Fixes for the ACA from someone who actually works with it

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With Congress beginning the process of repealing and replacing the Affordable Care Act, I am hearing a lot of questions about what comes next. People have suggested that Republicans have no ideas as to how to improve the situation, and many are worried we will go from the frying pan into the fire, so to speak. So as a proud Republican, who also happens to be an insurance agent having to deal with this law on a daily basis, I offer the following as ideas for a better way forward.

It’s not a perfect solution, but it’s a far better, fairer, and less complex way of proceeding, looking at things from the ground up, rather than from an ideological, top down approach.

Most of us would agree it’s not working as it currently is written, but instead of offering vague ideas, I will try to take things piece by piece, offering alternatives for each criticism. I will use real numbers, taken from the actual plans before and after ACA went into full force on Jan. 1, 2014, and illustrate using two couples we will refer to as J&J (Jack and Jill), and H&G (Hansel and Gretel).

Both couples were age 60 and 58 respectively, and both lived in New Haven County. But both were in very different places economically. J&J worked hard every day, stayed fit, and earned $65,000/ year, but they were trapped in an underwater mortgage, had two car payments on their economy cars, and had lost much of their meager savings in the great recession.

H&G, on the other hand, had sold their candy business, and were living quite comfortably in a $2 million home, driving luxury cars, owned a million dollar yacht,  had $10 million in gold and millions in cash to spend.

Until the end of 2013, when the ACA went into full force, the most popular plan I had was the Aetna 2500 deductible advantage plan. It offered co-pays for doctor, specialist, and prescriptions and was largely what the Standard [ACA] Silver plan was modeled after. The base rate for these two couples was $752/month.

J&J paid this, but H&G paid a bit more, as they were overweight, and had high cholesterol, the result of years of sampling their products. Adding 25 percent, they paid $940, but they both took cholesterol meds, and these cost $200/mo, so effectively, they got back the difference.

At the end of 2013, these plans were terminated, and both couples were forced to buy new, ACA compliant plans. The cost of the least expensive standard silver plan was an astounding $1,457.26/month!

However, ACA offered subsidies, so one would think this would help J&J, and not H&G, but they couldn’t be more wrong!

Since it’s entirely based on income and not financial assets, and at the time, $62,020 was the cutoff for two people, J&J get nothing. But H&G, with lots of wealth, but no actual income, would qualify for Medicaid! Now, does anyone think this is fair?

So our first correction should be to address Medicaid expansion, which should be block granted to states, who then can decide who really deserves it, and who doesn’t. Apply a simple asset test, so those who really need the assistance are the ones we spend our money on!

Now, assuming Medicaid expansion stays, with an asset test in place, let’s look at the next level…those who get tax credits to help pay the premium.

ACA is based on Modified Adjusted Gross Income (MAGI), but MAGI doesn’t appear anywhere on IRS 1040, only Adjusted Gross Income. If we must base it on this, one would think we could, at the very least, add a line so people are using the right figure.

ACA requires people to project their income for the upcoming year, essentially guessing at what they’ll earn, getting advanced money, then settling up afterwards when filing. This is ridiculous, especially for self employed, who often have no idea what they’ll make. So reverse it, and simply base it on the previous year.

Think about it…people haven’t even filed for 2016 yet, and they’re being asked to project for 2017, requiring them to upload documents they don’t even have.

Create a simple grid…family size 1-5, income under $20,000, $20,000-$40,000, etc. Make the credits 10-50 percent, and allow them to be used on any plan, applied for however they’d like (exchange, direct, through agent, etc). There’s nothing wrong with exchanges, and Access Health CThas tried hard, but the idea people didn’t buy coverage for lack of a web site is a joke! People shouldn’t be forced into how to buy.

Have them look at last year’s taxes, and enter the amount in the grid. This will help reduce the workload at the IRS, make the IT job at Access Health far easier, and avoid countless mistakes, oversights and errors.

As the saying goes, “an ounce of prevention beats a pound of cure!” For the life of me, I can’t figure why this wasn’t done from the beginning, unless it was necessary for some kind of Gruber voodoo math.

I can think of one circumstance that projecting could be beneficial, though… Jack was making $100,000/year, and got laid off. So OK, giving the writers of the law the benefit of the doubt, allow people to project if they want, but then they are required to state so on application, and are responsible to file reconciliation with IRS. For the other 90 percent of the people, there would be no issue.

The Supreme Court called this law a tax, and they were correct, though someday someone has to explain how they arrived there, given the actual case!

