Healthcare Reform is Here to Stay – Is it really going to be as “Affordable” as it’s title implies?

UntitledPrior to writing this article, I have been presenting seminars on the Patient Protection and Affordable Care Act (PPACA) or as other’s in the government and media like to call it The Affordable Care Act (ACA), and yet others have nick named it Obamacare. (I sarcastically like to call it “Obummer-care.”)

I have presented these seminars as a ‘good will’ effort to educate those who wanted the facts on PPACA. I felt the public needed to know what this legislation was all about.  I knew there was no way this Pandora’s Box and its ramifications would come to pass without economic sacrifice by all. And even before the legislation was signed into law I could foresee what a fiasco and invasion of our constitutional rights this law would become.  (Besides, I was so frustrated at how the media chose to only cover certain aspects about the law, but not the whole picture.)  The unfortunate part is that my grassroots effort was over shadowed by the media’s often ‘Pollyanna’ representation of the law.

I tend to be a ‘straight shooter’ and I don’t like convoluted explanations or regulations. Unfortunately this is what the American people are in for, with PPACA; which was signed into law on March 23, 2010, and began as over 2000 pages and is expected to be over 200,000 by the time it is completed.

As a Health Insurance Specialist and Agent (in the Bay Area (for over 20 years) I know and have seen firsthand, how healthcare costs have been rising uncontrollably.  I also agreed that something had to be done about the escalating costs of healthcare; but how President Obama and our Elected Officials have gone about developing and implementing this law, makes no common sense to me and many of us in the insurance industry.

Although there are some aspects of PPACA that many may consider positive changes in the law, such as:

  • Coverage for Annual Physical and Labs
  • Cancer Mandates and Exceptions
  • Contraception mandate
  • Infertility treatment
  • Clinical Trials coverage
  • Colorectal Cancer Screenings
  • Dependent Coverage to age 26
  • Mental health benefits
  • Autism
  • And  a myriad of other ancillary benefits and regulations.[1]

However, with all of these mandates (California alone has 48 specific mandates[2]Obamacare still does nothing to address Costs!     One thing this law does do,  is increase costs to the insurance companies, providers, hospitals, medical facilities and independent doctors; not to mention the increased costs to the business owners (with the over 60+ healthcare and tax regulations[3]) and American tax payers.  Which frankly makes me wonder why they called it the “Affordable” Care Act in the first place?

These mandates have placed additional burdens on businesses and citizens that are already struggling to keep afloat in a challenging economy.  Why did our legislators not have the foresight to see the ramifications to businesses and the economy?

If  ‘past outcomes are a good indicator of future outcomes’, then the  Massachusetts exchanges, which the Department of Health and Human Services (HHS) is using as their model, has not been the ‘panacea’ the government and people of Massachusetts hoped for.

Look No further than Massachusetts exchange  to understand my point.  Sure the commonwealth is a state in which virtually everyone has some form of health insurance, making it an outlier among the other 49 states.  But can anyone in Massachusetts with private insurance today, and who also had private insurance seven years ago before the state’s “An Act Providing Access to Affordable, Quality, Accountable Health Care” was forged into law, attest to being better of when it comes to their personal cost and coverage for healthcare?

The truth is the quality of the care has been deteriorating and getting more expensive.

What’s worse is that these additional costs are increasingly shifting to the consumer through higher deductibles, out of pocket maximums, decreased coinsurance levels, higher copays, and greater premium sharing.[4]

In addition, PPACA specifically states that rating ratios can be no more than a 1:3 ratio.  This, in brief, means that insurance carriers can not charge the eldest person in their rating pool, more than 3x the least expensive rate.  Thus, mathematically (numbers rarely lie) the younger populations rates will have to increase, and in many cases these increases are 3-4x higher than their current premiums.

In Massachusetts , where they have been struggling with a budget deficit in the hundreds of millions, insurance companies, hospitals, and other care givers are required to offset the difference by increasing costs  on those of us who are privately insured.  Again, I ask where is the ‘affordability’ in the Affordable Care Act?

The CBO (Congressional Budget Office) itself has had a hard time estimating the costs of Obamacare.

