Still Broken

Why is our Health Care System Still Broken – With or Without Obamacare?
by Bobb Joseph
Executive Summary:
Whether Obamacare – The Patient Protection and Affordable Care Act (ACA) – is fully implemented, or implodes and collapses under the weight of its 906 pages of law, 15,000 pages of regulations, and glitch-filled execrable enrollment on the federal online exchange (the Health Insurance Marketplace), the underlying problems with health care and health insurance remain largely unresolved. Our understanding of these – and how we as consumers choose to respond to them – will largely determine whether we hit the iceberg and sink, or veer away in time to save our private health care system.
Health Care
What’s wrong with health care today? Imagine a huge marble house nestled atop a hill at the edge of town with two problems: 1) poor insulation costing a fortune to heat in the winter and cool in the summer, and 2) a damaged and tarped-over left side. Like this house, the American health care system is plagued with two fundamental problems: the high and increasing cost of health care (poor insulation), and the near-50 million uninsured (damaged left side). And when you stir in to this the factor of “Other People’s Money” (OPM), you have a toxic brew: unchecked rising costs for patients – and providers – who don’t know or care what services cost, because someone else (the insurance company) is paying for them. And, unfortunately, although Obamacare purports to lower the cost of health care, the reality today is skyrocketing insurance premiums for families due to the increased costs associated with the health care law.
Health Insurance
So what about health insurance – how most of us pay for health care? What are some of the key drivers that keep rates high and rising?
First of all, we have an “87% provider cost problem,” not a “3% insurer profit problem.” Let me explain. Contrary to much of the uninformed public opinion, a recent analysis by the world-renowned accounting firm PriceWaterhouseCoopers found that health insurers average a meager three-cent profit margin on the premium dollar, paying out 87% to providers for medical and pharmaceutical services.
For two of the key cost drivers, let’s take a look at the “Doe” family.
John and Jane Doe pay $600 per month for their health insurance. Most states have a list of required benefits (“mandates”) that health insurance plans must cover by law – from gastric electrical stimulation to breast implant removal. While some states have fewer mandates (26 in Utah), others have piled them on year‑after‑year with over 60 of them (Rhode Island – 69, Maryland – 67, Minnesota – 65). It’s estimated that an average family could see savings as much as 25% on their insurance rates if they could just buy a basic health plan without the mandates. So now their premium is only $450. (Allowing consumers to buy across state lines, with appropriate state insurance oversight to provide adequate transparency and disclosure might also help to reduce premiums, though this has not yet shown to be true.)
And what about so-called “jury lotto,” where patients get large settlements or jury awards for medical treatment that goes awry? So Doctor Smith treats Jane Doe for an ear infection – something he has done for thousands of patients – and gives her a prescription, telling her to call if it doesn’t improve. Jane dies a few days later from a brain tumor, the family sues, and they “win” a $10 million award. So everyone’s health insurance rates go up, the doctor’s malpractice rates increase, and he now orders extra tests for the next patient to protect himself from the next lawsuit. The significant savings in tort reform (changes in the law to reduce litigation or damages while protecting the consumer) is estimated to lower premiums by as much as 10%. So with tort reform in place, the family might now see its insurance rate go down to $390 – a whopping 35% drop in their monthly premium.
Sadly, Obamacare goes in the other direction. Weren’t insurance rates supposed to drop by $2,500 per year as promised by President Obama?  Actually, families are now paying over $3,000 more annually, largely due to the costs associated with Obamacare (new required benefits, “no health questions” guaranteed-issue enrollment, new rating rules, etc.).
So what do we need to do in order to make changes to bend the cost curve downward? Here are three things to consider.
First, let’s continue to support insurer-provider cost-control initiatives. From continued aggressive network pricing discounts, to global payment and performance-based incentive strategies, insurers continue to find innovative ways to balance keeping rising provider costs in check while meeting their customers’ health care needs.
Second, we need to change our mindset as consumers when it comes to medical care. What if we treated health insurance more like homeowner’s insurance – coverage for the unexpected (illness or injury) – and largely paid for our day‑to‑day medical needs out of pocket (like home repair)? Great insurance options to consider include high deductible health plans with linked Health Savings Accounts (HSAs). Along with this, we need to shift our thinking from OPM (Other People’s Money) to MM (My Money).
Thirdly, how about a radical “Groupon” kind of approach. Let’s say John Doe is diagnosed with a hernia, and needs a major operation to fix it. And there are three hospitals in town – all three are fully credentialed and meet quality standards, plus his surgeon can admit to them all. Hospital 1 is an older traditional facility in a more frugal setting, with an estimated cost for the surgery at $10,000. Hospital 3 is a new, state-of-the art “Hyatt” hospital with high‑end amenities and a fancier environment – estimated cost $50,000. Hospital 2 is in the middle, with an estimated $25,000 price tag for the surgery. Here’s what Joe’s health insurance company tells him:
“You are covered at all three hospitals. But if you admit to hospital 3, you have an additional $2000 copay; if you go to hospital 2, we’ll cover the cost at 100%; but if you go to hospital 1, we’ll pay you $2000. Your choice.”
John weighs this and is comfortable at hospital 1, plus he likes the idea of getting rewarded for choosing a lower‑cost setting. So he has his surgery there. Not only does he get the $2000, but the insurance company saves $38,000.
And what about the hospitals? As competitive information is shared amongst providers and hospitals, and patients begin to choose lower-cost services, the likelihood is that the prices will come down. And finally, real market forces of supply and demand will come into play.
We are not going to solve our health care and insurance problems overnight. And although some argue that there are reforms in the health care law to “bend the cost curve” downward in the future, skyrocketing insurance premiums are what many people are seeing today. And over 30 million will remain uninsured after Obamacare is fully implemented, according to the non-partisan CBO. But whether Obamacare remains in place or not, we still need fundamental reform. If we are going to steer the Titanic away from the iceberg, consumers need to get engaged – and have financial incentives to do so. Once the sleeping giant of the American consumer awakens, watch out.

