The Affordable Care Act (Obamacare) designers were compelled to make the health insurance companies part of the deal. No industry so rich and powerful can just be abolished.
But the risk was high. The behavior of insurance companies was part of the health care problem. They profited by denying policies to those it judged poor risks, by revoking policies when subscribers got sick, and by tailoring policies with exclusion after exclusion, among many other tactics. Under the ACA those practices would be outlawed – all applicants would be accepted at one price, with standard provisions, and no cancellations allowed. Plus, importantly, profit and overhead rates would now be capped; if exceeded, the companies would need to rebate premium dollars to subscribers. Companies would retain the power to enter or exit markets at will and to price every product freely, but they couldn’t cherry-pick their subscribers anymore.
The ACA, however, left the insurance company-provider relationship untouched. The companies for years kowtowed to powerful high-priced hospitals, pharma, and large physician organizations, while dividing and conquering smaller physician groups, particularly primary care. Thus arrived the increasingly prevalent High-Deductible Health Plans (HDHPs), which will continue under the ACA. HDHPs represent terrible health policy: higher patient payments, disincentives for relatively inexpensive primary care, but continued support for high priced hospitals, procedures, and end of life intensive care.
With the new rules of the road, economists predicted the insurance companies would compete on the basis of efficiencies, service, and lower prices. But were the changes enough? Corporate behavior experts observed that a company’s culture tends to be persistent. Would the predicted beneficent behaviors indeed emerge, or would other unpredicted ones, sly explorations of design flaws perhaps, take their place? And also importantly, would the government be able to adjust rules and regulations nimbly as needed?
The eventual outcome is unpredictable, but the early transitional period is alarming. The insurance companies at this stage need to avoid catastrophic mistakes, even at the cost of initial market share. So they cancel grandfathered policies for their own convenience; enter only selected exchanges to decrease risk; and charge high prices for profit safety, even if they might need to rebate consumers at the end of the year. Moreover, they have created “narrow provider networks,” paying the included providers miserably, even if that leaves out the best doctors and compromises doctor-patient continuity. Needless to say, the high-priced areas remain untouched.
Obama erred in giving up so easily on the Public Option, which could have provided a safe haven for many in this interim period with uncertain choices. He also erred in not providing a transitional plan of incremental changes for those who would be facing higher prices. That would have been better than ignoring the problem. He also erred severely in not altering the insurance company-provider axis. Above all, he erred in not assembling a united, high-quality health care executive team.
While the short-term challenge is coverage, the long-term challenge will be reducing costs in the high-priced areas. Progress is difficult under the best of circumstances. Incompetence and venality are constants of life. The key for progress will be for the government to finally assemble a first-class team, to recognize facts on the ground unstintingly, and to develop a willingness to confront entrenched interests.