The ACA Exchanges Can Be Fixed, But They Were Meant To Be Broken
The serious problems surrounding auto-enrollment in the new Affordable Care Act exchanges are just starting to get real attention. The problem isn’t a lack of good solutions though. The real problem is that the exchanges weren’t intended to work well for regular people.
The fundamental problem with insurance exchanges is regular people are really bad at shopping for insurance
If you want to make these private insurance exchanges work better, the first step is acknowledging the entire Democratic message about the ACA making insurance shopping easy and useful for regular people was either profoundly ignorant or purposely deceptive. Expecting regular people to become highly sophisticated and active insurance shoppers was never realistic.
Selecting the right insurance is extremely complicated. Regular people lack the basic health literacy needed to even understand the choices and even if they do they lack the math skills to make proper use of the information. Most people aren’t going to select the best plan for them and we know from Switzerland only a very tiny percent will shop around each year because of the difficulty.
Efforts to make the ACA exchange choices marginally easier to understand or give more information to people is not a real solution. In the Swiss system things are already dramatically more standardized and switching to cheaper policies is still rare.
What is needed is a paradigm shift to make the exchanges about insurers vs regulators not insurers vs consumers.
Having the exchanges primarily about a place where sophisticated private insurance companies trying to convince poorly informed regular people to choose them is an information asymmetry disaster. It can easily put the economic focus on tricking people, not providing better quality.
To make the exchanges better you could make it about sophisticated insurers convincing well-informed and dedicated regulators of their quality.
This would work by mainly taking regular people out of the shopping process. Instead you have people upload their health information into the exchange and have them answer a serious of questions about their priorities. For example: How important is keeping your doctor? On a scale of 1-10 do you care more about saving money or a wider network?
The personal data would be entered into the exchange algorithm and the government system would directly recommend the plan that is the best quality, fits their priorities, and makes the most financial sense for them. People should still be able to manually choose their own plan, but I doubt many would. During each year’s new enrollment period you would have the exchanges make an aggressive effort to contact people to find out if their priorities have changed and if the system says there is a better options for them.
Since regular people are so bad at shopping for insurance this system would likely save the government and consumers significant money. You might think that is a feature, but perversely that is its flaw.
The Affordable Care Act is “broken” by design.
We didn’t get the Affordable Care Act because the public was clamoring for an expensive system using a mandate to force people to buy very complex insurance products from deeply unpopular companies. We got the ACA because our government is profoundly corrupt. Its complex and inefficient design is a direct result of President Obama making secret deals with the health care industry to protect their profits. What looks like waste and confusion for regular people is profits for drug companies, insurers, and hospitals.
If Democrats wanted to eliminate this auto enrollment issue they could have just put all the uninsured onto a basic public insurance plan. Not only would this auto enrollment problem disappear but the whole law would have been simpler, more effective, and significantly cheaper. Instead we got the private insurance exchanges.
If Democrats actually wanted people to really be able to shop for insurance they could have required all insurers to offer only very specific policies so the only differencd between them was price and networks. This would have made it possible for regular people to reasonably compare them. Instead they give insurers broad leeway within actuarial tiers that are difficult for regular people to understand.
If the Obama administration really wanted to try to improve quality and price on the Healthcare.gov they could have made it an “active purchaser” that actually negotiates with insurers. Instead they choose the more insurer friendly “clearing house” set up.
Even sticking to the stupid basic design of the ACA, policy experts could spend years coming up with changes that would dramatically improve the quality, efficiency and price for regular people; but that is all meaningless as long as that is not the real goal.
The problem is not that we don’t have solutions, the problem is the system isn’t about doing what is best for regular people.