Affordable Care Act Backwash

Financial Justice Health Care

k10329New Orleans         Talking to Professor Adam Seth Levine of Cornell University on Wade’s World  about his new book, American Insecurity:  Why Our Economic Fears Lead to Inaction, about how our political and organizational communication can subvert our own message or “self-undermining rhetoric” in his words, I asked him for his opinion about how the Administration “sold” the Affordable Care Act in the first enrollment period.  Specifically, I was curious if he had paid any attention to the early avoidance of any discussion of penalties and their last minute shift of emphasis on the same issue to incentivize enrollment.  Professor Levine was careful in his response, since one of the groups where he surveyed message reactions was HCAN, Health Care for America Now, an advocacy supporter of Obamacare’s passage that included ACORN in many states.  Careful, but not conclusive, although increasingly the backwash on enrollment, including the impact of the penalties, income estimates, and overall individual costs, are becoming a major part of the story.

The Wall Street Journal relied on a survey by McKinsey & Company indicating that “12% of uninsured people would buy policies if informed of the penalty” though, although there seems to have been no question that asked how many that had signed up did so because of the penalty or a way to separate the twin programmatic dynamic between mandatory and penalty.   The same survey also found that 41% were “unaware of the penalty.”  Many opted to pay the penalty for the first year of $95 or 1% whichever is higher largely based on their own personal cost-benefit analysis.  31% didn’t believe they needed health insurance and embraced the penalty as a savings.  26% believed they needed insurance but couldn’t afford it and went with the penalty.   The Obama Administration has extended signup periods until April 15th, tax day, since the penalties are deducted from tax refunds.  An observer commented that the extension was “good PR,” but the inaction on signups might indicate that their ambivalence about banging on the penalties may involve Levine’s “self-undermining rhetoric.”

H&R Block found through February that half of its clients who had subsidies because of their income are having to repay some of their subsidy through their tax refunds, which isn’t as painful, but still stings. Block claims that more than half of its customers underestimated their income, leading to a higher frontend subsidy causing an average $530 in reduced returns or 17% by their numbers.   This was still a smart way for the Administration to handle this collection problem though, since as Block, Jackson & Hewitt, Liberty, and countless tax preparers could have told the government from their experience with predatory pricing on refund anticipation products, people are more forgiving about losing money before it gets in their hot hands.

The penalties will get higher in coming years, so we need more information, messaging, and more effective outreach that drives people into insurance, but the rub will continue to be the costs and the fact that there are no limits to the deductibles for qualified plans.  Congressman Paul Ryan and a host of Republicans are trying to come up with so-called alternatives, but most of them focus on bringing the zombie policies back to life with lower-cost, limited-coverage plans that are virtually worthless. Consumers are looking at the monthly costs along with $5000 and $6000 deductibles and too many of them, pressed for money, are concluding that if they can walk and talk still, they are better off saving the money now. Unless costs are addressed more aggressively and deductibles and copays are capped, as they are in Massachusetts, rising penalties will build a political base for worthless plans that only have value at best for catastrophic health crises, not for better health for all our people.