We're entering the lawless age of health care

We're entering the lawless age of health care

Brett Kavanaugh’s confirmation to the U.S. Supreme Court would herald a new lawless age in health care.

Last December, Congress zeroed out the tax penalty for not having health insurance, effectively nullifying the individual mandate and with it, a key economic mechanism underlying the Affordable Care Act. In turn, Texas and 19 other states filed suit against the federal government, claiming the mandate mechanism previously upheld — and therefore the ACA overall — is no longer valid.

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The Trump administration announced it would not defend the ACA in court, adding to its multi-pronged effort to hasten the ACA’s demise. The administration has already shortened open enrollment, dramatically curtailed spending on advertising and enrollment navigators, legalized so-called skinny plans by extending the period in which “short-term” ACA-non-compliant plans are allowable, from three months up to three years.

These tactics feed a broad strategy of suppressing enrollments in ACA marketplaces by making it more expensive to get into that pool and more attractive to get out, thereby destabilizing the insurance market for comprehensive coverage.

Kavanaugh may be the final nail in the ACA’s coffin. He is expected to rule against the ACA should he — and the Texas case — reach the Supreme Court. At risk are the ACA’s consumer protections: caps on consumers’ out-of-pocket liabilities, coverage for essential health benefits, prohibitions on lifetime benefit caps, and the ever-popular requirement that health insurers provide coverage regardless of one’s health history and that they don’t increase rates based on pre-existing conditions.

Upheaval in the regulatory framework will likely yield a private system used by fewer people and governed by less regulation. Four million people are expected to leave the marketplace plans absent a mandate. To lure them back, insurers will market skinnier plans in new and possibly dangerous ways. Insurers who take advantage of flexibility and embark on more rapacious practices will likely further alienate consumers, already frustrated by their experiences with health insurance.

In our study on consumer health-care purchasing, participants conveyed overwhelmingly negative sentiment towards insurance companies. One participant summarized a general lack of trust: “In my perception of evil companies…it seems like an industry that’s really screwed up. It feels like there are predatory people in it.”

Other participants expressed immense frustration with health insurance complexity — the costs of which Accenture recently quantified as $4 billion per year — and erosion of value as deductibles and premiums rise and provider networks tighten. “I’m paying 100 percent of the cost,” Alistair said of any health costs he incurs when seeking medical care.

A start-up executive, he buys his own insurance via the marketplace — with a $400 monthly premium and a $7,000 deductible. Before Congress repealed the mandate, he rationalized his insurance purchase this way: “How do I decide that I need it? Just because I'm gonna get a penalty if I don't get it. And so I basically treat it as, rather than pay the tax penalty, I'll pay this…But I just expect to pay for every health care expense that I'll have.”

Without the ACA, we can expect much worse. More than half of people surveyed are already fearful of losing health insurance without ACA protections. Another poll showed 81 percent of voters, including 76 percent of Republicans, said health care will be extremely or very important in their vote for Congress this year.

But the GOP’s answer to voters is a bill that would not prohibit insurers from raising premiums to absurdly high levels, even though nominally reinstating some protections for people with pre-existing conditions.

In a new Wild West of health care uncertainty, who will protect consumers’ interests? Enter large corporations.

Fed up with ever-rising health care costs and consumer frustrations with increased cost-sharing, large employers are taking matters into their own hands. Comcast is the latest large company to announce their own health care initiative, revealing intentions to offer employees zero- and low-deductible plans and rely on start-up companies to provide individual support for employees navigating the health care system.

Comcast followed Amazon, JP Morgan Chase, and Berkshire Hathaway’s lead, who previously announced a joint venture to re-invent how they deliver health care benefits to employees. Led by newly announced CEO Atul Gawande, the new venture is expected to abandon traditional group health insurance products altogether.

In the post-ACA battle for consumer trust and confidence, these and other employers have at least one major advantage over health insurers: motivation for change. Comcast spends $1.3 billion on health care annually.

Employer health spending generally has more than doubled as a share of total wages in the last three decades, from 6 percent to more than 12 percent, driven by health care price and utilization increases. Employees share this pain; health insurance costs may be depressing real wages. Even with insurance, which 60 percent of adults have through employment, 25 percent reported foregoing medical care because of cost.

As uncertainty engulfs American health care, the regulatory void in consumer protections creates opportunities for private enterprises to become more responsive to consumer needs. Will a new sort of market force — one that respects consumers’ purchasing power and focuses on aligning products with consumers’ interests — save the day? Consumers are counting on it.

Deborah Gordon is a senior fellow and Anna Ford is a research assistant at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School. Follow Deb on Twitter @gordondeb.