One Way Obamacare Could Save You Moneyby
The opening of the Affordable Care Act’s state insurance exchanges has produced justified guffaws about the ability of the federal government to build a working website. It may also spur something more useful: a reconsideration, with new information for both employees and employers, of the tradeoff between greater choice and lower costs in health care.
One of the main purposes of the exchanges is to offer people an easy way to compare insurance plans. Because insurers can’t discriminate based on pre-existing conditions, they have to compete largely on price. In response, they have created plans with relatively small networks of doctors and hospitals, leading to lower premiums.
That’s good news for people who will buy insurance on the exchanges (and for Obamacare, whose success depends on the affordability of coverage there). If it leads to lower premiums for employees and employers -- that is, lower health-care costs generally -- it could be good news for everyone else, too.
Florida’s experience is instructive. The state’s largest health insurer, Blue Cross Blue Shield, has a narrow-network plan, Blue Select, for individuals shopping on the Florida exchange. The plan has also seen increased demand from companies, which can cut their premiums by 5 percent to 15 percent. WellPoint Inc., which offers exchange plans in 14 states, says it too has seen more interest in narrow networks because of the exchanges.
This suggests that Obamacare may be softening a longstanding taboo in American health care: Limiting choice, something associated with health-maintenance organizations. In the 1990s, such restrictions helped to spark a public backlash against HMOs. The skittishness remains, as neither of the other two insurers most involved in the exchanges -- Aetna Inc. and Humana Inc. -- was willing to talk about the use of narrow-network plans by their commercial customers.
The criticisms are understandable. A limited choice of doctors and facilities may not be a concern for people buying insurance on the exchanges, whose alternative may be no insurance at all. But for those with employer-sponsored coverage offering an array of options, moving to narrow networks raises the risk of losing access to the doctor of their choice.
But what is the cost of such unfettered choice? Increasingly, it is measured in forgone wages. Family premiums have more than doubled since 2002, reaching an average of $15,581 for small companies and $16,715 for large companies in 2013, according to the Kaiser Family Foundation. The question for workers may be whether they prefer a greater choice of health-care providers to more money in their pockets.
The difficulty of this question is compounded by the fact that there’s no guarantee that money would find its way to those pockets. Nonetheless, the chance to reduce premiums by 5 percent to 15 percent is one that companies and workers alike need to consider. The trick, as usual, is getting the details right.
As the exchanges grow and more companies consider narrow-network plans of their own, one way to prevent a repeat of the HMO wars is to give employees a meaningful role in the decision to switch -- in other words, give employees a choice about how much choice they want. Another way is for companies to commit to putting some of the savings from lower premiums toward higher wages. Companies could also look for ways to phase in any switch to narrow-network plans. That would limit the savings, but it’s worth trying to protect existing workers against the risk of losing their current doctors.
The return of narrow networks is not an opportunity for companies to cut worker health benefits with no regard for the impact of those changes. But if the exchanges demonstrate that narrow-network plans can provide quality care and affordable coverage, the country’s businesses would be doing themselves -- and their workers -- a disservice by not considering the same approach.
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