The past few weeks have seen a real political tempest stirring up around President Obama’s promise that “If you like your private health insurance plan, you can keep your plan.” While we don’t want to touch the political aspects of presidential promises with a ten-foot pole, we can try to shed some light on the circumstances that will make some people’s loss of their insurance inevitable – and even why that may not necessarily be a bad thing.
Health insurance has been regulated by the states and has not been the province of the federal government. Most states – Washington included – have not had a standard definition of what constitutes health insurance. If an insurance company offered it for sale and the state allowed it to be sold, it was insurance. Over time that has led the market to offer a broad range of benefits under the heading of health insurance. Many of these, some even offered by major companies, have been termed “junk health insurance” because the benefits were woefully insufficient in today’s medical care system. Plans were offered at low cost that was so limited they covered only $1000 of hospital costs and $2000 of outpatient costs per year. When the Affordable Care Act was passed, it laid down some basic requirements which essentially set a national “floor level” for what constitutes health insurance. Many individual health insurance policies will not meet these standards.
By January 1, 2014, any new plan sold to individuals or small groups must cover the following benefits:
- Ambulatory patient services –care received without being admitted to a hospital – for example, at a clinic, physician’s office or same-day surgery center.
- Emergency services – where failure to treat could lead to serious disability or death.
- Hospitalization – in-patient care like room charges, fees for care from doctors and nurses and tests and drugs administered during while you are there.
- Maternity and newborn care given to women during pregnancy and labor and care for newborns
- Mental health and substance use services to evaluate, diagnose and treat mental health and substance abuse issues.
- Prescription drugs prescribed to treat an illness, like an infection, or an ongoing condition, like high blood pressure.
- Rehabilitative services and devices to help people with injuries, disabilities or chronic conditions.
- Laboratory services to help diagnose a medical condition or monitor treatment.
- Preventive and wellness services like routine physicals, screening, and immunizations.
- Chronic disease management to manage an ongoing condition, like asthma or diabetes.
- Pediatric services, including oral and vision care – the same services, but applied to kids.
In addition, coverage cannot be denied because of preexisting conditions and coverage cannot be cancelled because of illness or errors in applications. Coverage can be cancelled in the case of non-payment of premiums or serious misrepresentation on application.
The Affordable Care Act will certainly result in the cancellation of some people’s insurance policies – even if people like them – contrary to the President’s promise. Many of those policies will be cancelled because they cannot meet the standard of comprehensive coverage required.
A large number of people will benefit from this new set of standards. Around three quarters of US adults have at least one ambulatory care visit each year and over 20% visit an emergency room. The average ER visit expenses now run over $1200. Nearly 10% of us will be hospitalized as an inpatient every year at an average cost of over $9,000. Almost all of us will use prescription drugs in the course of a year and while many of us don’t foresee the need for rehabilitative services, the fact is, accidents, stroke, sports injuries and a host of other problem have the potential to afflict all of us.
Areas such as maternity benefits and mental health or substance abuse issues may look more problematic to an individual. These benefits certainly drive insurance costs higher and some individuals may be reasonably certain they are not needed. However, we can understand the benefits of improving access to mental health treatments for all when we look at some of the recent killing sprees that have involved people with mental health issues.
It is certainly true that some individuals will lose coverage they may have desired to keep; it is also the case that some people may be required to pay for coverage they do not need in an individual underwriting sense. Some of these individuals will pay more for new insurance than they paid before. The hope is that in the long run having a larger pool of people to share the underwriting risks embodied in these new insurance essentials will mean lower costs for most people and lower health care costs in general as providers do not have to adjust their costs to account for uncompensated care.