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Why Didn't They Sign Up

The Heritage Foundation Building

“Some (low-income) individuals may remain uninsured because they are not aware of the coverage option or face barriers to enrollment, even though they may be eligible for financial assistance under ACA.” “Cost still poses a major barrier to coverage for the uninsured”, making it the most common reason given, when they are asked, “what is the primary reason you are uninsured?” (19.) A new study just published entitled, “Subsidizing Health Insurance for Low-income Adults: Evidence from Massachusetts” takes this inquiry much deeper. The study concludes that even a modest enrollee premium can be a major deterrent to universal coverage among individuals with a low-income. This is one of the reasons the Medicaid expansion was so successful. Understanding the reason enrollments in ACA were so comparatively disappointing is more complicated than one would think. It is not simply because of adverse selection but because low-income people are NOT willing to pay the (gross) cost of coverage. Senator Rand Paul could have saved these Ivy league researchers a lot of time. (20.) 

They found that health insurance leads individuals to consume more health care (as much as 25% more) than they would have consumed if they were uninsured. This is normally considered a good thing, as the value of providing the coverage is to get people to take advantage of it. A KFF Study found that uninsured adults are far more likely to postpone health care or forgo it altogether, with potentially severe consequences, particularly when preventable conditions or chronic diseases go undetected. However, low-income people are smarter than some researchers give them credit. They know that they are more likely to get providers to forgive them for uncompensated care if they are NOT insured. Some research indicates that they can often settle their health care bills for 20% to 35% of the cost of care, but not if they have any kind of health insurance. I know some people, who purposely tell their health care providers that they do not have health insurance, even though they have it, for this very reason. 

This study of the mature programs in Massachusetts, shows the existence of a significant degree of resistance to sign-up for health insurance, even with very generous premium subsidies. They found that premium rates at 25% of carrier cost will at most get only Half or less (<50%) of the potential uninsured enrollees. And, even if subsidies lower the premiums to 10% of average health carrier cost, Twenty (20%) percent of the uninsured would remain uninsured under normal circumstances.

As a nation, after we add the Eleven (11) million Medicaid expansion, we only have about Ten (10%) of our population without health insurance. Premium subsidies would have to increase dramatically to close the gap between the cost of insurance and their willingness to pay. (20.) Unless we decide to give all of the uninsured individuals health insurance for FREE, we will never ever reach universal health insurance coverage in this Country. However, on the bright side, the uncompensated care situation can be delimited.

The Massachusetts Study reveals that low-income adults may have become strongly accustomed to the lack of health insurance, just as adults with higher incomes cannot imagine being without health insurance. It is mind boggling for each to seriously consider the others position. To some degree, it is easier for low-income people because they usually have less to lose. Anyone, who has taken a trip to the ER sees that the uneducated, unemployed and working poor use it as their primary care physician. Many of our needier citizens learn from experience that EMT’s respond immediately with an ambulance and have not the slightest reluctance to using the emergency room or calling 911 whenever necessary. Since they generally never pay the bill, the service is free to them and hopefully a life saver, when it is necessary. People do not often die or go without health care in acute situations, but we certainly can develop a less expensive and more effective way to treat their minor ailments.

ACA failed and BCS believes we have learned more about the character of the uninsured individuals in our health insurance market. The effort to replace ACA should incorporate how best to spend our limited national treasure addressing the need to deliver cost effective health care to the low-income uninsured population in the United States. BCS Consultants will address this issue in the next White Paper, presumably after the dust has settled on the current repeal and replace contretemps.

It is no wonder Representative Nancy Pelosi told the House of Representatives they had to vote on ACA before they could read it. To sum up, the ACA insurance carriers did not get too involved in any REAL risk underwriting, because the Obama Administration agreed to establish risk corridors through which to pay the insurance carriers for their losses. Promising to pay a health insurance company to cover their unexpected losses is like throwing the fox into the hen house. There was No incentive for the insurance company to charge reasonable rates because if they low balled the rates, they would attract more members and after they got their market share, when the loses developed, the federal tax payers will make them whole again. And, we almost did that and still may be forced by the courts to thus pay up. In this way, the Obama Administration collaborated with the insurance companies in a perfect storm mantra of “the lower the rates - the better.” They both wanted to attract as many participants into ACA as possible and deliberately created a situation that contributed significantly to the underfunding of the programs, leaving the federal and state tax payers hanging out to dry. 

Karen Ignagni, the former top lobbyist powerhouse for the American Health Insurance Plans in Washington D. C. was the one person, in the beginning, considered to have the influence to stop Obamacare. “Some conservatives regarded her as the enabler of Obamacare, willingly submitting the industry to vast government oversight in exchange for new customers receiving millions in federal subsidies. At the other end of the spectrum, progressives saw her as defender of the for-profit insurers that made out like gangbusters under the flawed health law that could have done so much more for consumers.” Wendell Potter, a former insurance official turned consumer watchdog with the Center for Public Integrity, was quoted speaking about Karen Ignagni informatively, to Politico in 2015, “She knew that the industry would do better under the law. She was able to envision, even with the new consumer protections, that the industry would get many billions of dollars in new revenue that can be converted into profits, and that is exactly what happened,”(21.)

In sum, ACA had NO limitation on uninsured enrollees with pre-existing conditions, NO medical or personal qualifications for participation, NO deductibles and NO coinsurance for some people and NO risk of loss for anyone that did NOT sign up for the program. Consequently, insurance companies did not really compete with one another for the business. They appear to have been in a race for the lowest premium in a risk-free proposition, which guaranteed protection against losses. The insurers obviously led their programs with teaser rates. And, as anybody would expect, some of them lost a lot of money and were subsequently motivated to drop out of the program, creating more chaos. Others raised their rates to the point of ridiculousness. And here we are Today. What a mess!