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PART TWO OF SERIES

5 things you need to know about health care and insurance in the U.S.

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Health care occupies a prime spot in today’s political theater — and an increasing share of national expenditures. But the Kaiser Family Foundation, a nonpartisan think tank that tracks the industry, found that three-quarters of Americans can’t define basic health insurance terms — and the situation is getting more complex.

Today, we conclude a two-part series that aims to bring you up to date so you can follow the issues that will influence your health care — and, potentially, your vote — for years to come.

What's covered?

Once upon a time, it was up to employers, consumers and insurance companies to agree on what medical expenses each health plan covered.

People wanted their illnesses covered, but they didn’t want to pay for benefits they didn’t use. Insurance companies could offer a range of plans, from low benefits to high benefits, covering some medical costs but not others.

Employers or individuals would buy what they wanted and could afford.

The Affordable Care Act changed that by requiring a broad set of “essential health benefits” — outpatient care; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription drugs; rehabilitative services; laboratory services; preventive and wellness services; chronic disease management; and pediatric dental and vision services.

One impact: higher costs, because all health plans paid for more things. (Health plans under the ACA vary according to how much they pay and the amount of out-of-pocket costs required, but the benefit categories are uniform.)

Reducing costs has been a top goal of both sides on the ACA debate. Critics argue that the law has sped up the increase in insurance and medical costs, rather than slowing it down.

To reverse the spiraling cost trend, some Republicans have proposed ending the national essential benefits rules and letting each state decide what insurance plans should cover — and what they shouldn’t. That would be a return to pre-ACA days.

Already, states are allowed to seek waivers from the benefits rules if they don’t have competing insurance plans available.

There’s precedent for that.

Each state has an agency that oversees insurance within its borders. Although the states often coordinate their regulations, each state is, more or less, in charge of the insurance business within its borders. That includes setting standards for health insurance plans, although that power today is subject to the nationwide ACA rules.

Occasionally, state legislatures debate whether to require or limit health insurance coverage.

Should insurance companies be required to extend benefits to abortion procedures? Treatments for AIDS and HIV? Mental health? Substance abuse?

Before the ACA, the rules for coverage varied from state to state. If an insurance company wanted to offer health plans in a state, it must follow that state’s rules.

ACA backers view the essential benefits as supplying good insurance uniformly across the country. Opponents view the essential benefits as a cost-raising rule imposed on people by the federal law that should be reversed, with control returning to the states.

Old vs. young

If you give something to somebody, it’s tough to take it back.

The Affordable Care Act gave older Americans a break on insurance premiums, at the expense of younger Americans, on individual and small-group health plans.

Now the Republican proposal approved by the House of Representatives would end that break, and Democratic opponents say that would make rates unfairly high for older Americans.

It worked like this: Before the Affordable Care Act, insurance companies in most states could charge their oldest clients up to five times as much as a 21-year-old. That’s known as “age band rating” of insurance premiums — the older you are, the more you would pay.

The logic is that older people have much higher health care expenses, so they should pay more for their insurance.

The Affordable Care Act compressed that 5-1 ratio down to 3-1. That is, older people could be charged only three times as much as 21-year-olds.

Compressing the ratio to 3-1 was intended to spread the cost of health care more equitably among people of various ages. Politics may have played a part, too, as older Americans vote more often than younger Americans.

But there were side effects.

To bring in the same amount of money to cover insurance claims, insurance companies charged younger people more than they would have with the 5-1 ratio. Rates went up for everyone, of course, but would have gone up more for older people if the 5-1 ratio had stayed in effect.

One study showed premiums for younger people were 40 percent higher with the 3-1 ratio than the 5-1 ratio, while older people’s premiums were 20 percent lower than they would have been (even though they actually increased, overall).

As a consequence, more young people skipped insurance. Remember, the ACA had hoped to attract lots of young, healthy enrollees into health plans because their claims would be relatively low.

The ratio compression had the unwelcome effect of making the insurance pool older, sicker and more costly.

The Republican proposal from the House would restore the 5-1 ratio, intending to help attract more young people to buy insurance and, presumably, make the insurance pools better able to cover medical claims.

But try telling that to an older person whose insurance rates would increase even more if the 5-1 ratio returns.

Why so upset?

Health care is an emotional issue because it’s so important.

And that’s why it’s a political issue, too. People care about health care — literally a matter of life or death — and they can be upset at the cost and quality of care and the process of paying for health care through insurance.

Some people see health insurance as a business that makes profits from people’s misfortune.

Nobody wants money to get in the way of curing a disease, repairing an injury or preventing an illness, but paying the bill can be difficult.

As political rancor increasingly divides the two political parties, health care and health insurance have become hot-button issues in the nation’s political debate.

