With or without Obamacare, health insurance costs are on the rise, and the new law doesn’t do much to stop them from climbing. If anything, several provisions of the legislation passed in March could drive costs higher than they would have been under prior law—unless, of course, insurers can find other ways to bring these costs down.
What Cost for Keeping Your Doctor?
Businesses are already searching for more affordable options for their employees. One increasingly popular step: health plans that cover only services provided by a relatively small number of participating doctors and hospitals.
These plans are most attractive to small employers, but as The New York Times recently reported, “Large employers, as well, are starting to show some interest, and insurers and consultants expect that, over time, businesses of all sizes will gravitate toward these plans in an effort to cut costs.”
So what’s the problem?
Most folks think being able to select a less expensive option is a good thing. Yet the Times notes plans such as these “could come as a surprise to many who remember the repeated assurances from President Obama and other officials that consumers would retain a variety of health-care choices.”
President Obama’s promise before the American Medical Association last summer was that, “If you like your doctor, you will be able to keep your doctor. Period.” If employers alter current health plans to provide coverage for a restricted number of physicians and other providers, this won’t be the case. To keep seeing the doctor you like today, you may face a higher co-payment or be asked to pay completely out of pocket.
Paying More for Restricted Access
As Obamacare takes effect, more Americans could end up with plans that restrict their access to care because of provisions that raise premiums. And there are plenty of those in the 2,700 pages of the Patient Protection and Affordable Care Act.
Obamacare will allow the federal government to determine what benefits must be included in qualified health plans. The benefits included as minimum requirements for coverage are expected to be generous. Add to this the required coverage of preventive care, and you’re looking at paying a pretty penny for a standard health plan.
Then there’s the other insurance regulations: the new law prohibits insurers from putting lifetime or annual caps on insurance policies. Many Americans carry plans with limits because they also mean lower premiums. Eliminating these affordable choices will mean paying more.
The Insurance “Death Spiral”
Obamacare also ensures “guaranteed issue” starting this year for children and in 2014 for everyone else. This means Americans will be able to get coverage regardless of pre-existing conditions. Sounds fine, but it opens the doors for healthy individuals to wait until they get sick to purchase coverage. This in turn would drive up premiums for everyone else in what health policy wonks refer to as the insurance “death spiral.”
Finally, the new law alters public health programs in ways that will indirectly drive private sector premiums higher. Expanding Medicaid means doctors will be treating more patients at Medicaid’s below-market rates. To cover their losses on Medicaid patients, physicians will have to charge their privately-insured patients even more.
No Free Lunch
Despite wishful thinking on behalf of Obamacare proponents, there’s still no such thing as a free lunch, in Washington or anywhere else.
As Obamacare ratchets up premium prices, insurers and employers will step up their search for savings, and restricting provider networks is one way to do this. But, as the Times reports, “some benefits consultants wonder if these plans represent any real solution to high medical costs. The narrow network, if it is based on the insurers’ ability to demand low prices, may be ‘just another short-term fix,’ warned Barry Schilmeister, a consultant at Mercer.”
Reduced costs don’t necessarily mean better value. In this case, Americans could pay less, but will also receive less. Real reform would lower costs while maintaining Americans’ access to the best doctors the world can offer. With Obamacare’s passage, we’re even farther from that goal.
Kathryn Nix (firstname.lastname@example.org) is a researcher in The Heritage Foundation’s Center for Health Policy Studies.
First appeared in Health Care News