The Affordable Care Act, more commonly known as Obamacare, is a perverse twist on the Robin Hood tale. Rather than steal from the rich, Obamacare has taken from the middle class.
Prior to ACA, the self-employed middle class had many options for comprehensive insurance. They were largely able to afford their premiums and deductibles, and out of pocket costs were manageable. Most importantly, they were free to choose their own doctors and hospitals from a nationwide provider network.
To use my family as an example, four years ago I had a PPO plan that cost around $16,000 a year and had a maximum out of pocket expense of $2,500. The plan offered a national network and I was able to go to any doctor or hospital. Today you cannot buy such a plan at any price. The option that comes closest to the plan we had is a “Gold” HMO policy, with a premium of around $44,000 with a $9,600 out-of-pocket maximum. For the middle class, such a policy is financially prohibitive.
Over the past four years, medical costs for the self-employed have gone up over 300 percent and the coverage of the plans has deteriorated. For a middle class family of four, making around $98,000 there are no subsidies. You have two options — buy what amounts to an expensive catastrophic policy with constricted benefits, or pay the tax penalty, be uninsured, and hope for the best. And while many middle class families — whether they qualify for subsidies or not — may be able to afford their premiums, they may not be able to afford their deductibles. How many of us can afford to pay a $13,500 bill that comes in the mail? In effect, they will be able to afford their policies but be unable to utilize them.
On the individual market, there are only two insurance companies to choose from — Anthem or Connecticare. Connecticare’s rates are slightly less expensive. But for the most part, the plans are similar.
There are only two places where you can buy insurance — on the exchange or off the exchange. The exchange plans tend to be significantly cheaper than the off-exchange plans. For example, a Connecticare plan is about 35 to 40 percent cheaper on the exchange than on off the exchange.
From a cost perspective, the exchange plans make the most sense. However, from a network perspective, the plans on the exchanges are extremely limited in terms of the size and scope of their networks.
On the exchange, the provider network is restricted to the state of Connecticut, and even then many of the best doctors and hospital programs in the state are not on the panels.
While many of the exchange plans offer out-of-network coverage, this benefit has even higher deductibles, and poor reimbursement rates – often less than half of the customary rate. So if you choose to go to an out-of-network provider, your out-of-pocket costs can be through the roof.
In terms of coverage, the off-exchange plans are better, but not much better. Off the exchange, your network will be larger and you will have a better chance of finding a provider you like or one that is taking new patients. Some plans even let you see providers in some of the surrounding areas beyond the borders of Connecticut. However, even if you go with an off-exchange plan, the networks are still limited and are not national in scope. They do not compare to an employer-sponsored policy.
Once you’ve decided whether you want to buy a plan on or off the exchange, the next decision, is the type of plan — a high deductible or low deductible plan.
There are three sets of numbers you have to look at to compare plans: premiums; deductibles; and maximum out-of-pocket costs. For the most part, it all boils down to a simple equation: the higher the premium, the less the out-of-pocket expense; the lower the premium, the more the out-of-pocket cost.
From a financial perspective, I believe it makes sense to go with the lowest premiums and the highest out-of-pocket cost. If you have few health care needs during the contract year, you will have to spend little out of pocket towards your deductible. So whether you pay the actual amount of your deductible is not necessarily a given.
If you are fortunate and do not meet your $13,500 deductible, you end up saving money with the lower premium plans (lower premiums in my family’s case is $28,500 a year, with a $13,200 out of pocket maximum). I think you have nothing to lose by taking the lower premium plan, and much to save. But some people, from a psychological perspective, prefer to pay higher premiums and then not have to worry about having to pay for services rendered.
But whichever route you go, maximum out-of-pocket costs, (premiums, deductible, out-of-pocket max) for all the plans ends up being about the same.
In summary, if you are OK with only going to a Connecticut hospital, and most of your doctors are on the exchange network, the exchange plan makes sense. If you might want to go to a New York City hospital, there is a strong possibility that there can be a significant out-of-pocket expense. If you want to go to a provider or facility in Ohio or California, this is no longer possible, no matter which plan you choose, except in the case of emergencies.
For the behavioral healthcare provider, the ACA has been problematic as well. While they have raised premiums, they have not raised what they pay providers in over a decade. In some cases, they have actually decreased their allowable rates by over 50 percent. Member cost have gone up over 300 percent, provider reimbursements have stagnated or have gone down – yet the stocks of these managed care companies have gone up over 400 percent in the past four years. No surprise there.
At risk of being labeled the “L” word, I believe that everyone — middle class included — should be entitled to good health coverage.
Martin H. Klein, Ph.D. is a licensed clinical psychologist practicing in Westport and Branford.