So the Obamacare Exchanges are now up and running – what do I need to know?

So what’s up with buying health insurance starting October 1 on the new Health Insurance Exchange (or “Marketplace”)? In Iowa, depending on what county (and Region) you live in, there will be up to four insurance companies to choose from (there are two in Cass County). Here are some questions that might help you figure out if the Exchange is right for you.


Question: What do I have to do starting October 1?

Answer: Nothing, if you already have health insurance through work or from an individual plan (including Senior plans). If you don’t have health insurance, then you must buy a plan or pay a tax penalty.


Question: Do I have to buy a plan on the Exchange?

Answer: No. You can buy a plan on the Exchange, or off the Exchange from any health insurance company doing business in Iowa (an independent health insurance agent can let you know what your choices are either way).


Question: So why should I buy a health plan from the Exchange?

Answer: You would only want to buy a plan on the Exchange if you are in a lower income bracket. If your estimated 2014 income is between about $12,000 and $46,000, so you may qualify for a subsidy or tax credit, to lower your monthly insurance payment.


Question: Even if I have health insurance now, can I shop for new coverage?

Answer: Yes, you can shop on or off the Exchange during an “Open Enrollment Period” starting October 1 and up to next March 31, and not be turned down or rated due to health problems.


Question: Where can I find out more information?

Answer: Contact your local independent health insurance agent, attend an upcoming State of Iowa Market Place Meeting, or call (877-955-1212 or 515-281-5705) or click the Iowa Insurance Division. There is also a fact sheet from the Governor with some helpful information for Iowans, as well as a robust website from Wellmark Blue Cross Blue Shield of Iowa.


Robert Joseph

Independent Health Insurance Agent

Midwest Insurance Mart

Ph: 243-2483



The content provided is for information purposes only and not intended as legal advice.  The information provided is not a substitute for a consultation with a professional advisor or health plan.

Obamacare Collapse: Section 89 Déjà Vu?

Amidst all the words by pen and screen about Obamacare, few have compared President Obama’s signature health care reform legislation to the late ‘80s debacle of “Section 89,” the now-forgotten attempted addition to the IRS code included in the sweeping Tax Reform Act of 1986, which collapsed under its own weight – just before it was to take effect. Section 89 was a federal government’s attempt to require employers to provide non-discriminatory life and health insurance benefits to all employees, without regard to income. But the nightmarish rules and regulatory burden it was poised to foist onto businesses was so onerous and complex that as it neared implementation, there were 13 bills before Congress to change or eliminate it entirely.

Could this same fate befall the so-called Affordable Care Act, or Obamacare?

With many “shoes” having already dropped, and so many straws of exemption placed on the camel’s back, the possibility of Obamacare simply collapsing under the weight of its 906 pages1 and over 15,000 pages of regulations2 is not just a wish of conservatives but a real possibility.

So here are some of the dropped shoes to date:

Waivers – More than 700 organizations and 2 million Americans have been given waivers3

Delays – Companies with more than 50 employees have been given a one-year delay4 in implementation

No income verification – Individual income verification for the insurance exchange changed to the  “honor system” for now5

Missed deadlines – Over 20% (41 out of 82) deadlines for implementation have been missed 6

Insufficient funding – Some of the 18 separate tax increases7 needed to fund Obamacare are being eliminated or postponed, and some groups are finding ways to avoid them8, which – combined with an overly optimistic initial estimate, may lead to a significant shortfall9 and debt

Messy rolloutGlitch-filled initial enrollment October 110

Despite the administration’s relentless and daedal efforts to keep pitching this landmark legislation of President Obama and restructuring of the healthcare and insurance for more than 310 million Americans, there are threatening dark clouds on the horizon that may portend its demise.

Perhaps, in the event of the collapse of this “snow globing” of one-sixth of the American economy which fails in its two fundamental stated goals of reducing health care cost and covering the uninsured, the prescient one‑sentence warning from Dr. Barbara Bellar should have been heeded:

“We’re going to be gifted with a health care plan we are forced to purchase and fined if we don’t, which purportedly covers at least 10 million more people without adding a single new doctor, but provides for 16,000 new IRS agents written by a committee whose chairman says he doesn’t understand it, passed by a Congress that didn’t read it, but exempted themselves from it, and signed by a president who smokes with funding administered by a treasury chief who didn’t pay his taxes, for which we will be taxed for four years before any benefits take effect by the government, which has already bankrupted Social Security and Medicare — all to be overseen by a Surgeon General who is obese, and financed by a country that’s broke.”