When does the ‘affordable’ in the Affordable Care Act kick in?

It’s a good thing Democrats made health insurance “affordable” when they passed the Patient Protection and Affordable Care Act in 2010. I’d hate to see how much health insurance would cost if it were expensive.

The Kaiser Family Foundation just released its annual survey of employer-sponsored coverage, finding that the average premium for family coverage increased 5 percent to $19,616.

{mosads}To put that in perspective, the real median household income in 2017 was $61,372. Thus family health coverage costs nearly a third of the median family’s income.

But citing the average family premium of nearly $20,000, as high as that is, can be misleading. A small employer, especially a one with older-than-average employees, likely blew through $20,000 a few years ago. The premium for a couple in their 50s with a teenager can easily run $25,000. Bump that up by $4,000 or more for each additional child.

However, those outrageously high premiums would be even higher if employers and health insurers hadn’t taken a number of steps to contain the cost explosion by adjusting benefits and exposing employees to significantly higher out-of-pocket costs.

The Kaiser survey points out that since 2008, annual deductibles for covered workers have increased 212 percent — eight times the rate of inflation. And to think Democrats used to call high deductible coverage “junk insurance.” Yet, under ObamaCare deductibles have exploded.

Insurers are also taking steps to increase out-of-pocket spending in less-noticeable ways. For example, in years past insurers charged one copay for a generic drug, say $10, and a slightly higher copay for a brand name drug, say $25.

Then insurers moved to three copay tiers or more. The generic might still require a $10 copay, while some brand name drug copays could run between $25 and $250.

In addition, some insurers now require co-insurance of 20 percent to 40 percent of a drug’s cost for some of the newest and most expensive drugs. If a drug costs $5,000 a month — and some cancer drugs cost that much or more — 40 percent co-insurance could cost the patient several thousand dollars a month. And that comes on top of other health care-related expenses and premium costs.

Imposing such high co-insurance rates on specific drugs has raised concerns that insurers were trying to discourage some of the sickest patients from enrolling in their plans. As Kaiser Health News noted a few years ago:

• In 2016, Harvard Law School’s Center for Health Law and Policy Innovation filed complaints with the U.S. Department of Health and Human Services’ Office for Civil Rights alleging that health plans “offered by seven insurers in eight states are discriminatory because they don’t cover drugs that are essential to the treatment of HIV or require high out-of-pocket spending by patients for covered drugs.”

• Consulting company Avalere Health found that several insurers’ silver plans had been adversely targeting some of the sickest populations with higher drug costs. “An analysis found that in the case of five classes of drugs that treat cancer, HIV and multiple sclerosis, fewer silver plans in 2016 placed all the drugs in the class in the top tier with the highest cost sharing or charged patients more than 40 percent of the cost for each drug in the class.” Pulling some of the most expensive drugs from the top tier was likely due to protests and threats of legal action. 

To be fair, insurers and employers felt they had to take steps in order to control their costs, otherwise premiums would likely have been even higher than they are.

Other factors are also playing a role in the premium increases. Hospital systems were consolidating prior to ObamaCare, but the ACA put that trend on steroids, enabling hospitals to demand higher reimbursements from insurers.

Consulting firm Kaufman Hall reported in January there were 115 hospital and health system mergers and acquisitions in 2017, up 13 percent from 2016, and the largest number in recent history. For comparison, there were 50 hospital M&A transitions in 2009, the year before ObamaCare passed.

Unfortunately, options for containing premium increases and coverage reductions are limited. The Trump administration is trying to provide as much insurer and state flexibility as possible under ObamaCare, but it’s unclear yet as to how much those efforts can achieve.

And there’s a new proposal, the Health Care Choices Proposal, backed by a number of health policy analysts. It seeks to block grant current federal health care spending on Medicaid and ObamaCare to the states along with some regulatory reductions.

Since Washington has done such a terrible job trying to make health insurance affordable, maybe it’s time to give the states a chance. How much worse could they do?

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.