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New Year's resolution for policymakers — make coverage affordable

New Year's resolution for policymakers — make coverage affordable
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The newly enacted tax law eliminates the Affordable Care Act’s individual mandate, which requires Americans to either obtain health insurance or pay a fine. For some, this provision is an important achievement, striking down the most strongly disliked aspect of an unpopular law, and offering constituents the freedom to forgo coverage without a penalty. Ironically, though, this outcome will exact a cost.

From our research with consumers over the years we have learned a few basic things that probably will not surprise. People do not want to be made to buy things they can’t afford, and nearly everyone wants health insurance.  

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While the tax bill provision may tip its hat to freedom, a large and now surely worsening affordability issue remains because elimination of the mandate (starting in 2019) inevitably will increase premiums. Some experts fear the mandate’s disappearance foreshadows the potential unravelling  or, at minimum, the weakening of the individual insurance market, as the healthy drop out and the prices faced by those remaining climb ever higher.

 

Yet if recent marketplace enrollment numbers are any indication, interest in affordable coverage remains strong, creating a stable base that will make a "death spiral" scenario in most markets quite unlikely.  

That there is healthy enrollment in marketplace coverage despite reduced outreach and a continuous stream of negative publicity reflects the fact that the demand for health insurance is what marketers call “sticky” and economists call “inelastic.”

Consumers we have talked to believe that being covered is critical to their health and financial well-being. For most, coverage is a “need to have” rather than a “nice to have” and they will do whatever they can to stay insured. They understand, and research confirms, that coverage provides many health benefits.

Health insurance is an important financial instrument as well. Recent coverage expansion has been associated with reductions in bankruptcies, collections, payday loans, and other manifestations of the distress caused by unpaid medical bills. Health insurance, like all kinds of insurance, facilitates saving, financial planning, and investment, and is an important part of the economic infrastructure. 

For those who remain uncovered, by far the biggest barrier is financial. Most affected are the six to 10 million individuals in the unsubsidized range of the individual market (over 400 percent of poverty — $48,240 for singles/$64,690 for couples), whose incomes are neither low enough for subsidies, not high enough to make high prices tolerable.

Premiums for many of these consumers already are sky-high, particularly in rural areas. In some counties in Nebraska, the current monthly premium for the cheapest bronze plan for a 27-year-old is more than $500.

The elimination of the mandate will only make the outlook for this group bleaker, as more people will either do without coverage, or be diverted into various types of inadequate products that will fail to protect them in the event of serious medical need. The potential expansions of association plans and short term coverage will serve to accelerate this trend.

To some extent, high prices reflect decisions made by states, such as allowing people to remain enrolled in pre-ACA plans, or loosely regulating less comprehensive products, or not expanding Medicaid — decisions that effectively make premiums in the individual market higher. These prices also reflect the high cost of health care itself.

While it’s widely acknowledged that health care in this country costs too much, the problem is most acute for those of moderate means in the individual insurance market. This population uniquely must face the full retail cost of health care, without benefit of the subsidies or tax exclusions that dull the pain somewhat for the rest of us.

Consumers cannot be asked to overcome this affordability gap through resolve and self-denial. Nor should they go without health insurance that they want and should have. A list of New Year’s resolutions for policymakers from both sides of the aisle should therefore begin with finding ways to make affordable coverage available to the overwhelming majority of Americans who want it.  

There are some sensible national reforms that could ease the pressure on middle-income individual market consumers, such as reinsurance or other market-stabilizing approaches, more generous subsidies for individuals, a new exchange offering of a less expensive/generous “copper plan,” or the creation of a more affordable public option. Some states are already considering adopting their own mandates, or other policies that would incentivize enrollment.

The mandate provided imperfect relief from pre-existing affordability problems; its removal will surely make a bad situation worse. Not only do Americans want affordable health insurance, our society will function better when we are all covered. In striking down an unpopular pillar of the ACA, lawmakers have set a chain of events into motion. It is time they resolve to work together on market reforms that will bring affordable coverage into reach for all.

Dr. Richard Besser is the president and CEO of RWJF and Katherine Hempstead is the senior adviser to the Executive Vice President, RWJF.