The ACA and Newton’s 3rd Law of Motion

Sir Isaac Newton’s Third Law of Motion taught us that “for
every action, there is an equal and opposite reaction”.  As we near the end of the fourth full year of
the [partial] roll out of The Affordable Care Act /Obamacare, it has become
increasingly more challenging for people to differentiate “action” from the
“equal and opposite reaction”.  Put
another way, some of the things we’re experiencing, required by the ACA, are
directly attributable to the law itself (call these “actions”).  And then there are things we’re seeing that
are the result of the many requirements, mandates, fees/taxes, expansions associated
with the ACA (call these “equal and opposite reactions”).   This
will all make more sense when you see the chart at the end of this article.

Health insurance companies, the few that remain, and
employers, get a bad rap for changes they‘re implementing.  It’s important to keep in mind that despite
the heavy involvement of government in the health care financing sector, the
U.S. still employs a private/free market model.
Unlike the majority of the world’s developed countries that utilize some form of a single payer, government-controlled model, our health care system still involves
and very much includes a profit incentive, right or wrong, good or bad.  As such, when the government passes laws
requiring health insurers and employers to do certain things, the industry (and employers) will
figure out a way to comply and at the same time, realize a profit
margin.  In fact, insurance companies are
often times demonized for some of the decisions they make, or strategies they
deploy, when in fact they are doing their ample best to comply and remain a
viable, profitable business.  More
importantly, insurers need to assure they have enough money available to meet
all their claim obligations.  Consider that at the
present time at least, the majority of U.S. citizens rely on an insurance
policy for their healthcare expenses, not the state or federal government.


And since employers account for 62% of the health insurance
policies owned by some 149 million U.S. citizens (according to the Kaiser Family Foundation),
they too are forced to react to the ACA’s numerous provisions, while remaining
viable and profitable.  Often times
employer reactions to the ACA result in less than favorable outcomes for
employees.  The simplest example of this
would be employers shifting more of the expense of health plans (out of pocket
levels and premiums) onto employees.  But
a more complex example might be the trend emerging that finds employers
replacing their defined benefit plans with defined contribution plans.  This trend mimics what happened with employee
retirement plans in the 1980’s with the advent of the 401(k).  In fact a number of large, well known
employers announced such a switch last year (e.g., Walgreen’s, Sears, Darden
Restaurants).  The defined contribution
model involves employers providing employees with dollars, rather than
prearranged benefit plans.  Employees
utilize these dollar allocations to purchase their own insurance plans.  So-called private exchanges are emerging all
over the land, to accommodate the process of employees shopping for and
purchasing insurance, using employer allocated money.

Following is a partial list of examples of ACA “actions and
reactions”, to demonstrate my point:

ACA Provision
(ACTION)
INSURANCE
COMPANY/EMPLOYER
(REACTION)
1.) New fees and
taxes
Higher premiums; employers replacing defined benefit plans
with defined contribution plans
2.) Modified
Community Rating
Lower rates for older individuals, higher rates for
younger folks; higher premiums
3.) Minimum Loss
Ratio
Reduced agent commissions; lower renewal rate increases
4.) Guaranteed
issue
Higher premiums; higher cost of prescription drugs (narrow
Rx formularies); narrow PPO networks; higher deductible/coinsurance limits
5). Elimination of
the use of preexisting condition limitations
Initially, a drastic reduction in the availability of
“child only” policies; higher premiums; higher cost of prescription drugs
(narrow Rx formularies); narrow PPO networks; higher deductible/coinsurance
limits
6.) Mandating
covering 10 essential health benefits
Higher premiums; higher cost of prescription drugs (narrow
Rx formularies); narrow PPO networks; higher deductible/coinsurance limits
7.) Employer
Mandate/Shared Responsibility
Skinny plans; reduction of hours/positions; termination of
health insurance offering; eligibility changes (e.g. spouses not eligible or
cost more to cover)
8.) Copays must
apply to out of pocket maximum
Higher deductible/coinsurance limits; higher premiums
9.) Allowing a 30%
incentive for participation in Wellness programs; 50% surcharge on tobacco
users
Modified wellness programs; higher
premiums for affected individuals based on wellness program
participation/results; higher premiums for those who choose to use tobacco
10.) Ban on
lifetime and certain annual limits
Higher deductible/coinsurance limits; higher premiums


And with all the “grandfathered” and “grand mothered” plans
out there, the time will come when the various delays associated with such
status will expire, bringing with it a separate round of “actions and reactions”!

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