It’s a redistribution of payments, thus a redistribution of wealth. Think of it as rent… J&J make $65,000/yr, their neighbors H&G $62,000. Would anyone think raising both their rents from $750/mo apiece to $1,500 overnight, via a rent tax, then putting up $1,000/month to subsidize H&G is anything close to equitable?

Of course not, but that’s exactly what ACA did! Of course, much of the time, it comes down to who can “forget” to report a little income. For many, given the huge amount they were saddled with, there may well have been little choice. I can’t tell you how many times as an agent I’d ask about income, and get “should I use what I claim on the books?”

Besides, talk about a glass ceiling! How’s anyone ever going from $62,000 to $65,000 if the moment they do, they’re out $12,000 in subsidy? They’re better off to close for a month… hardly a recipe for economic growth! So widen out the credits, and make them smaller, so more people get them, but the difference is less.

Now, the thorniest issue is bound to be that of pre-existing conditions. ACA thought they would address this with only allowing people to apply during open enrollment, which means Nov. 1 to Jan. 31, and outside this time, people can only apply if they have involuntary loss, e.g. job loss.

Unfortunately, it has not really helped. Carriers are losing their shirts on these plans, especially outside open enrollment, and are doing everything they can to not take applications, including refusing to pay agents anything at all on any cases placed during the rest of the year.

People think open enrollment only applies to the “Obamacare” plans, but in truth, it’s all individual plans, on and off exchange. If someone calls me asking to buy, at full price, a regular health plan for their family, has no medical issues, and just wants coverage, I am not allowed to take the application. Then, they’re fined for not having insurance.

This is ridiculous, and a complete waste of resources, as agents like me could spend the time enrolling people, and are only paid if we’re successful, so we cost the taxpayer nothing. Keep open enrollment, and during it, allow guaranteed issue (no pre-ex). But outside open enrollment, allow the carriers to medically underwrite. This will mean the sick person is no worse off than now, and would just wait until year end as they currently do, but if a healthy person applied mid year, they could get accepted.

This means instead of avoiding people mid-year, carriers will seek them, as they will provide offsets of cost. People like me can use the eight months of unproductive time finding people, and the system is better as a whole.

If the state, once ACA is repealed, would just allow the carriers to use the plans they had before this started, Aetna, United Health, and others could quickly re-enter the market, and people like myself would be able to get way ahead of things coming into the next season, as we would have all spring and summer to place people.

Right now, there are only two carriers left to choose from, both on and off exchange. Not much in the way of competition! Unless things change, my guess is the carriers will eventually all drop out, as there’s simply no way to make money if people can buy a plan, then promptly spend $40,000 on a planned procedure, then drop out. Unless the fine is going to be as much as the insurance, some amount of underwriting is going to have to be allowed and the best chance for those who have major issues is to entice other, healthy people in as offsets to their costs.

In the long run, if we’re willing to put up $1,000/month for a $,1500/mo “comprehensive” plan covering things like sex change surgery, why not put up $1,000/month for a $1,000/month plan, and offer at zero? I can make a Ferrari cost less than a Ford if the government puts up enough of a monthly payment!

Look at Medicare Advantage plans. Not perfect, but much less difficult to deal with than ACA. Further, allow people who would otherwise be Medicaid (low income AND assets) to coordinate, similar to the Medicare Savings program. This has many benefits, including coverage for doctors who’ve opted out of Medicaid.

Remember, not everyone wants Medicaid, but under ACA, if you’re Medicaid qualified, it’s that or full price. You can’t get the tax credit. Also, the government can pay the carriers extra to manage certain chronic illnesses, so carriers aren’t as adverse to them, and may actually seek them out.

Again, see Medicare Advantage. Take some of the savings from the previous simplifications, and use it to license people in the lower income areas. Then, put them to work enrolling people, for which they’ll be paid the standard commission rates for Medicare Advantage (approximately $250/year).

Use Access Health to train them, and allow Access Health to function as a Managing General Agency, meaning the agent gets $250, but Access Health gets $50 as well. Other agencies could assist for say $25 of the $50, or whatever. Run correctly, they would make enough to not need to be paid by the state, and my guess is they’ll make quite a bit!

This aligns everyone’s interests, and since the lion’s share of those getting the new plan would be in poor, urban areas (those currently on Medicaid), it would effectively channel money into the cities, helping the communities to help themselves. We all talk about revitalizing cities. Here’s a way to actually do so!

Stephen Hunt is an independent insurance agent, a member of the Assessment Appeals Board in Avon, and is the Vice Chair of the Avon Republican Town Committee.


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