The Affordable Care Act was barely approved by a vote mostly along partisan lines in 2010, with Democrats in favor and Republicans opposed. A Republican plan to change the law also barely passed the House of Representatives. The Senate is weighing its version, with no consensus emerging yet.

Consumers — many of them voters — also are divided on the law. Some have benefited, getting solid insurance they couldn’t get before and having their health problems tackled for the first time. Others see the law as costing them money with no real benefit.

Insurance companies, for the most part, have had difficulty operating individual and small-group businesses profitably under the law’s rules, and many of them have dropped out of states or counties where they have been losing money on those health plans.

Group plans are generally becoming more costly or shifting more expenses from employers to consumers.

Doctors and hospitals are learning to cope with the new rules, among many changes sweeping the health care industry. Efforts to improve health care quality also are moving ahead, although with less public debate than that surrounding the cost of care.

At the same time, parts of the ACA are popular with both parties and with voters: Few oppose charging men and women the same for health plans, even though women, on average, spend more on health care. Few oppose allowing young people to stay on their parents’ insurance plans until age 26. Most agree with ending lifetime or annual limits on insurance benefits. Most favor the law’s ban on rejecting people who have pre-existing health problems.

But requiring everyone to buy insurance and fining those who don’t? Requiring full coverage for everyone, even for people who don’t want it? Requiring insurance companies to accept anyone, no matter how sick?

Not so much, say some.

Surely there must be alternatives.

Medicare for all

With all the fuss and bother, why not just give up and have the government subsidize everybody’s health care?

In essence, that’s the “Medicare for all” option, also known as a single-payer system, a national health program or universal health care.

Or, to some opponents, socialized medicine.

If the Affordable Care Act was a big change, a single-payer system would be gigantic.

There are different versions, but essentially the federal government would pay a large part of everybody’s health care and handle payments to doctors and hospitals.

People would pay premiums based on uniform criteria — you didn’t think Medicare was free, did you? — and the government would negotiate payments to health care providers and pharmaceutical companies.

Insurance companies might compete for contracts to handle the payment system, as they do with Medicare’s programs, but they wouldn’t accept the risk of claims and wouldn’t set rates for health plans. Without accepting risk, insurance companies wouldn’t be selling true insurance.

Doctors and hospitals would have to decide whether to accept the payments set by the government, or work outside the government system. Wealthy people might pay extra on their own for what they perceive as better medical care or better access to care.

Similar models are followed in most other developed countries with free-market economies, although detractors say there are trade-offs in terms of long waits for treatment or other access problems. There’s a debate over whether care quality is better in those countries or in the United States.

Savings supposedly would include administrative costs and expenses such as advertising by insurance companies, and eliminating the profits earned by health insurers.

Such a system also may result in lower payments to doctors and hospitals.

Opponents argue that a government-run health system would not be as efficient as one subject to free-market competition and profit incentive. With all its flaws, the U.S. medical system is top-quality, and arguments to the contrary use misleading information, opponents say.

During debate on the Affordable Care Act and since the law has been enacted, some viewed it as an interim step toward universal health care. It remains to be seen whether that happens.

What's next?

So far, it’s not clear. Here’s what we know and don’t know:

1. The Affordable Care Act, still the law and still functioning. Its provisions control federal policy and heavily influence state policy on health insurance and health care, although those policies are undergoing changes through rule-making by the Department of Health and Human Services.

2. The American Health Care Act, approved by the House of Representatives. Its provisions would make significant changes in federal health care law and leave some parts of the law standing, and mean fewer people with health insurance than today.

3. A U.S. Senate proposal, expected to be different from the House version and subject to debate. If the Senate acts on a measure, the two versions could be subject to compromise before a final bill would be sent to the president for possible signature.

4. State government agencies, which control parts of health care policy such as Medicare eligibility. Parts of the House proposal would give states more authority over details such as health plans for people who have a high risk of large health care costs.

Government policy on health care also is subject to influence from insurance companies, medical care providers, consumer advocates and, ultimately, the American people.

Voters may consider health care policy when they go to the polls in 2018, and members of Congress will keep the election in mind as they consider proposals.

Some key issues to follow:

» Will the law require almost everyone to buy insurance or face tax penalties?

» Will the law continue requiring broad insurance coverage?

» Will states be able to skip ACA requirements to encourage insurance companies to offer plans?

» Will people with pre-existing health problems be guaranteed coverage?

» Will federal money help states set up insurance pools for high-risk people?

» Will the range of premium differences between 21-year-olds and older people remain at 3-1 or increase to 5-1?

» Will Congress fund subsidies for low-income people to buy insurance?

» Will “Medicare for all” move ahead?

» Will efforts to reduce health care costs and improve quality move ahead?

Answer those questions, and you’ll have an idea of the future of health care in the United States.

steve.jordon@owh.com, 402-444-1080

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