimbursement rates that are much lower than those paid by other insurers, including Medicare.

Physicians and their billing companies should carefully examine proposed contracts to avoid entering into arrangements that turn out to be unacceptable.

Predictability in the market

The insurance exchanges had problems before Trump came along. Large insurers, including UnitedHealth, Humana and Aetna dropped out of most of the exchange markets, and that left fewer choices for people seeking insurance. For the companies that stayed, rates went up and the market became more predictable.

The Trump administration’s plans to alter subsidies, coverage requirements and rules for short-term policies will increase unpredictability again.

Jeff Atkinson is a professor for the Illinois Judicial Conference and has taught health care law at DePaul University College of Law in Chicago.

 

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