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I'd like to welcome Robert field to
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knowledge at Wharton Robert is a
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professor of health care management at
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Drexel University also a law professor
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and he is also a lecturer of health care
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management here at Wharton and we're
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here to talk today about news that's
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been out recently about Obamacare which
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could cause some to have questions about
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its viability and that's because some
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very high-profile insurers have
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announced that they're withdrawing from
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the program or at least largely
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withdrawing I guess the poster child for
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that would be Aetna and they're
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withdrawing they say because of
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sustaining substantial losses and so you
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we've seen some headlines that suggests
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that Obamacare's on the ropes is on this
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kids it's in a death spiral and I'm
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guessing that things aren't quite that
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extreme so we asked Robert to come in
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and give us his views on what might
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really be going on right well it seems
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as though whenever Obamacare gets a cold
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the experts say it's pneumonia and it's
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on its deathbed and and all is lost I
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don't think we're anywhere near that
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situation right now do we know five or
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10 years from now where things will go
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of course not but for right now it's
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still functioning and a few things we
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need to remember number one of the 20
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million or so people who are now insured
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who were not before Obamacare most of
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those have gained insurance through
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Medicaid and the recent announcements of
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the insurers have nothing to do with
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Medicaid and even if the exchanges went
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away Obamacare would mean new insurance
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for millions and millions of people in
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terms of the exchanges volatility in a
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brand new insurance market like this is
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to be expected Obamacare is not unique
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this is hardly the first time that we've
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tried something like this Romney did it
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in Massachusetts in 2006 Bush did it in
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Medicare in 2003 when he beefed up
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Medicare Advantage which is a choice of
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private plans on a structured market and
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he did the same thing with Medicare
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prescription drugs where you go to a
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website and choose a
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and their government subsidies and it
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determines what kind of coverage you can
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get so we know this kind of mechanism
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can work we also know that it takes a
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few years for the market to even itself
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out so this this is not the death throes
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of Obamacare could we could I ask you to
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give us a brief explanation of what an
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exchange is how it works in this case so
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then when we get into details it will be
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more clear sure so if you are an
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individual who does not get covered
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through your employer or not old enough
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for Medicare you're not poor enough for
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Medicaid you go to a website and every
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year between november and january you
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can select an individual policy in a
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manner that's similar to Travelocity or
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Expedia you see a choice of options and
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they have different deductibles and
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copays and premiums and networks and you
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decide which one works for you and
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different companies presumably and in
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most areas different companies in many
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areas now it's only going to be one
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company however each company has a
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number of different plans okay so you
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may not have your choice of companies
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but you will still have a choice of
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different plants okay and I understand
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that in some counties because I think
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this is done on a county-by-county basis
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that there's I we're down to one insurer
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but you're suggesting that even there
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you've got a choice of class right so
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the significance of there being one
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insurer is you have less market
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competition and it's gonna be harder to
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hold down prices so those people may
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well pay more but they will still have a
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choice of different kinds of plans
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different deductibles copays networks of
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providers and so forth I mentioned Aetna
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which is I guess the the highest-profile
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company that's a talking about pulling
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out of most of the exchanges that was
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above them but not all of them right and
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it was citing some pretty big losses
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almost a half a billion dollars I
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believe other companies have cited some
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pretty big numbers as losses and so this
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is I guess the grist for saying that
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things aren't working so well and and
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they may be they may be heading into a
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downward spiral could you but that but
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then there's this other wrinkle with
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that now where it was good
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oh she a ting I should say it was
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attempting to merge with humana i
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believe it was right and the Justice
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Department was putting the kibosh on
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that right and so they somehow i don't
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know threats the right word but they
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they suggested that if that was not
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approve then maybe they weren't going to
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be so interested in participating
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continuing to participate in certain
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exchanges so could you explain that is
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that like a kind of form of blackmailers
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or some might say well you I guess you
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could call it that you could call it a
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negotiating strategy if you wanted to be
