Is Obama’s healthcare plan affordable?

The underlying numbers, not the technology glitches, are the biggest threat to US president’s landmark policy.

I often see my job as a Usplainer.  What is a Usplainer you ask?  It’s not really a word. I made it up. To me it’s someone who explains the United States to a world audience. To do that, I have to constantly remind myself that things I just innately know as an American are not common knowledge to the rest of the world. That said, this has been a particularly challenging time because I’ve been talking about the US health care system and the President’s Affordable Care Act.

The name of his signature legislation is in itself confusing. The focus of the bill is not really about making the cost of care more affordable. The United States pays the most for its healthcare, and consistently gets the least for it compared to the rest of the industrialised world.  This law, at its heart, is about reforming the nation’s health insurance system and that system is just hard to explain. First, the most important thing you need to know is that for the most part, health insurance in this country is a for profit system.

The insurance companies have largely been allowed to operate in the manner they saw fit with very few government demands. Before this new law passed, if you had insurance through an employer – the way the vast majority of Americans obtained insurance –  you didn’t really pay much attention.  You needed care, you got it, and the employer picked up the majority of the cost. For those people, it was a fine system.  For the uninsured and the self-employed, it was a different world.

David and Goliath

If you didn’t have insurance and wanted to buy some, you were at the mercy of the insurance companies.  If you had a pre-existing condition, and it could be something as simple as a an allergy or as serious as cancer, they could deny you coverage or charge you astronomical rates.  They could sometimes find ways to drop you if you got sick, and limit the total amount they would spend on you every year.

And insurance companies can negotiate much lower rates for service, which is why, for example, an uninsured person could pay $100 for a doctors visit while an insurance company may have negotiated $20 for the same service. That was the system that President Barack Obama promised to change. He said he was going to take on the insurance companies, but what he did instead was make a deal with them.

The president’s initial plan was to get the government involved. Right now, government-run health insurance is only available for the elderly and the extremely poor who have children.  After a fairly bruising fight with his own political party in charge of both houses of Congress at the time, the Obama administration decided it could not get “a public option” through Congress, and backed out of that pledge.  That is when it made the deal that became the law.

The deal

If the insurance companies agreed to some limitation, the government would require most Americans to buy their product.  Under the law, insurance companies have to spend about 80 percent of their profits on care and they can’t refuse to cover someone because they have a pre-existing condition. They can no longer charge people more if they’ve been sick, or are a woman.  In exchange, they will get millions of new customers and the government will help pay the premiums for the poorest. Americans who can afford to buy insurance and don’t will have to pay a fine at tax time.

The problem

If you think I’m going to say the Obama healthcare website doesn’t work, you are wrong.  It doesn’t, but that is the “something shiny” distracting the media and Congress. They are also fixated on the fact the President said everyone who liked their coverage could keep it, and that wasn’t the case either.  

More than three million people were were told their insurance company is dropping their plan, and for many the new plans are much more expensive. The President is now trying to fix that situation and while it is an issue, it isn’t the most important. 

The question people should be asking is this: will the law work? I don’t think anyone can say for certain that this system will survive the long run, and that could have huge consequences.

Here is the problem: Experts say for the insurance exchanges to work, seven million people need to sign up this year. Those millions need to be a combination of the healthy and the sick for the numbers to work, for the insurance companies to remain “profitable”.  I’ve been looking at the plans, and I have to say even with a functioning website, that might be a tough sell.  Obama often describes the insurance being offered as “good quality and affordable”.  I’ve often heard in life you usually can’t get both of those things. 

The “affordable” plans I’ve seen cost up to $2,000 a year in premiums. That is the amount you pay to have insurance. For the poor and even the middle class, the Affordable Care Act will allow the government to pay a large portion of that bill. That’s not the problem. It’s the quality part that people should start questioning.

When the president talks about plans that cost as little as your cellphone bill, that doesn’t tell the whole story. The monthly costs are low, but remember that old saying “you get what you pay for”. 

I’ve been researching the plans online, and in many states those “inexpensive” policies don’t buy you much. Many have deductibles that range from $2,500 to $5,000, meaning insurance firms don’t have to pay a dime to cover medical costs until you’ve paid thousands first. The only thing insurance companies have to provide without charge is some screenings, vaccines and a flu shot.  Most healthy Americans won’t come close to spending $5,000 a year on medical care.

Middle ground

I can’t help wonder if young healthy people will realise what they are getting and decide to pay the small fine instead. If that happens, insurance companies could pull out of the exchanges, or the government will have to go all in, and possibly look toward universal health care yet again.  This current plan will still leave tens of millions without insurance.  This is the middle ground that the president has staked his legacy and a huge chunk of the American economy on.                          

The bottom line is that success of the Affordable Care Act is by no means guaranteed. But that’s not being talked about in Washington. The focus here is all on the technology, bureaucracy and blame for the slow jump start. I hope I’ve “usplained” why that is missing the point.

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