EDITOR’S NOTE: Healthinsurance.org’s Curbside Consult is a periodic informal dialogue with medical and health policy experts about pressing issues of the day.
Sabrina Corlette is Research Professor and Project Director at Georgetown University’s Health Policy Institute. She directs research on health reform, particularly the regulation of private health insurance plans and the implementation of new insurance market rules under the Affordable Care Act. As someone who has focused more closely on Medicaid than on the private side, I’ve learned a lot from Corlette’s work.
We recently caught up over Skype, and – in a two-part interview – discussed how the new health insurance marketplaces are actually working.
In Part 2, we talk about whether the Affordable Care Act is improving the health care system. Will “Health Reform 2.0” be “just as fun” as the original? Is the health reform succeeding at reducing “job lock?” And will small business owners see dramatic changes in the way they can help employees with health coverage?
It’s a great conversation. Enjoy!
Transcript of Part 2:
Harold: Again, you’re watching Curbside Consult on healthinsurance.org. I’m Harold Pollack talking with Sabrina Corlette about now the prospect of Health Reform 2.0, which I’m sure will be just as fun as Health Insurance 1.0, except it will be about constraining the things that we like instead of at least offering some people something they haven’t had before.
It does strike me as a very heavy lift in American politics. Just everything about health reform is a heavy lift. In the ACA, so many of the benefits went to a relatively disorganized and politically marginalized group of people. You know, the bottom third of the income distribution were the most likely to be uninsured or underinsured and, also, sick people who are just a small fraction of the population. Many of us, if we’re not sick … First of all, we don’t know. We might have terrible insurance policies that would really … We would lose our house if we got cancer, but we’re not getting cancer, so we have no way of knowing that.
Harold: But we do see when it gets more expensive or more inconvenient. We have all of those problems and also so much of the population is just totally insulated from the issues that ACA is trying to deal with, whether you’re a senior or a professor with a nice health insurance policy that’s getting a nice tax subsidy. I’m insulated from both the cost side and the insecurity that many other people face, so if you want to mess with my coverage, it’s basically going to be something that’s taking something from me for something that really doesn’t benefit me personally. I think that’s a real problem with trying to reform the system.
Sabrina: It is a problem. That’s why it took … Presidents since … What? Theodore Roosevelt have been trying to do it and unsuccessfully until now. I will say, though, even for middle-class successfully employed people, upper-income people, there has been this phenomenon of ‘job lock’ … where people stay in jobs that they may not particularly enjoy, or may not feel that it really deploys their talents, simply in order to keep those health benefits, either for themselves, or a kid or a spouse who’s got health care issues. For the first time, that kind of anxiety that many middle- and upper-class families may face is simply gone. So people may be unleashed from jobs that … This is something that there’s been a lot of debate about. Is that a good thing or a bad thing?
Harold: That was my next question. Is that a good thing or a bad thing?
Sabrina: We actually recently did a study in collaboration with the Urban Institute, in which we estimated that about 2.5 million new entrepreneurs will be created because they’ve been released from this sort of ‘job lock’ phenomenon, where no long tethered to those job-based health benefits, they can go off and create the next I don’t know Segway in the garage or Elf On A Shelf, or whatever it is that they’re dreaming about. It’s not just that. It’s the moms who’d prefer to stay home with their kids, but needs to hang on to that job because of the health benefits or the 60-year-old who is dreaming of an early retirement, but can’t because they need to hang on until Medicare.
I completely, completely agree with you that one of the political challenges of health reform has always been that it’s focused on this disaggregated, politically disempowered group of lower income uninsured, but it’s difficult to quantify the benefit of easing that middle-class anxiety about “Gosh, I’ve got to stay in this job because I need those health benefits.”
Harold: It’s interesting. That also brings out how ACA over time might bring about some pretty large social changes. If you look at something like this Congressional Budget Office projections of the costs and so on, how tentative those necessarily are because if suddenly more people start working part time or whatever the issues are, of course, that will have an enormous impact economically and socially. And we are … that’s very hard … from the 2014 perspective, it’s very hard to predict what those impacts will be.
Sabrina: That’s right. It’s extraordinarily hard to predict. I think many of us will look back five, ten years from now and say “If only we had known.” I do think particularly small businesses, that could be an area where we’re going to see a lot of dramatic changes. Small business owners have struggled for years to offer coverage to employees. Many of them really want to do it because it’s an important way to get good talent and keep good talent, but it’s very difficult, very expensive, and they’ve struggled.