The cost of Obamacare can be very confusing (to say the least) as estimates range from $1.7 billion to a net savings of $143 billion over the next decade.  And then there’s President Obama’s initial claim that the Patient Protection and Affordable Care Act (ACA) would cost $940 billion.[5]  However, after additional reviews of the bill and the costs vs. estimated revenues (which to date do not include accurate forecasts of future costs) the CBO updated its Obamacare cost estimate to $1.76 Trillion (with a ‘T’).  This is 3 times more than their original estimate of $940 billion.  Keep in mind, the most expensive provisions don’t take effect until 2014, when mandatory health insurance coverage and subsidies kick in.  The biggest cost is expanding Medicaid (or Medical in California) and The Children’s Health Insurance Program (CHIP) to include more low-income people.

So, if the CBO said the costs of Obamacare were anywhere from $940 billion to $1.76 trillion, then how could it say it reduced the budget deficit by $143 billion?

That’s because the ACA legislation also passed new taxes and budget reductions in other areas.

Here’s just a brief summary of the new taxes imposed by Obamacare, which are estimated to bring an estimated additional $567 billion in Revenue.

  1. Hospital Insurance Tax – $212 billion
  2. Non-Compliance Tax – $64 billion
  3. Cadillac Healthcare Insurance Tax – $32 billion
  4. Medical Device and Insurers Tax – $107 billion
  5. Raising the Medical Deduction limit to 10% – $104 billion
  6. An excise tax of 10% on indoor tanning service

In addition, there were 5 areas where cost savings of an estimated $477 billion are to be implemented:

  1. Reduce drug/Rx subsidies to wealthy – $87 billion
  2. Reduce Hospital DSH (disproportional share/indigent care)  payments – $37 billion
  3. Reduce Medicare payments – $197 billion
  4. Reduce Medicare Advantage Payments – $135 billion

However, even with all of these revenues and cost reductions,  and other excise taxes not mentioned here, the CBO has once again changed its estimates from $940 billion in savings to $104 billion.

Many economists, healthcare experts, underwriters  and agents in  the insurance industry continue to differ, even today, with these estimates.   Until  attention is placed on controlling the costs of care,  premiums will continue to rise. It’s a simple equation to understand, as  utilization of care goes up, so do costs.  And we all know that once those who don’t have insurance begin to use the medical systems, hospitals and emergency rooms, costs are bound to sky rocket.

So, now you can see why so many in the insurance industry, who understand risk rating and the purpose of insurance, have such a skeptical view of the PPACA legislation.   Even though I,  like many others, agree that something had to be done about escalating medical premiums.   Targeting insurance companies as the culprits was and is not the solution.  If you truly look at the purpose we purchase insurance, it is because these companies can negotiate rates that are often much lower than what a hospital or medical facility would charge you on a fee for service basis.  Next time you receive and EOB (Explanation of Benefits)  from your carrier, look at the column where it states what the services would have cost you if you didn’t have insurance.  This will give you an ‘eye opener’ to what your services truly cost.

In conclusion,  the only way to reduce sky rocketing premiums, is to address the costs, and this I believe is one ‘pandora’s box’ the government doesn’t want (and very well should not)  to open.

By:  Sylvia Oliverez, Owner & Insurance Consultant/Agent headshot

Be Well Insurance Solutions in Santa Clara, CA    and  Board Member, Silicon Valley Association of Health Underwriters  LogoJPG (2)


Join SVARW for an Educational Seminar on Healthcare Reform, as presented by Sylvia Oliverez, Agent/Consultant with Be Well Insurance Solutions, and Pam Hedblad, CPA with Abbott, Stringham & Lynch. 

Date:  Wednesday, March 20th, 2013.
Time:  9:00 AM to 11:00 AM
Location:  La Rinconada Country Club   14595 Clearview Drive    Los Gatos, CA 95032
Cost:  $15 which includes continental breakfast

[1] Mandated Insurance Benefits and State Laws: Overview.   NCAL (National Conference of State Legislatures) 1/10/2013

[2] March 9, 2012: California mandates 48 Specific Areas of Coverage, California Health line, by: David Gorn

[3]; Regulations & Guidelines

[4] The Boston Business Journal:  So Everyone has health Insurance. Now What?  (1-2-2013) Craig Douglas.

[5] Cost of Obamacare: The facts about the True Cost of the Affordable Care Act, By: Kimberly Amadeo, Economy Guide.


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