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A No Good, Very Bad Day for the ACA, con't

By Dr. Chris Lillis

I posed the following questions to a few trusted sources, and pasted below are the responses back I have so far.  If I get more responses, I will follow again with another post.

1) Is it safe to assume that the worst case scenario will be about 5 million people will fall into the "gap" of getting their old insurance dropped AND having an income too high to obtain a tax subsidy?


2) Can we do some "real" calculations for these folks?  How much will these folks save when they no longer need to pay out-of-pocket for preventive care?  Can we quantify the savings for someone who has a catastrophic illness who will now have the benefit of an out-of-pocket maximum?


3) What would the impact be on the insurance market as a whole if insurers were permitted to write policies that DO NOT cover pregnancy for individuals over the age of 50? It seems this element of the minimum benefits package is especially onerous for those who do not qualify for subsidies and have higher premiums.


Daniel Polsky, Executive Director, Leonard Davis Institute of Health Economics at UPenn replied:


“There are good questions.  I don't know the answer to any of them except that I can't imagine coverage for pregnancy for women over 50 having any relationship to the final premium.


I would frame question 2 differently.  The folks getting the letters were clearly very price sensitive when they purchased their last policy, but were they "rational" in the sense that they understood the benefits and chose a lower cost policy as their optimal plan?  I think the administration's point of view is that these individuals did not make a rational purchase in that they would have regretted their choice in hind site after getting sick because they would have only then realized that they did not really purchase a product that offered the type of protection from loss that they had originally thought.  If the individual market was a failed market because of the information problems then the paternal minimum benefits will improve welfare.  But if the market was working, eliminating these plans will create some real losers in the trade, particularly among those who don't get compensated with a subsidy.  But as I said to my friend who will have to pay $300 more a month, what you are buying is real insurance.  If, God forbid, something happened to someone in your family your insurance may cover you until the end of the policy year, but you'd have a tough time getting a policy for that same price (if at all) the following year.  So that extra $300 is buying you real insurance for the first time….in my mind, the most important added value will be the guaranteed issue and renewability at premium rates that are not determined by health status.  Much of the focus has been the added value within the given plan year, but the real value only gets discovered when the healthy folks get sick and would have found themselves with few options within the individual market.  ”


Henry Aaron, Bruce and Virginia MacLaury Senior Fellow, The Brookings Institution responded:

“3.     I would be amazed if the impact of covering pregnancies for women over 50 were more than .01 percent.  But this coverage strikes me as particularly important for pre-menopausal women over 50, as their pregnancies, rare though they surely are, are extremely high risk.  That is the sort of thing we have insurance for.  And once one starts saying that particular groups will not be covered for selective conditions that they cannot or are unlikely to have, one is on the road to de-pooling and risk selection.”

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