Ways to Improve the Affordable Care Act

Current Status of Health Care in the United States
Health care in the United States is in a state of legislative flux. The Affordable Care Act was passed in order to reduce the number of uninsured people in the country, as well as start to contain the runaway growth in health care costs through a number of measures that essential brought more of health care under stronger government influence. The ACA was mostly successful, both in terms of cost containment (Weiner,) and bringing down the number of uninsured Americans (Mangan, 2017).
However, there were some challenges with the ACA. The first is that the individual mandate was unpopular in some circles, as people were faced with a choice of paying a penalty if they did not purchase health care insurance, which was viewed as a forced expenditure. The individual mandate faced legal challenges and the ethics of this provision were debated (Gostin, 2010). Another issue with the ACA was the government-set structure of the plans, which created issues for insurers and in some markets there were few if any options for health care coverage at different points in time, as insurers simply did not see those markets as profitable within the scope of the plans (Mangan, 2017). A third issue might be identified in the structure of the ACA, which gives states considerable power over the implementation of the Act, so that its outcomes are different in different states. This led many Republican-run states to drop certain aspects, such as refusing to take money for Medicaid expansion (Healthcare.gov, 2017).
The current federal government is also determined seemingly to undermine the ACA, if not outright repeal it. This create the condition of uncertainty for insurers, patients and health care providers alike, which benefits pretty much nobody. Any health care reform would ideally be aimed at identifying issues with the current regime and addressing those with targeted action, rather than ill-conceived, politically-motivated repeal campaigns with no plausible substitute for the ACA.
Review of a Portion of the ACA
The section of the Act reviewed covers the definition of ACA-compliant plans. Within the ACA, there are health insurance plan exchanges. This structure basically creates a marketplace where insurance providers provide plans according to standardized templates. They then market these plans, competing on both price and service. The marketplaces are a means of fostering greater competition in the health care insurance market. This occurs because the plans are standardized, which makes them easier for the insurance companies to administer, but also easier for consumers to understand. The information asymmetry between consumers who need health care coverage, the insurance companies, and the health care providers themselves, has been identified as one of the critical issues driving health care costs higher – consumers are price-takers and that allows for them to be exploited. The creation of the exchanges seeks to remove some of that information asymmetry by having insurance companies compete with standardized plans.
The ACA lays out the types of plans and how they are structured. There are four categories of health care plans – bronze, silver, gold, and platinum. These plans are based on the deductible percentage – with a platinum plan you pay 10%, down to 60% for a bronze plan. The idea is that people want to have different structures depending on their health care needs. Within this, there are some high degrees of variance of course. Each local market will have its own exchange; these are set up by state and the degree of competition within each market will vary. Areas with higher populations and greater density of health care providers will likely see a more competitive exchange, for example. It is worth knowing that there are provisions within the ACA to help offset some of the cost of these plans, for people who qualify on the basis of income.
These plan categories are intended to offer a baseline level of coverage for people, and at the same time give people the option of what they want to pay. There are some issues with this structure, however. First of all, there is the individual mandate, which of course means that people have to pay for at least the bronze plan. Relatively healthy individuals are thus faced with buying at least a bronze plan, which can run into the hundreds of dollars per month. Prior to the ACA, there were some plans on offer in most markets that had lower levels of coverage than mandated by the ACA. Such non-compliant plans were essentially eliminated with the ACA in favor of more expensive plans, thus increasing the cost of health care coverage for some individuals. Further, healthy people who might otherwise not have had health care coverage at all are faced with payment for at least a bronze plan.
The other issue one notices with the structure of these plans is that they by no means offer full coverage. The best plan, platinum, still comes with 10% co-pay. This means that even someone on a platinum plan can pretty easily be bankrupted by exorbitant health care expenses. While the majority of high-expense situations come from end-of-life care and chronic illness, the reality is that accidents happen, and sometimes healthy people get ill as well. Those individuals could easily face financial ruin, even with the best plan.
