Source: White House on Flickr.

The Patient Protection and Affordable Care Act, more commonly known as Obamacare, was officially signed into law by President Obama in March 2010 with a couple of goals.

Obamacare's primary tenets
First, it was designed to lower the number of uninsured individuals in the United States, thus granting medical care access to a greater swath of the population. More people insured means insurers can spread their medical expenses across a larger number of members, and potentially keep their long-term costs down.

It was also designed to reform the insurance industry to guarantee that insurers were spending a significant portion of premium money received on care for their patients, as well as providing a number of essential minimum benefits in their health plans.

Finally, it was geared at giving consumers the tools to make more informed purchasing decisions when buying health insurance. It was understood that making health insurance marketplace exchanges as transparent as possible would allow consumers to make apples-to-apples plan comparisons, increase competition among insurers, and potentially lead to more affordable healthcare for all.

But what if the latter goal of Obamacare, improved affordability for access to medical care, wasn't being met? According to a recent telephone survey conducted by the Commonwealth Fund, this could be the case.


Source: Pictures of Money via Flickr.

Obamacare: not so affordable after all?
The Commonwealth Fund Affordable Care Act Tracking Survey, which was conducted between March 2015 and May 2015, consisted of a 16-question telephone interview with 4,881 adults aged 19 to 64 across the United States. The aim of the study was to determine just how affordable Obamacare plans were for ACA enrollees in comparison to the coverage that workers receive from their employers. For added context, the Commonwealth Fund lists 23 million people as being covered by Obamacare (roughly 10 million via marketplace exchanges and 13 million through Medicaid expansion), while around 150 million people receive health coverage through their employers.

The findings of the study tended to demonstrate that workers' perception (and income) played a key role in whether Obamacare's plans were deemed "affordable" or on par with employer plans. Individuals who were eligible for the Advanced Premium Tax Credit (APTC) -- the "subsidy" that lowers the cost of a premium payment for individuals earning between 100% and 400% of the federal poverty level -- and cost-sharing reductions, which help cover the costs of copays, coinsurance, and deductibles for those making between 100% and 250% of FPL, often had a view of Obamacare's "affordability" similar to that of individuals covered by their employer rather than consumers who made more than 250% of FPL In short, people making more than $29,425 (250% of FPL) in this survey likely believed Obamacare was less affordable on the marketplace exchange than if you were covered by your employer. 

Source: Flickr user Dan Moyle.

When asked "how easy or difficult is it for you to afford the premium costs of your health insurance?" just 53% of all adults with marketplace coverage noted it was "very easy" or "somewhat easy," compared to 76% of respondents with employer coverage. Workers with incomes under 250% of FPL had a relatively small difference in the perception of plan affordability (65% to 54%), but move to a higher income level and beyond the cost-sharing reduction option (i.e., above 250% of FPL) and less than half (49%) of adults on Obamacare's exchanges described the premiums as affordable, compared to 81% of adults covered by their employers.

It's not just the premiums
Responses from the Commonwealth Fund's survey would also appear to suggest that deductibles associated with a consumer's health plan have a lot to do with the affordability of a health plan.

When given four options to describe what sort of deductible they owe (no deductible, less than $1,000, more than $1,000, or don't know/refused), there was a discernable trend, with plans found on the ACA exchanges entailing higher deductibles.

Source: Centers for Disease Control and Prevention.

As with plan premiums, individuals receiving APTC and CSR credits on Obamacare exchanges had deductible profiles similar to those of employer-sponsored individuals. Only 30% of adults with incomes below 250% of FPL who were covered by their employers had deductibles of $1,000 or more, compared to 40% for ACA-covered individuals in the same income range. In adults with incomes above 250% of FPL, just 35% of people with employer coverage had $1,000 or higher deductibles, compared to more than half (53%) of all Obamacare enrollees.

If there was a silver lining in the Commonwealth Fund's survey, it's that most adults, regardless of where they obtained their health coverage, believe they could afford medical care if they became seriously ill. In total, 80% of employer-covered individuals believed they could cover their medical costs if they fell seriously ill, and 65% of ACA-covered consumers responded in the affirmative.  

What's truly to blame?
If Obamacare was designed to be a more affordable option than plans that existed before its implementation, you might be at a loss to understand why so many consumers would suggest that it's not as affordable as once perceived. I suspect it boils down to three factors.

First, the way Obamacare is set up encourages consumers to opt for cheaper plans in the bronze and silver tier sections rather than the gold and platinum plans, which are primarily geared toward upper income and sicker individuals. Consumers would prefer their premiums to be as inexpensive as possible, which is why 68% of marketplace enrollees have chosen silver plans and 21% bronze plans as of June 30, 2015 according to the Centers for Medicare and Medicaid Services. Silver plans are most often chosen because the silver plan is required if eligible consumers under 250% of FPL want to receive cost-sharing reductions.

The problem with going the "cheap" premium route is that it leads to the highest deductibles. While silver plan enrollees with tax credits to ameliorate their premium costs and CSRs to help cover their medical expenses will likely see relatively small deductibles, bronze enrollees could be exposed to deductibles that they simply can't afford to pay. What's the good of having health insurance if the deductible is too high to use it?


Source: Flickr user Francisco Osorio.

The second problem is the lack of a universal expansion of the Medicaid program across all 50 states. In 2012, the Supreme Court ruled that it would be up to each individual state to choose whether or not to expand their Medicaid program to include residents earning up to 138% of the FPL. As it stands now, some 20 states have still not approved expansions to their Medicaid program. What this does is leave low-income individuals exposed to potentially high deductibles if they attempt to purchase health insurance.

Finally, the checks and balances in place to keep insurers from raising premiums at a rapid rate under Obamacare don't appear to be having enough effect.

Under Obamacare, insurers are required to submit detailed requests to the Office of the Insurance Commissioner in each state where a greater than 10% increase (or decrease) in plan premiums is suggested. How it's supposed to work is the OIC and the insurer compromise and meet in the middle somewhere, thus saving consumers money. However, that's rarely how it works, with the OIC for many states not having much authority to regulate premium pricing. Tack on the fact that smaller market states only have a small handful of insurers for consumers to choose from, and the groundwork is set for premiums to remain woefully high, at least in some markets.

A trend worth watching
In my opinion it could be difficult to keep premium cost inflation under control in the coming years with drug and device makers now focused more than ever on personalizing medical care. What will be worth watching is if Obamacare's enrollment figures can improve and/or hold steady, or if we begin to see enrollment taper in the coming years due to affordability concerns raised by the Commonwealth Fund's study.

This certainly puts health insurers in a bit of a precarious position. They're still sitting in the driver's seat with significant pricing power, but they'll have to be careful that they don't price Obamacare consumers out of the market. While I remain cautiously optimistic that insurers can indeed find benefits from Obamacare, consumers' perception of affordability is a trend worth watching very closely.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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