On November 14, President Obama announced that he would delay by one year the implementation of requirements imposed by the Patient Protection and Affordable Care Act (ACA) that would have led to the cancellation of some low cost health insurance plans. The president felt compelled to do this because he had repeatedly stated, “If you like your health care plan, you can keep your health care plan,” and opponents charged that he was going back on his word.
Opponents of the ACA have pointed to this as evidence that the ACA is not working, and even some Democrats have expressed this interpretation. Beyond the partisan political fights is a more fundamental disagreement about the meaning of fairness and the value of universal coverage.
The “patient protection” dimension of the Patient Protection and Affordable Care Act is reflected in provisions that ban the use of pre-existing conditions to deny health insurance coverage and limit the circumstances under which health insurers can rescind policies. But it also includes the creation of minimum coverage standards that do not allow insurers to sell inexpensive plans that fail to offer adequate protection against the costs of health care. However, the law temporarily grandfathered in many substandard plans that were in place at the time the law was passed, and many of those plans expired in 2013. Because there is so much turnover in the individual and small group health insurance market, many of the plans that would have been cancelled by the ACA were issued more recently and, at the time they were sold, insurers knew could not continue beyond 2013.
Much of the uproar over the cancellation of these plans reflects a distortion of the facts, but just beneath the veneer of the overheated political rhetoric is opposition to the values that animate the law. In that spirit, the cancellation of health insurance plans that do not meet the law’s minimum standards for coverage is evidence that the law is working, not that it is failing to do so. Although it does so by creating a “patchwork on a patchwork,” meaning “a patchwork of reforms that builds upon the existing patchwork system of American health insurance,” the ACA tries to move the U.S. closer to a social insurance model for health insurance and away from a commercial model in which the price of health care is based on its actuarial value.
Social insurance tries to spread risks across a population and across the life course so people who are healthier and wealthier will subsidize people who are less healthy and poorer. From a social insurance perspective, including everyone in a risk pool and forcing redistribution is a matter of making everyone pay a fair share for being a member of a minimally decent society that does not allow poor health, which may be the result of forces beyond an individual’s control, to result in financial ruin.
In contrast, a commercial insurance perspective would treat this sort of redistributive goal as unfair. People who enjoy good health ought to pay less and people who are sicker ought to pay more (actuarial fairness). This depends on a lot of assumptions. First, it assumes that whether you need more or less health care is something over which you have a great deal of control. Second, it assumes that the benefits to society of forcing sick people to pay more outweigh the costs of doing so. Most of the world rejects the commercial model in health care and the ACA is an effort, constrained by the reality of national politics, to move the U.S. closer to this “international standard.”
If the point of insurance is to spread risk over a larger group, healthier people will pay more than what might be considered “actuarially fair.” Those who adopt a social insurance perspective place great value on spreading risks as broadly as possible. Those who adopt a commercial insurance approach want to limit this and segment the market to protect healthier people against subsidizing the care of people who are sick.
The choice between these models is driven by values. The more value we assign to broad coverage, the more sense it makes to define the population, the risk pool, very broadly. So, beyond the attempts to score partisan political points, this is really a fight about whether health insurance in the U.S. should be based on social insurance principles – and that is the issue that should receive greater public attention.
Michael K. Gusmano is a research scholar at The Hastings Center.