The Affordable Care Act opens up some new opportunities there, perhaps not in the way that drafters intended, but we’re hearing in a number of states about small business owners that are looking at disbanding their small group plan, giving their employees a wage increase and telling them to buy coverage on the exchange, which they can do because it’s guaranteed issue, they get premium tax credits if they’re low- to moderate-income and it’s decent coverage. For some small employers, it’s going to unshackle them from the provision of health care. That’s a win for the employer and a win potentially for the employee, but a loss for the taxpayer, right? because the federal government picks up that cost.
Harold: I was talking with my step-sister, who, by the way, is very disappointed in ACA so far. She works for a pretty small employer and she’s a big supporter of liberal causes. Her health insurance has basically gotten worse under her employer and he’s blaming Obamacare for it, which seems to me that’s the obvious play … whatever you’re doing is to blame Obamacare, but she wishes that her employer didn’t offer any insurance because she can’t go to the exchange because he’s offering this insurance that she doesn’t like. It seems to me that that’s a pretty unstable situation because, obviously, once the employer figures out that it’s a negative from his employee’s perspective, he could just drop it.
Sabrina: Right, right.
Harold: I think she would be happy to go on the exchange. She’s just annoyed that she can’t do that and yet she’s not eligible for the subsidy because of the offer by her employer.
Sabrina: Right, Right. Another concern and something that we’re going to need to watch … particularly for large employers that might want to avoid the employer mandate and having to pay a fine if they don’t offer coverage … if they just offer a bare-bones plan, is that going to get them out of the mandate, but not make their employees very happy. That is something that is worth watching and maybe something that policymakers will need to address if it picks up as a trend.
Harold: If you had your druthers and we made you king of the health care world, would you just get rid of the employer mandate and just let it go and let lots of … If IBM drops their coverage and everybody goes to the exchange, “Hey that’s fine?”
Sabrina: Well … it’s a little bit of an accident of history, right, that anybody has had employer-based health coverage and that we’ve been so reliant on the employer-based system really since the Second World War. If you look at how other countries do it, they don’t do it that way. It’s sort of a crazy way to do it. On the other hand, I wouldn’t want to wave my magic wand and make employer-based health coverage go away completely because I just think that’s a system that people have come to really rely on. I think it’s one … a rationally built system, that if we could start from scratch, and built a rational system, it wouldn’t be employer-based coverage, but that’s the system we’ve got and we can’t just eliminate it overnight without ending up with severe disruption and a lot of unhappy people.
Harold: Yeah, I think that’s right. I must say that if I had say a disabled child, I would really want to wait and see how these Marketplace plans are actually working before I had a strong opinion about what I would want my employer to do because there is a sense that the current system has been road-tested more than the marketplaces have to this point. Even though the marketplaces are very promising, I’m sure that there’s going to be lots of glitches that have to be ironed out before they’re sort of ready for many people who have unusual circumstances to really deal with.
Sabrina: That’s absolutely right. What we’ve also seen in a number of states and a number of markets is insurance companies dramatically narrowing their provider networks to offer plans on the exchange. There’s a real trade-off for consumers there. Obviously, if you narrow your provider network and pay providers less, you can offer a more affordable premium to people and that’s attractive, but it may mean that important marquee hospitals, academic health centers are not included in the network.
It may mean that certain sub-specialties and other specialists are harder to make an appointment with. It may mean you have to drive further to get care. So, as you say, you’re a parent of a disabled child, that’s not been such a problem in the employer-based market. Networks have been fairly robust for a while in the employer-based market, so that is a trend that we’re going to have to watch and understand whether consumers are happy with the coverage that they have through that marketplace and are getting the care they need.
Harold: I have such mixed emotions about that as well for the reasons that you identify. I think that … you mentioned that Health Reform 2.0 will have to deal with cost. Narrow networks, first of all, they allow the consumers more economical policy, but they also give some bargaining power to the demand side of the table. Of course, the University of Chicago should be included in every plan, but the more you require broad networks, it’s true that you help consumers when they have someone sick and they need to go to an academic medical center, but you’re really undercutting the bargaining power of the insurers to go the big academic medical centers and say “You just charge a lot of money for what you provide.”