Similarly, a health person taking on a bronze plan is going to be in a tough situation if they actually need any sort of health care. At 60%, that is an amount for just about any health care that will ruin a person who isn't making that much money. The structure of these plans, therefore, might be ok for creating exchanges, and increasing overall coverage rates, but they create new pain points that remain unresolved.
Recommendations
Thera are two recommendations to improve the ACA by addressing some of the pain points that have emerged with the structure of the metal plans. First, the highest-level plan should provide total care, without deductible. The cost of this plan would increase, of course, but would allow for people to choose for themselves if they want to have more of a Canada-style health care where they pay up front but are then covered when they get sick or injured. Some people are risk averse that they would do this, as platinum does not adequately resolve the downside risk of catastrophic health care situations. Eliminating bankruptcy risk might be a viable option, especially for people who make decent money and can afford a high-end plan – the incremental increase in cost will not be that much.
The current structure of the plans might shift, depending on market demand. There is not that much spread between gold and platinum at present, but it might be the case that more spread is valuable. Or perhaps that gold could provide 85% coverage instead of 80%. Any changes to the other plans would be based on analysis of the market, and whether the market for health care plans was segmented properly when the ACA would first put into place. The reality is that the ACA plans were created without adequate information about market behavior, but any good business will tell you that once you have had the ability to gather price and demand data for a few years, it is sound business practice to adjust your product/price options based on market feedback. So the particular plan options might need to change beyond just the platinum plan, but that would be a data-driven decision.
The other recommendation for improving the ACA would be to – and this would be useful regardless of whether the platinum plan changes or not – implement some form of catastrophic coverage for all Americans. Currently, there are catastrophic coverage plans available for people under 30, or who meet certain criteria. I am unsure as to why the age 30 was arbitrarily chosen. The reality is that catastrophic coverage is much different than routine coverage, and for many people it is the catastrophic coverage that matters the most. The metal plans are really designed only for routine coverage. Again, there is significant downside risk on any metal plan for the customer because an accident or serious illness would result in bankruptcy. While there is definitely a cost associated with providing catastrophic coverage, the insurance companies can work with government to set the cost of that coverage appropriately. This extended catastrophic coverage could be entirely optional. It would solve the problem by allowing healthy people to buy the bronze plan for routine coverage (still mandatory) and still have proper coverage for unforeseen circumstances. Catastrophic coverage could still yet be made unavailable to people who have issues that might make them a higher cost risk – there are ways to structure this in order to make it financially viable for insurers. But the real concern is to eliminate the downside risk – why make people pay for health care coverage if that coverage doesn't get the job done?
Conclusions
The current metal plans in the ACA may solve some big picture issues, but they were also created without any market feedback. There is now market feedback, so there is now opportunity to improve the metal plans. The biggest issue is that people are forced to buy a plan, but none of these plans addressed the massive downside risk associated with serious accident or with sudden illness, and thus leaves Americans exposed to financial ruin in the event of entirely unforeseen circumstances. Either changing the platinum plan to be 100% coverage, or extended the catastrophic plan to allow anybody who wishes to eliminate this downside risk to partake would help to alleviate the stress faced by people who are risk averse and simply wish to eliminate the risk of bankruptcy in the event of a serious accident or unforeseen illness. As that is a pain point unaddressed by the current structure of the ACA, it presents an opportunity to improve on the Act.




References

Gostin, L. (2010). The national individual health insurance mandate: Ethics and Constitution. Georgetown Law Faculty Publications and other works. Retrieved December 10, 2017 from http://scholarship.law.georgetown.edu/facpub/430/

Healthcare.gov (2017) Medicaid expansion and what it means for you. HealthCare.gov. Retrieved December 10, 2017 from https://www.healthcare.gov/medicaid-chip/medicaid-expansion-and-you/

Mangan, D. (2017). Obamacare kept reducing number of Americans without health insurance during Trump's first few months in office. CNBC. Retrieved December 10, 2017 from https://www.cnbc.com/2017/08/29/obamacare-kept-reducing-number-of-americans-without-health-insurance.html

Mangan, D. (2017) People in half of Virginia's counties on track to have zero Obamacare insurers next year. CNBC. Retrieved December 10, 2017 from https://www.cnbc.com/2017/09/07/half-of-virginias-counties-on-track-to-have-no-obamacare-plans.html

Weiner, J. (2017). Effects of the ACA on health care cost containment. Leonard Davis Institute of Health Economics. Retrieved December 10, 2017 from https://ldi.upenn.edu/brief/effects-aca-health-care-cost-containment