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Fight Over Obamacare Heats Up in Rhode Island

Tuesday, June 11, 2013


A report released today claims that there are financial disincentives to obtaining health insurance coverage under the Affordable Care Act.

A report released today entitled, "Will Rhode Islanders Purchase Insurance Under Obamacare," claims that there will be financial disincentives in Rhode Island for a "significant number of individuals and families" to obtain private health insurance coverage under the President’s Affordable Care Act -- and as a result, Rhode Island should be prepared to see enrollment through the Rhode Island Health Benefits Exchange that is significantly below current expectations.

"I think advocates [of the Affordable Care Act] are going to be disappointed when they realize there's still going to be a sizable uninsured pool out there once this is implemented," said Sean Parnell, President of Impact Policy Management, a public policy consulting in Washington, D.C., and adjunct scholar with Rhode Island Center for Freedom and Prosperity, who authored the study.

Ian Lang, who is with the Rhode Island Health Benefits Exchange, was confident however that the exchange will serve to benefit the majority of Rhode Islanders.

"We'll be informing consumers and helping them make decisions based on budgetary and health needs," said Lang. "We're thrilled that we'll have over 25 plans, and we're confident we'll have significant choice both on the individual and business levels. The exchange will be able to negotiate with insurance companies to drive new and innovative plans designs moving forward, we'll be constantly improving the product."

Report: Economic Incentive Runs Contrary to Stated Goal of Obamacare

When the Rhode Island Health Benefits Exchange opens on October 1, it will allow individuals and small businesses to shop for healthcare coverage, providing subsidized healthcare coverage to those between 100 and 400% of the federal poverty level who do not have access to affordable coverage through work, or are uninsured.

The report issued by the Rhode Island Center for Freedom and Prosperity, however, looked at how the subsidies are supposed to work in tandem with the law's "individual mandate,’ which requires most citizens to obtain health insurance or pay a tax as a penalty, and found that for many age and income levels, there would be financial incentive to not buy insurance and instead pay -- or possibly avoid altogether -- the tax.

Parnell states in the report, "Based on proposed insurance rates in the Ocean State, and given the individual mandate penalties specified in the national law, for most income and age categories earning more than 200% of the federal poverty level for individuals, and 250% for families and couples, there are often substantial pocket-book reasons NOT to purchase insurance, even when subsidized via the state’s pending health benefits exchange."

"The financial incentives to obtain health insurance coverage (subsidized or unsubsidized) or be uninsured and pay the tax depend on several factors," wrote Parnell, describing the methodology. "Age and how much an individual or family earns as a percentage of the FPL (adjusted gross income); what the Bronze and Silver level premium for their age/family composition would be; what their premium subsidy would be; and what their tax for being uninsured would be."

Speaking with GoLocal, Parnell expressed his concerns that the new law was not going to achieve its intended goal on reducing the numbers of those without insurance.  

"Those who are younger, and not so informed of their options, might not see the value of purchasing insurance," Parnell said. "The "young invincibles" will continue, who don't see the need. It will be an uphill battle to get them to buy."

Parnell claimed that the cost of out-of-pocket routine office visits without insurance, while potentially costing several hundred dollars per visit, would be a factor in encouraging younger and healthier individuals to rethink buying more expensive insurance -- given paying the non-compliance tax would still cost them less.

"What many people don't know is that there are options out there for them. There are a surprisingly high number of ways for people to get healthcare access quickly, whether it be in a new open enrollment period, or when they get married, for instance. In addition, there are affordable "critical illness" policies, which generally aren't used, but would could address catastrophic costs."

Parnell noted that having older, higher-risk individuals purchasing insurance through the exchange would "distort and damage the risk pool."

"If the people who purchase the insurance are older and sicker, it will drive up policy premiums even higher. So then that slice of people for whom it was already a close call to get insurance, the increase in premiums would put them over the edge," said Parnell.

Despite his findings that there would be "broad financial disadvantages for a significant number of individuals and families under the Affordable Care Act," ParnelI didn't see fault in the health benefits exchange.

"I have no doubts that the folks who are putting together the exchange are working to try and put together a successful program," said Parnell. "I'm not sure how they'll respond to our report, as some of our ways to address the disincentives are outside the box. I think a lot is going to depend on how they inform and educate people. It's a complex analysis for folks who are on the coverage border."

"It's great for some people, I'm not going to say it's a good deal for all people," Parnell said. "And it's important to note that the federal government, who's contributing to the subsidized rates, would then have to subsidize even more if the program isn't successful in insuring individuals."

Health Benefit Exchange Weighs In

"This report is only looking at a small segment of what we've doing," said Lang. "We're going to be a catalyst for change in the system. The exchange will offer full employee choice -- Rhode Island is one of the only states to do so. So employers will come into market place, select a plan, determine the amount to pay in for employee premiums, and then employees can then choose "up" for options or choose "down" based on their needs."

"I'm not saying they're won't be examples what was pointed to [in the report]," said Lang. "The data shows us though that people will move towards insurance, and it will be important for us to analyze data in order to tweak our product line."

Lang pointed to Massachusetts, who had already implemented universal health care prior to the Affordable Care Act, as an example for comparison.

"The number of uninsured working-age adults in Massachusetts declined from 13% to 4% between 2006 to 2008," said Lang, citing the Massachusetts Division of Health Care Finance and Policy statistics. "And in 2010, only 1.9% of Massachusetts residents were uninsured."

"It's not merely looking at numbers, but true practice," said Lang. "The experience in Massachusetts shows that people didn't drop out."

Lang added, "People want to focus on short term, what's going to happen right away. We're sprinting to get everything up and running by October 1, at which point we'll be going from a sprint to a marathon. Then our goal is over time to drive the system reform we want to achieve."

Next Steps

The report released today by the Rhode Island Center for Freedom and Prosperity marks the first in a series looking at the potential effects of the Affordable Care Act in the state.

"The second report we'll be releasing will be quantifying the groups of Rhode Islanders will likely remain uninsured after the [Affordable Health Act] takes effect," said Mike Stenouse, CEO with the Center. "We'll then issue a third looking at public policy solutions, as well as private strategies, that address the disincentive issues, without any additional taxpayer funding."



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