A pessimistic thought on the exchanges
In the House health-care reform plan, the exchanges are expected to serve 21 million people in 2019. Almost all of those people come from the uninsured population or don't make enough money to afford the coverage their employer offers. That is to say, almost all of those people will be eligible for premium subsidies. The numbers in the Senate finance bill are very similar.
I'm a longtime proponent of the exchanges, but key to their functioning is their ability to serve a population that's not entirely low-income. For one thing, you don't want them stigmatized as a place where poor people get health-care insurance. But for another, it's not clear that they'll be particularly competitive if they're primarily serving a subsidized population.
Imagine that my family makes $45,000 a year. That puts us at about 250 percent of the poverty line. In the Senate finance bill, our premium contribution is capped at $4,349. Surveying our options, I see a plan from Aetna that costs $10,000, a plan from Kaiser that costs $9,000 and a plan from Cigna that costs $11,000. All seem pretty similar, but then, I'm not an expert in these things. Which do I choose?
You might say I should choose the Kaiser plan. But why? It's cheaper, but it's not cheaper to me. After all, my contribution is capped at $4,349. Moreover, it's generally true that things that cost more are better. It stands to reason that Cigna is giving me something for the extra $2,000. Indeed, I'm being subsidized to the tune of $7,000, as opposed to $5,000. It's clearly a better deal.
Maybe there are elements in the plan that somehow protect against this, and I've just missed them. But I don't think so. And though this dynamic isn't terribly important in a world where the exchanges are large and lots of unsubsidized customers are creating competitive pressures, they might be very significant in a world where the exchanges are limited to people who need to be subsidized, and so are facing a different cost calculus.
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