Healthcare redlining

By Phil Mattera, Dirt Diggers Digest

Media coverage of the Affordable Care Act these days bounces back and forth between good news and bad. One day the Obama Administration signals that there are more problems with the employer mandate and once again changes the rules. Two days later, federal officials are bragging that ACA enrollment is booming and that even the Young Invincibles are signing up.

Yet perhaps the most significant recent development is the analysis just published by the Wall Street Journal on the limited range of plan options in the ACA exchanges. The newspaper found that in 515 counties across 15 states there is only one insurer selling coverage through the online marketplaces. In more than 80 percent of those counties, the sole insurer is a local Blue Cross/Blue Shield plan.

For the residents of those counties who seek coverage through the exchanges, the ACA is forcing them to do business with a de facto monopoly that can get away with charging inflated premiums. The Journal cites the example of rural, low-income Hardee County in Florida, where comparable exchange-based coverage can cost $200 a month more than in nearby Tampa.

The ACA is premised on the idea that competition would bring down costs and provide better coverage. The Administration and most Congressional Democrats bought into that notion so deeply that they were willing to exclude a public option as unnecessary. That decision looks increasingly bone-headed.

It is true that those who qualify for federal subsidies may be shielded from the cost differentials, but a substantial portion of the uninsured earn too much to qualify for that assistance but are still far from affluent.

A big part of the problem is that major for-profit insurers such as Aetna and UnitedHealth Group have been participating in the exchanges on a very selective basis. The Journal noted that Aetna, for instance, has "targeted areas with stable levels of employment and income to attract desirable customers to its marketplace offerings."

This is, to put it mildly, infuriating. The ACA was supposed to put a stop to the tendency of Aetna and the other insurance giants to decline coverage to certain categories of people, usually because of pre-existing medical conditions. Now the insurers were supposed to take on all comers, with the federal government functioning in essence as their marketing arm.

It turns out that the national insurers had found another way of cherry-picking. They are simply choosing not to participate in the ACA market in less affluent parts of the country, where they apparently assume that residents are going to have too many medical needs. In a presentation to investors, Aetna admitted that it was participating in exchanges in fewer than one-third of the states.

The decision to limit the scope of their involvement does not result from any financial distress on the part of the major players. In recent weeks Aetna, Humana and Wellpoint have all reported healthy gains in profits for 2013. The big boys are also getting bigger. Aetna swallowed competitor Coventry Health Care, which added $14 billion to its annual revenue stream.

For those of us who advocated a single payer approach, or at least a public option, the behavior of the insurance companies comes as no surprise. These companies have always found ways to increase profits at the expense of coverage, and they always will. Now that they cannot discriminate explicitly against those in poor health, they will discriminate against communities in which think there is likely to be larger numbers of less healthy residents. It is an insidious new form of redlining.

It is disappointing that the Obama Administration, which is going to such great lengths to help businesses adjust to the ACA, seems to have little inclination to help individuals contend with the substandard offerings in some of the exchanges.  For them the Affordable Care Act may be far from affordable.