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kinder Etna and Humana have wanted to
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merge the bigger insurer would have more
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market power the Justice Department has
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been concerned about that market power
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and threatened to challenge the merger
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in court and back in July aetna told the
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Justice Department that if they went
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through with that aetna would withdraw
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from most of the exchanges so they would
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say you're worried about lack of
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competition we're going to show you lack
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of competition we're just going to pull
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out so it calls into question whether
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these losses were really so
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unsustainable or whether this is a
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litigation strategy right so but in
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fairness were they saying that that they
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were losing money and this merger would
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allow them to not lose money and
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therefore if it wasn't approved they
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would have to pull out because they were
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losing money or how did they actually
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phrase it yeah they didn't say that they
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would stop losing money they said that
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they would pull out of the exchanges or
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are they implied that they would so it
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was it was more a tit-for-tat and and
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the merger deal was not approved and
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they did in fact pull out well it's it's
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for the court to decide at this for
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still not okay but they pull that they
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do not pull out of every market they
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stayed in a few and United that pulled
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out of many markets before that stayed
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in a few which means it preserves their
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right to come back in at a later date so
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it suggests they haven't given up on the
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whole law of course they aren't the only
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big insurers in the market there are
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others who are seen to be doing very
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well thank you is that right Kaiser base
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in California hydrobromic hazard
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Permanente has tended to do quite well
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now their plans are mostly available in
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California in the
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but they actually double down on their
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efforts and they're going to be
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expanding their market presence many of
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the Blue Cross plants around the country
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have been doing okay almost all of them
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participate and then there are some
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other smaller jurors that have been
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doing all right so it's not Universal
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deathbed throughout the country it tends
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to be focused on certain companies in
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certain areas another point you make in
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in your blog and I know you've written
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about these things is that in general
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these insurance companies are doing very
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well with government programs their
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profit margins are very good on Medicare
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and Medicaid could you just talk about
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the the bigger picture of insurance and
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government programs sure so our private
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insurance industry depends to a large
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extent on government programs under
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Medicare about thirty percent of the
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beneficiaries get their coverage through
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a private insurer and under Medicaid in
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every single state coverage is
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administered by private companies and
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that's a huge profitable line of
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business for them so if you take that
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and subtract out the Obamacare losses
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they're still doing very well through
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the government if we were to link the
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Medicaid expansion with the Obamacare
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exchanges the insurer's would still be
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coming out ahead on the ACA another
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point that you make is that some of this
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I think you alluded to this at the
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outset some of this is actually kind of
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hiccups for a program that's still
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fairly new and and finding its feet and
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that some of the problems that we're
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seeing will likely work themselves out A
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or B could be fixed without a lot of
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difficulty if if certain changes were
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made whether they can be made
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politically or not is a separate
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question but could you talk about those
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two things yeah so some of the changes
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we could make and this could be done at
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a state level is to sell the insurance
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companies you can play in the Medicaid
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expansion if you also play in the
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exchanges so it might mean you're going
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to make a little less money in total but
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the Medicaid business is worth it and
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that way we can make sure that they
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stayed in the exchanges and
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another idea which depends a lot on the
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outcome of the presidential election is
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to have what's called the public option
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to have a government program that would
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compete in the exchanges with the
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private companies so we know that each
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area would have at least two plans the
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surviving private plan and the
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government plan and we could see which
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works best but guarantee that there will
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always be a fundamental choice and some
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price competition and competition is it
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fair to say that medicare has a public
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option which is for a while it was the
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only option but now there's as you say
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you can go through private insurance so
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that's kind of a mixed system that
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wasn't it yeah very much so so if you
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think of traditional Medicare as you
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said it really is a public option and it
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is close to what's envisioned for the
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public option under the ACA the private
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side has been quite profitable quite
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popular almost a third of beneficiaries
