It's been an uncertain time for health insurance providers. The back and forth debate in Congress over potential plans to repeal and replace the Affordable Care Act has been an ongoing source of stress for consumers and insurers. The complexities seem never-ending — and tensions are running high, even within the Republican party.
Medicaid has become a major point of contention, as Republican senators who have expanded Medicaid in their states want to defend their constituents against future cuts.
Sen. Ted Cruz's proposed Consumer Freedom Option amendment, which would allow insurance companies to sell bare-bones policies provided they also sell comprehensive plans, has prompted criticism from insurers. CEOs from the advocacy group American Health Insurance Plans and insurance providers in the Blue Cross Blue Shield Association wrote a letter coming out against the amendment. Under the proposal, people could opt out of maternity or mental health coverage, for example, which could raise the cost of insuring maternity care or mental health to about the actual cost of service.
Craig Hasday, president of Frenkel Benefits, an insurance brokerage and benefits consulting company, joined Marketplace Weekend's Lizzie O'Leary to discuss the ways that the health care debate affects insurance providers — and how that affects consumers. The following is an edited transcript of their conversation.
Lizzie O'Leary: What do health insurance markets look like in the U.S. right now?
Craig Hasday: There's a lot of different components of the markets. I mean the vast number of people that have health coverage in the United States are covered by Medicare and Medicaid or by employer provided coverage and within that employer marketplace there's two segments — there's the small group marketplace and the large group marketplace. And the large group marketplace is largely self-insured. So when you look at coverage most Americans are actually through the employer covered by self-insured employers and there are no insurance companies.
O'Leary: What does that mean self-insured employers?
Hasday: So insurance means someone's taking risks. Someone is taking a premium and they're paying claims as they're presented. With self-insurance, the employer takes the place of the insurance company: they're taking risks. There might be stop-loss insurance, which is insurance to protect against catastrophic claims, but they're actually paying the claims and making the claims adjudication decisions.
O'Leary: So when you think about where we are right now — you work with a lot of companies — what do companies come to you guys and say "this is what we want for our employees"?
Hasday: I would say that, largely, employers want to provide the best benefits possible within their budgets. And the budgets vary widely by industry, by profitability of a company, but most employers are good stewards of insurance. Not all, I mean some you know try to get away with as little as they can. It's actually interesting, as the Affordable Care Act went into play there was a lot of consternation among large employers, but really large employers by and large figured out how to navigate around the Affordable Care Act and really not much changed. And you know one of the interesting discussions was regarding the repeal. And I was asked what would happen if there was repeal, what would happen and large employers, and quite frankly, very little. The large employers have largely planned around ACA. The rules would roll back to what they were, and they would eliminate some fees and taxes which they would not have to pay. But really the markets wouldn't really be disrupted for large employers, and for Medicare if there was repeal. The big issue with repeal is Medicaid. And that's a wildcard because so many people have come to rely upon Medicaid benefits.
O'Leary: So what happens if there is just a strict repeal vote? You know these kind of votes that we saw repeatedly in the House? What happens then?
Hasday: Well it doesn't look like that's going to happen at this point. But if there was a repeal it would roll back to the pre-ACA rules. The biggest issues in the rollback of the Affordable Care Act are people with subsidies, and that's going to have an enormous impact. People have subsidies who are paying very little for coverage. They're going to lose those subsidies and all but the very sickest are just simply not going to be able to afford coverage, it's just unaffordable. And we're going to create a situation where the insurance companies are not going to be willing to play. The variable that I think is going to come into play are the states because insurance provided by insurance companies is regulated by state law. As far as Medicaid goes, there are so many people in the country that have become so reliant upon Medicaid benefits, I just don't see that states that have expanded Medicaid are going to be able to roll it back without revolt.
O'Leary: And that certainly seems to be the case with the senators from those states who said absolutely not.
Hasday: Very clearly. The senators in states that expanded Medicaid understand the political realities of pulling back the Medicaid expansion, and they're going to have to find a way to fund it. Increase taxes, something, but I don't I don't think there could be a full rollback of Medicaid in the states that have opted to expand.
O'Leary: If you could make tweaks to the ACA, what would you do?
Hasday: I would definitely expand the coverage tiers, the premium tiers, from three to five. So right now under the Affordable Care Act, the difference in premium between the ones that pay the lowest cost are the ones that pay the highest cost is a maximum of three times. There's only three rate bands.. What it allows is the difference in costs between the youngest and the oldest citizens to be a wider spread of rates. Right now within the Affordable Care Act, we have a vast number of younger, healthier people who are opting out of the system. Part of the reason they're opting out is because they are subsidizing older Americans. If there were more rating tiers then the older people would pay costs which are more equal to the amount of benefits that they would consume. So increasing the rating tiers I think is important. I would unquestionably increase substantially individual penalty to not participate in coverage because one of the other problems with the Affordable Care Act is people would access the system when they needed benefits and then opt out. And that free-riding cost the insurance companies quite a bit.
O'Leary: You study this stuff very closely, look into the future a little bit. Do we have any sense of what's going to happen in the next year?
Hasday: I don't think the future is a year. I think we're looking at more like the five to 10 year time horizon. I think that we're going to be jockeying with chipping away at the Affordable Care Act. I think that even if the Republicans aren't successful in repealing or replacing the Affordable Care Act through the legislative process the Republicans are going to be able to substantially impact things. For example by not enforcing the individual mandate, which by the way is pretty weak anyway. I think that for the next few years we're just going to be stumbling through trying to keep equilibrium in the system. I'm a little worried, because you know one of the things that all of this political posturing does is create uncertainties, and insurance companies are very nervous about uncertainties. I mean they they're concerned about where that's going to lead, because the legislatures, federal and state, have the ability to take what's out there and mandate that insurance companies do certain things or apply political pressure to continue to offer coverage, or continue to offer some types of coverage. Insurance companies are very nervous, and if you've been watching the stock prices of insurance companies they've been moving quite a bit with almost every change in the Republican debate. I think the insurance companies are kind of trying to lay low, because they're not exactly sure what direction the health care in this country is going. I think that what they're trying to do is control the controllable.