15 Sep 2014 ObamaCare Has Harmed The Quality Of Insurance

Most of you remember late last year when millions of people were losing their insurance plans in the individual market.  At the time, many ObamaCare apologists, including the president himself, tried to excuse the cancellations by saying that the health plans that people were losing were “substandard.”  MSNBC host Ed Schultz referred to the lost plans as “crappy” but only because he couldn’t “use the S-word.”

However, ObamaCare supporters never produced a shred of evidence that plans in the individual market in 2013 were inferior in quality to the plans on the ObamaCare exchanges.  The study we are releasing today shows that plans on the ObamaCare exchanges are in fact inferior in quality when compared to the plans on the individual market via eHealthinsurance.com and Finder.healthcare.gov.

Entitled “Despite ObamaCare Supporters’ Claims, Health Insurance Plans Prior to ObamaCare Exchanges Were Neither ‘Crappy’ Nor ‘Substandard, it compared the cost-sharing — i.e., the deductibles and the out-of-pocket maximums — of plans on the individual market in 2013 and on the ObamaCare exchanges in ten major metropolitan areas for a 27-year-old single person and a 57-year-old couple. It also examined the provider networks, comparing the number of health maintenance organization (HMO) plans to preferred provider organizations (PPO) plans in the individual markets and ObamaCare exchanges.

Here are the highlights:

• There was an average of 33 plans in each area for a 27-year-old on the individual market that had lower premiums and lower or equal deductibles and out-of-pocket maximums than the cheapest plans on the ObamaCare exchanges. Milwaukee, Wisconsin had the most such plans with an average of 68.
• For a 57-year-old couple there was an average of 10 policies in each area that had lower premiums and lower or equal cost-sharing in the 2013 individual market than the cheapest plans on the ObamaCare exchanges. Louisville, Kentucky had the most with an average of 26.
• The ObamaCare exchanges had many more of the restrictive HMO networks in their plans relative to the individual market, an average of 16 more HMO plans for both 27-year-olds and 57-year-olds.
• The less restrictive PPOs were more common in the individual markets, with an average of 32 more plans with PPOs for 27-year-olds and 25 more for 57-year-olds.

While “quality” is often a very subjective concept, this study focused on cost-sharing and provider networks because they are the least subjective dimensions of quality of health insurance plans. Regarding the relationship of the premium to the deductible and out-of-pocket maximum, few people, if any, would consider it good value for the money to change to a policy with a higher premium and a higher deductible and out-of-pocket maximum than a policy they previously owned. In other words, looking solely at the aspect of premium relative to out-of-pocket costs, almost no one would rationally consider it an improvement in quality to pay a higher premium and get less out-of-pocket coverage.

The quality of the network of physicians, hospitals and other health care providers available through an insurance plan is a bit more subjective.  While HMOs are more restrictive than PPOs, there are HMOs like Kaiser Permanente and Group Health Cooperative that get high marks from consumers. Nevertheless, data from the employer-based market shows that people tend to prefer less restrictive networks. The Kaiser Family Foundation shows that at the height of HMO coverage in 1996, about 31 percent of employees with employer-provided health insurance were in an HMO plan. By 2013, that had dropped to 14 percent. At the same time, PPOs grew from 28 percent to 57 percent of covered employees. Based on actual consumer choice, most of those consumers appear to consider the less restrictive networks of PPOs to be higher quality than HMOs.

Unfortunately, as this study demonstrates, quality has declined in these areas in the plans on the ObamaCare exchanges.  This is due to the regulations that ObamaCare places on exchange plans, such as the benefit mandates.  Those regulations cause premiums to increase.  To keep premiums anywhere close to reasonable on the exchanges, insurers had to skimp on cost-sharing and provider networks.

There is nothing wrong with doing that—provided that’s what consumers want.  Yet consumers no longer get to make that choice. They no longer have the option of foregoing some benefits for lower out-of-pocket costs and broader networks.

So, not only has ObamaCare reduce insurance quality, it has reduced our choices as well.