We often criticize the insurers because they’re not covering care in a marquee hospital, without asking the accompanying question, “How much was that hospital charging for that?” That has to be part of the conversation because academic medical centers … there are some of us, where it’s like buying your groceries at the movies and it’s just really expensive.
Sabrina: Yeah. Consumers have largely been insulated from understanding the differences in provider pricing. As you point out, some of these marquee hospitals, the prices they charge are not commensurate with the quality of care that they provide. There’s often no correlation. And so, I do think now we’re moving in a direction with a lot more price transparency, a lot more exposure of providers that are charging really ridiculous prices relative to the health care outcomes that they can produce. We have a country where the political calculus that we have made is that we’re not going to have governments setting rates for commercial payers. We’re not going to have a public option plan. The only people who can push back against that provider pricing right now are the health plans. As you point out, if their ability to do that is constrained because they’re told they have to contract with every hospital in every town, that’s going to lead to increased premiums for consumers.
Harold: One last question, as we get near the end, what do you think of the “Cadillac tax?” Do you find that it’s having a real-world impact in what you’re seeing in the work that you do?
Sabrina: The Cadillac tax is the 40 percent excise tax on very, very high costs or generous health coverage provided by employers. It doesn’t go into effect in full, I don’t think, until 2018 or maybe it’s 2017. I can’t remember the exact date. I do believe … I don’t have any solid evidence, except for anecdotes right now … I do believe that a number of employers that do offer this generous coverage are rethinking that. I spoke to one large employer recently, who said that they are planning to offer … I think, actually, just this year … they’re offering a much slimmed-down plan and giving employees a big incentive to enroll in that plan. So I think that is going to be a trend we’ll start to see over the next few years as employers kind of make that calculus that they can’t be offering these extremely generous benefits anymore.
Harold: On the whole, do you think that’s something that’s welcome or is that something that’s problematic?
Sabrina: At the end of the day, it means more cost sharing for employees. That’s a trend that’s been going on for years … long before the ACA was passed. And you know, health economists would tell you that consumers need skin in the game to over time create the political pressure that we need to address the cost problem.
On the other hand, there’s really good evidence that shows that when people have really high deductibles, or really high cost sharing, they don’t just forgo unnecessary care; they also forgo really important primary and preventative care that’s important to keep people healthy over the long run. So these are REALLY tough questions.
Harold: We ask the tough questions here.
Sabrina: Yeah, it’s hard to find that right balance. But you know … my in-laws recently retired, but they were in a plan where they literally had no deductible and no cost sharing. It was through a university. They literally had no out-of-pocket costs at all. In this day and age, that’s sort of just not going to be sustainable.
Harold: Well, I think particularly for those of us that are say in the top third of the income distribution, that we really should see more of those costs. It seems to me that the warning that you issued that cost sharing leads people to forgo some of the important preventative and primary care that they need, it’s really low-income people with health problems are the ones where we’d be the most concerned. If you’d looked at the old RAND Health Insurance Experiment, that was a really disturbing finding there, particularly with things like hypertension and vision and dental care.
I think that for a lot of people that can afford it, it’s a somewhat different issue and that we probably do need to rethink that some because I actually think that … you said that it was very difficult to … We’re spending 17 percent of GDP on health care. It seems to me quite possible we could be at 23 (percent) five years from now, ten years from now. That is really … especially given the way we finance health care in such an inefficient and disorganized way. That really would be problematic. And so we would have to … in order to make Health Care Reform 2.0 successful, I think we really do kind of have to make more visible the economic burden that that is putting on the economy and putting on government and other payers.
Sabrina: Right, right. Well, you know, there’s been some interesting work done around what they call value-based insurance design … the idea being if you’ve got hypertension or diabetes, that any care to help you maintain your health would be free or almost cost-free, but that less necessary, more elective procedures or procedures that don’t have a lot of evidence behind them would come with a lot higher cost sharing. That kind of approach has a lot of appeal. It’s great in concept, but it can be difficult to execute.
Harold: This is a great place to end it. Thank you so much for a wonderful conversation and for the work that you do. We’ll put some links up on the website to the reports that you’ve been co-author of a voluminous collection of really informative and judicious non-partisan information that I think helps us understand how the Marketplaces are going. I’ve learned a lot from your work and it’s an honor to talk to you.
Sabrina: Thank you so much. It’s a great pleasure to talk with you today.