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use it it's really a model for what the
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ACA would look like if there were a
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public option and then individuals could
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choose which way they want it to go and
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just a backtrack a little bit I believe
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that you have written that a lot of the
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losses that we're seeing were
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anticipated because there's an
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experience with other programs such as
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Romneycare that some of them will
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ameliorate they will they will go away
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as the system matures A or B as I say
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they could be they could get a fixed
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they could get a patch so I think that's
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an important point is that this this
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wasn't wholly unexpected what we're
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seeing right right there were a few
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mechanisms in place to mitigate the
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potential losses from this new market
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world one of them was risk Carter's so
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companies that did better than expected
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would put some money back into the
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kitties some of them that did worse
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would get money out of the kitty and the
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funding for that was blocked in Congress
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so that mechanism hasn't work in fact
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there's a lawsuit pending right now by
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insurance companies to try to get back
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some of that money if the idea was that
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it's hard for them to set premiums now
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having experience we didn't have a
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market like this prior to 2014 and it
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takes a few years in insurance to figure
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out what's what another aspect of this
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is that the losses for the insurer's
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they say are because the risk pool is
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sicker more people are getting care than
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they anticipated one of the reasons for
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that is because Obamacare has been
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successful in other ways they had
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anticipated when they passed a lot a lot
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of insurers would drop coverage and they
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would throw a lot of their employees
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into the risk pool well fewer employers
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than expected of drop coverage in fact
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employers have been adding coverage
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rather than subtracting it since
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Obamacare went into effect so all of
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these healthy working people are not in
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the exchanges and then we have the young
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people who are staying on their parents
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policies who are not in the exchanges so
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it's sort of like a balloon you push
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down one side and it pops up somewhere
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else we succeed on the employer side in
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the young adult side but it pops up in
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terms of a sick or risk pool in terms of
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the overall working of the law therefore
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it doesn't mean it's a failure it means
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that we need to get the balloon into
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shape rather than popping it and on the
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young adult side this is I guess the
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provision that allows children to stay
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on their parents policies until they're
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26 whereas it used to be for those
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children with a college that they were
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covered until college and then went off
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roughly age 22 so as though as that
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group moves through and becomes 26 I
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guess that will start to add more
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healthy people into the pool for those
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that aren't on an employer right right
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so presumably if those people do go into
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the risk pool if they don't even employ
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the provides coverage yes it would
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increase the healthy contingent in that
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risk pool one other aspect of this
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though is that the law and the
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administration of it have been very
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lenient about enforcing the mandate that
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everyone buy coverage and a lot of
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people have slipped through the cracks I
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have preferred to pay the penalty or
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have not paid the penalty and haven't
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been caught so another way to address
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this is to be more vigilant about making
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sure that everyone buys in
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does that require new laws and
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regulations or is it simply enforcing
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what's on the books most of it could be
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done by enforcing ones on the books and
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I think Obama has been trying to tread a
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line if he's too vigilant there's going
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to be pushed back in more political
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resistance to the law but if he doesn't
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enforce it then we have the problem that
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we've got we're healthy people stay out
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of the risk pool so at this point I
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think if the law is going to thrive the
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balances do you push the other way in
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terms of being tougher on people who
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choose to remain uninsured anything else
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we should know about this while we have
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you in front of us it seems as though as
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I was saying the bad news about
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Obamacare gets plastered on the
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headlines we forget that we now have
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somewhere between 10 and 20 million
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people who now have insurance who didn't
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before now often those are not great
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policies but it has been a lifesaver for
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some we have shown that it can be done
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and going forward we have opportunities
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to fix it and to this day we really
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don't have a replacement plan a viable
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replacement plan out there and until we
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do it's either scrapped the guarantee of
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coverage or go ahead as we have been we
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don't yet have a third option so we will
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see the politics of the new Congress and
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the new president whether the mindset is
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to try to fix things or just push over
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the sand castle and go back to where we
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were thanks for coming in particular
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very much
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you
