Affordable Care Act Effect on Private Health Insurance

Universal health care is one of the main, and arguably most divisive tenets of modern-day politics. Members on both sides of the aisle will agree that the overarching premise of a universal system is an admirable effort to strive for; it's the implementation of such system that's heavily debated. On March 23, 2010, President Barack Obama signed into law the United States' latest attempt of a universal health care system, and most significant healthcare reform since 1965 when Medicare and Medicated were enacted, the Affordable Care Act. With seemingly endless debates on the Affordable Care Act since passing, many of the talking point have been exhausted; we know the percentage of the population that remains without health insurance, the burden it has placed on small businesses, and the opportunities it has provided to those who could not otherwise afford medical services, but the impact it has made on private health insurance is the one that is least discussed. The Affordable Care Act brought about a myriad of changes, but one can argue the one change that affected Private Health Care providers the most is the sudden expansion of health insurance coverage due to the Affordable Care Act's individual mandate. In short, the individual mandate requires every person to have health insurance, or pay an annual tax penalty. The intent behind the individual mandate is to encourage people to apply for health insurance and create a more proportional pool of sick and non-sick people enrolled (it's important to note that a legislation was passed in 2017 that repealed the individual mandate, however, the repeal is not effective until 2019, and as such, the effects of it have yet to be felt). Additionally, ACA expanded health insurance coverage in part by prohibiting discrimination against people with pre-existing conditions and offering subsidies to low-income people purchasing through newly-created exchanges on the individual insurance market, Ashley Semanskee, research assistant at the Henry J. Kaiser Family foundation, explained. Data reviewed from the Centers for Disease Control and Prevention (CDC) shows 20 million fewer persons were uninsured in 2016 compared to 2010. On the surface, this data is positive because it shows the effectiveness of Affordable Care Act, and while one may assume a price decrease in premiums due to a larger number of participants, the opposite is true. Vera Gruessner, Editor at Xtelligent Healthcare Media explains a potential cause of higher premium rates, this legislation has brought forward medical coverage for an additional 20 million people and abolished the pre-existing conditions clause. The risk pools for health plan populations are now much different than before and health payers are being required to cover the expenses of some of the more costly patients within the healthcare delivery system. There are other Affordable Care Act mandates that contribute to higher premium rates, such as mandatory preventive services coverage. Brian Blas©, Senior Research Fellow at George Mason University, conducted research to quantify the premium increases and found, the average state individual market premium increased 41% between 2013 and 2014 and an analysis performed at the country level, suggested that premiums increased by 49%. Increasing premium rates is just one-way healthcare plan providers are responding to the Affordable Care Act. The other tactics they are employing are high deductible plans, and reducing the number of health care providers they accept, commonly referred to as narrow network. A narrow network typically entices you with a lower monthly premium, but limits your choice of providers. Dan Mangan, reporter at CNBC markets states, in 2015, 54 percent of insurance plans sold on that marketplace had more restrictive networks, or the list of medical providers covered for customers. But this year (2017) 68 percent of plans sold on HealthCare.gov were either a health maintenance organization or exclusive provider organization plan. Each have relatively restrictive or narrow networks. Narrowing the networks forces consumers to rely more on out of network health care providers, which often carry with them the burden of high out of pocket maximums. This can compound when you factor in the new trend of high deductible plans. A deductible is the amount of out of pocket money a consumer annually pays, before the insurance benefits kick in. A high deductible plan carries a higher deductible than a typical plan. Avalere Health released a report projecting future growth of high deductible plans. Specifically, the report states, Avalere analysis also found that deductibles for the most popular type of plan on the exchange--silver plans--will climb in 2018, to an average of $3,937, up from $3,703 in 2015, and each following year they will increase. When looking at narrow network and high deductible plans from the lens of a consumer who requires a lot of health care, it's easy to see the disadvantages they provide. However, there are some positives. If you are a relatively healthy or low-income person, these plans provide you the opportunity and slight peace of mind to be covered from catastrophic events, while reducing your burden of a high monthly premium rate. From a strictly financial standpoint, the Affordable Care Act did more than just raise monthly insurance premiums, and increase annual out of pocket maximums. Many will argue that the same insurance providers who at times were painted as being on the wrong end of the stick, found a new revenue stream. This new revenue was flooding in from the large percentage of the United States population that were not previously insured, but were now federally mandated to find coverage, or pay an annual penalty. Tom Haynes, president of TBP Solution, a health care insurance broker, and guest writer at Forbes, explains how major, publicly traded insurance providers have performed since the inception of the Affordable Care Act, Five major publicly traded insurance carriers are Obamacare players: WellPoint, United, Aetna, CIGNA and Humana. All have taken somewhat different approaches to the opportunities created by the law, but they all share similar financial and stock market performance trends since Obamacare's passage and implementation??”steadily upward. Since mid-2013, these managed care' companies have been some of the brightest shining stars of Wall Street and Obamacare is a major reason. The short falls on the Affordable Care Act when viewed from the consumers perspective, such as high monthly premiums and annual out of pocket maximums, can also be attributed to the success of these insurance providers. These changes were made to combat high medical costs of the now larger sick pool, but they also apply to the rest of the pool. Namely, the young and healthy individuals who are not participating in the health market are also paying the higher monthly premiums and annual out of pocket maximums, while using very few of the services. This, in theory, is leading to insurance providers collecting a substantial amount of money more from this population, then they would have previously received prior to the Affordable Care Act. A Common Wealth Fund study, published July 2016, on how the Affordable Care Act affected insurers' financial performance concluded, Only some insurers fared especially poorly. One-quarter of insurers underestimated medical claims in the individual market to a much greater extent than the rest. A fifth of insurers in the individual market substantially improved their financial performance between 2013 and 2014. All well-functioning markets have winners and losers, so it should be no surprise that some health insurers failed to succeed in the ACA's reformed market, especially during the first year. A more recent study done by Matthew Johnston of Investopedia on the performance of large insurance providers compared to the S&P 500, a stock market index of 500 large companies, showed continued favorable growth for insurance providers. Specifically, Johnston stated, Aetna Inc. (AET), Anthem Inc. (ANTM), Humana Inc. (HUM) and United Health Inc. (UNH), four of the five biggest American health insurers, have outperformed the S&P 500 index over the last three years ending Oct. 1, 2018. Cigna (CI), the worst-performing of the five, came in slightly below the 40 percent rise of the S&P 500.

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