While Congress has fruitlessly argued over whether to “repeal and replace” Obamacare, policymakers in California have been working not just to implement, but also to improve, the Affordable Care Act (ACA)—both expanding eligibility and working to address unfair out-of-pocket (OOP) costs. It is critical that, after this election, the nation not only follow California’s lead, but go beyond it, to address health care affordability more comprehensively and nationally.
To be clear, the progress under health reform is real. This is especially true with respect to the individual insurance market, where pre-ACA insurers were free to scale back or cap benefits and deny coverage altogether to those with pre-existing conditions; the ACA represents a sea change. The act transitioned us from an individual market where we paid for coverage based on our health status, to a world where we pay based on family income, using a sliding scale. But even for those who qualify for subsidies of hundreds or even thousands of dollars, this help may not be enough—especially in high cost-of-living states like California.
While reviewing the ACA in the medical journal JAMA recently, President Obama agreed, saying that more should be done to ensure affordability. He suggests that, since the ACA has come in 28 percent below cost projections, some of those savings should be redirected to increase financial assistance and ensure that coverage is more affordable for low- and middle-income Americans. We recall that the original House version of the ACA, prior to its passage, was more generous in providing financial assistance. For her presidential campaign, Hillary Clinton is correct in proposing specific improvements along these lines, such as enhancing assistance for low- and moderate income families, and instituting a global guarantee that no American pay more than 8.5 percent of his or her income for health care premiums, regardless of their income (the ACA currently offers this promise to those under 400 percent of poverty, but leaves those, especially older folks just above that threshold, at risk of paying more).
Additional financial assistance should alternatively, or additionally, be directed to reducing OOP costs, whether that be deductibles, co-insurance, high copays for prescription drugs, or other OOP expenses. The insurance plans available in the marketplaces offer families a tough trade-off, between paying more money through premiums for a gold or platinum plan, or getting a cheaper premium, but facing higher out-of-pocket costs when actually seeking care. In California, for example, a silver plan has a deductible of $2,500. A bronze plan’s deductible is $6,500—basically hitting the overall out-of-pocket maximum required in the ACA.
Adding subsidies for OOP costs would be important progress (either by tying financial assistance to a gold plan rather than the second-lowest silver plan, which is how the ACA determines the subsidy level), or by directly reducing out-of-pocket costs—as the ACA does for families under 250 percent of the poverty level who get an “enhanced silver” plan. Not surprisingly, Covered California, the state health insurance exchange, has seen much more enrollment by lower-income families who have access to these better value plans. Academic literature also demonstrates that high deductibles and other OOP expenses serve little clinical or policy purpose—patients don’t shop smarter, they simply put off and receive less care as a result, even necessary care.
In the absence of proper financing from the federal government (which it, ideally, would be best suited to provide), California has taken other steps to help consumers. For example, Covered California, has “active purchasing” authority to bargain for the best possible value, and has used that negotiating power to standardize the benefits of health plans in each tier, in order to allow consumers to make apples-to-apples comparisons and spur head-to-head price competition on premiums. In a public process that included input from consumer advocates, Covered California designed a benefit that puts many preventive and primary care services before the deductible. For consumers who do not face surgery, hospitalization, or other major health expenses, they can receive many of their doctor visits, prescription drugs, and other costs based on a co-pay and without any need to meet a deductible first. This means that some value is provided to consumers even without major health expenses, with catastrophic coverage as a backstop.
Health advocates have been pushing Covered California to obtain federal permission, in the next few years (through a “1332 waiver” under the ACA), to find savings for reforming the health care system, and then reapply those savings into greater affordability assistance.
Consumer advocates in California have already successfully passed, and continue to push for, legislation to address other often unfair out-of-pocket costs. For example:
- Consumer advocates worked to ensure that all plans cover the 10 essential health benefits in the ACA; prior to health reform, plans often carved out key benefits, like maternity coverage or even doctor visits, leaving consumers to pay out-of-pocket for expensive procedures. California advocates sought to reduce a loophole for large employers to avoid these requirements. The standardized benefits in Covered California help ensure that that every plan covers the basics, providing families with greater peace of mind.
- Seeing some specialty drug co-payments in the hundreds, or even thousands, of dollars, California adopted a monthly cap market-wide of $250/month for most outpatient drugs. Hillary Clinton has proposed implementing this standard nationally.
- To prevent Californians from inadvertently needing out-of-network care, and preventing the costs associated with out-of-network providers, several consumer groups sponsored a bill to require more accurate and updated provider directories. This has been part of a general set of policy reforms to ensure network adequacy and timely access to care, so patients are guaranteed access when and where they need it, without having to go out-of-network and face higher cost-sharing as a result.
- California is currently debating a solution to “surprise medical bills,” where a patient goes to an in-network hospital or facility, but is then seen by, and billed by, an out-of-network doctor or other provider. AB72 (Bonta, et. al.), which is pending, would ensure that patients pay only the in-network copayments, rather than out-of-network charges of hundreds or thousands of dollars.
And California is continuing to work to ensure that consumers don’t get unexpected or unfair bills. These issues have long festered in our health system, but they are more urgent now than ever, with more lower-income families covered through the ACA. Unfair, unexpected bills of hundreds, if not thousands, of dollars can be financially destabilizing to a low-income family.
Not only do out-of-pocket costs create a direct, detrimental financial impact, but, perhaps more fundamentally, they also undermine the feeling of security that being insured is supposed to provide. A high deductible, or a bad experience with a large unexpected bill, can make a patient reconsider the inherent value of such health insurance. This could lead many individuals to stay uninsured or drop their coverage, and ultimately face the health and financial consequences of doing so.
The reforms outlined here—from those proposed by President Obama in his recent article to those suggested by Hillary Clinton during her campaign, and to those being fought for by health advocates in California and other states—are all about making sure everyone can afford inherently pricey coverage and care. These reforms should be pursued concurrently with another equally important set of continued reform efforts—those which seek to bring down the base cost of care, or at least “bend the curve” of cost growth, whether those costs come from insurers, drug companies, doctors or elsewhere.
Either way, what we ultimately need is a system where people can get the care they need, when they need it, and not have to worry about their family finances in doing so. And California is showing us the way by taking at least some of the first, yet essential steps toward this goal.