No matter what you think about health reform, there is a nonpartisan view that the Affordable Care Act creates an implementation nightmare. California’s insurance marketplace was thrown into chaos in the fall with the cancellation of policies and people rushing to get insurance from the state’s balky health exchange. More problems are foreseen as employers have to comply with health reform later this year, Medi-Cal is expanded and the newly insured deal with the Internal Revenue Service.
For those trying to understand the execution problems of Obamacare, Ed Persike is a resource. The owner of Persike Benefit Solutions has worked in insurance for more than 40 years and knows the industry. Readers should know he’s involved with conservative politics. He has been active in civic activities as a member of the Local Agency Formation Commission, the Stanislaus County Red Tape Task Force and the county Parks and Recreation Commission.
What is your general view of the Affordable Care Act and the effort to make sure most all Americans have health coverage?
The intentions of the ACA were laudable. The execution and implementation is an unmitigated disaster at both the state and national levels. The regulations within the ACA exclude entire groups from both coverage and the mandate. All the ACA has done is to reshufﬂe who would be insured and how much they’d pay. About 15 percent of the population will remain uninsured by design.
The root cause of the problem is that the driving force behind ACA was political. A solid case is made that it had more to do with money and the spoils of winning elections than implementing a workable health care system.
You have been critical of Covered California, the state-run health exchange. In your view, what mistakes were made?
The act is a political beast, it’s too complicated, and Congress and the president make it more so every day. The original bill was 2,300 pages. It is now over 20,000 pages, and 157 political entities have been created at both the state and national levels. They all are adding their own new regulations. There are in excess of 41 brand-new taxes associated with the ACA.
The second issue is that thousands of new bureaucratic jobs were created, which duplicate what Blue Cross, Blue Shield and other insurers already have in place. These new jobs further entrench the politicians in power at taxpayer expense. They were totally unnecessary.
It’s truly frustrating for consumers to wait on hold for three hours (no exaggeration) and then get someone on the other end who says ,“I don’t know.” The management of Covered California reinvented the wheel, using untried, untrained people with no insurance background as their feet on the ground.
Another critical issue is that those who were appointed to run Covered California by Gov. Jerry Brown really had no background in the administration area of health insurance. The painful results speak for themselves.
You have made the point that Covered California did not use the infrastructure of the private insurance industry. What do you mean?
Blue Cross, Blue Shield, Kaiser and others have been successfully processing insurance applications for decades. They have been receiving and processing tens of thousands of health insurance applications every single month and medically underwrite them. Doesn’t common sense tell you they would be able to handle an application? Other than the Democrats’ desire to build a political infrastructure, my colleagues and I cannot fathom why each company issuing coverage was not made the primary party responsible for gathering the data and issuing the insurance contracts. Instead, an unwieldy system has been created because elected government ofﬁcials and appointees felt they were smarter than private enterprise. At this point, it’s obvious they were wrong.
In a recent newsletter, you wrote that “binders” are not being used by Covered California. Explain that, and what problems does it create?
The whole process does not make sense from a policy issuance basis. Remember, the ACA product is guaranteed issue. The only thing to be evaluated is the amount of the subsidy, and that is based on income. All conventional insurance products require a “binder” to be able to offer valid coverage. What this means is that virtually all insurance companies require a check or credit card payment at the time of application. From there, the process is simple. Once the policy is approved, it is issued because the binder is in force.
Covered California decided against the binder process. Thus, each and every new applicant must be contacted by the issuing insurance carrier, the insured must write a check and communicate back to the company before the policy is placed in force. By designing a nonconventional payment system, the system is crumbling under its own weight, requiring multiple contacts between Covered California, the insurance carrier and the individual. Multiple steps create greater chance of a foul-up along the way.
What are your concerns about how implementation of the ACA will affect employer-based health insurance later this year?
You will see thousands of smaller, employer-based health plans just disappear. It’s too big a hassle for a small employer. For larger companies, it’s fraught with danger and liability. Who really understands a 20,000-page opus of regulations? You could think you are in total compliance, and then all of a sudden, you face a huge government ﬁne for something you didn’t know existed. There is no resource to go to at this point to make sure you are 100 percent compliant. The law is too complicated to enforce.
Very large corporations will have an easier job of complying because they can hire someone to do nothing but make sure they are in compliance. Even so, there will be issues. Low-paid employees and their employers will have meaningful issues. There will be a real push-back by industry. The ACA is a job killer. The ﬁnes are large but the potential costs can be crushing. Full-time jobs over 29 hours will be tough to get, and tougher to keep.
Simple economics says, if I lay off three full-time employees, and replace them with four part-time employees working 29 hours each, I will have cut my costs tremendously. If I have fewer than 50 employees, I can just cancel the health plan entirely and wash my hands of the entire mess and the potential liability. The employees can fend for themselves.
Before Congress passed the ACA in 2010, many people in the health care industry thought something needed to change with health care funding. A shrinking number of people with private insurance were footing the bill for uncompensated care, plus many people were denied coverage because of their health conditions. Was there another way to improve things?
It was obvious that changes in the health delivery system were way overdue. In terms of major industrial countries of the world, we were middle of the pack in health care delivery and results. In the area of cost, we are among the worst, with cost per person nearly double that of the next highest nation. Simply put, we had the highest costs by far and we received middle-of-the-road results.
As a nation, we have done a horrible job of managing health care to the uninsured poor. The system drove them to ﬂood hospital emergency rooms. These costs were borne by the middle class with premiums estimated to be 20 to 25 percent higher than they actuarially needed to be and through higher taxes.
Under the ACA, we have a further bifurcated society. The out-of-pocket costs for the metal plans (bronze, silver, gold, platinum) will drive many to bankruptcy – in reality, it is not insurance at all. Prior to the ACA, we had the problem of a shrinking pool of privately insured people and an increasing pool of the uninsured. In looking at the realities of the ACA, we will still have a staggering amount of uninsured folks.
The government has stated that we will still have about 15 percent to perhaps 20 percent of people uninsured even if the ACA was successful. We also now will have a pool of insured (with subsidized health plans) who will pay virtually nothing or only a small portion of their health care premium.
If Ed Persike had his wishes, how would health care be designed?
It would include everyone in the nation, no exceptions, including government workers. It would cover citizens and noncitizens alike. It would require a national ID card, giving access to basic insurance beneﬁts. If one wanted better coverage, they would go out and purchase a supplement in the marketplace.
There would be strict limits on overpricing. It would be paid for by an across-the-board tax on goods. This plan is already being used in developed nations all over the world.
What is your prediction for the current health reform initiative? Will it succeed or survive after the November 2014 elections?
It has no chance to succeed. Bloomberg is reporting there is already an insurance company bailout secretly in the works because the young people the ACA depends on to make the numbers work are shunning it in droves. Regardless of GOP wishes, it will survive in some form. Now that it is in place, dismantling it is impossible. I would think some of the structure will be removed, as it is unmanageable.
I believe there are a lot of angry people out there, and as the new rules and new taxes become evident, there are going to be a lot more angry voters. Many politicians are attempting to distance themselves from the ACA. The major players in California have been immune to the actions of Covered California – so far. I would submit that once the public ﬁgures out that all the decision-makers in Covered California are political appointees of Gov. Brown and/or his Democratic leadership, they will be vengeful. The next election may be very interesting.
Bee staff writer Ken Carlson can be reached at email@example.com or (209) 578-2321.