The Climate Change in Insurance Exchanges

A different kind of climate change was in the news this week, as Gallup reported that the percentage of people who are uninsured declined rapidly from 17.1 percent to 15.9 percent in just three months.

That is a pretty substantial drop, and one that began when people started signing up for Obamacare.

According to Gallup and others, it translates into an additional 3 million people who now have health insurance, consistent with the numbers of people signing up for Affordable Care Act coverage.

That’s good news for Obamacare – perhaps. 

One of the more interesting – and sometimes frustrating – things about health policy is that like climate change it unfolds slowly over time, and so it is often difficult to see the change in climate while it is happening.

For one thing, there are always other variables.  For example, the unemployment rate has also gone down during this period, from 7.2 percent last October to 6.7 percent today. It is possible that some of these 3 million newly-insured people obtained insurance through employment, and would have gotten it anyway.

And there’s always the glass-half-empty view to consider.  Both the unemployment rate and the uninsured rate are just about back to where they were in 2008, right around the time that the economy was collapsing.  So most of the progress we’ve made so far amounts to dragging ourselves out of a deep hole.  We’re still just back to where we were before we fell in.

But if we look too closely at this, we miss the bigger picture.

In spite of all of the initial problems with Obamacare exchanges, and despite the unpopularity of the Act itself (54 percent still disapprove of the law, according to the Real Clear Politics average of recent polls), and despite those who believe that they may have lost their insurance because of Obamacare, the trend today is clearly in one direction.

More people are becoming insured.  And that means something in the long run. 

For one thing, it means that health and mental health providers who have been holding out from participating in insurance plans until they are sure that there will be patients there will need to start signing up.  There will be patients there, and they will be looking for providers who accept their insurance.

For another, it means that individuals who can afford insurance but have been choosing not to buy it – betting that the law will go away before they ever have to pay a penalty – are probably not going to win that bet.  As more people pay up to become insured, there will be increasing pressure on everyone else to pay their fair share, too.  Insurance is becoming more of an individual's responsibility.

People may not like their health insurance very much, but once they have it, they never want to lose it again.

So in all probability the fates of the Affordable Care Act and private health insurance are intertwined now and for the foreseeable future.  The structure of our health insurance system is changing before our eyes because of the Affordable Care Act.  But it isn’t going to undermine the idea of insurance – just the way we pay for it. 

Here is a parallel example to explain what I mean.  When IRAs were created, they were like today’s exchanges.  They were a small thing.  Defined benefit plans – or pensions – were the norm for employees (as employer-based insurance is still the norm today).  But IRAs, 401(k)s, and other tax-deferred savings offered a retirement savings option that took a savings burden off of employers and transferred it to workers.   This changed – in a single generation – the nature of how we will pay for our retirement years. 

The same thing could be happening now with health insurance.  The exchanges may seem like a small and controversial thing today – perhaps 5 million or so will be insured through them at the end of the 2014 sign-up period.  But this number is growing every day, and will grow a great deal more in the future. 

And as a result new small employers – the creators of so many new jobs in our society – may increasingly decide not to offer health insurance as workers find deals that are just as good on the open exchange markets. 

Shifting from employer-based insurance to individual insurance does reflect a change in climate.  As we argue over the details, who really knows how significant this change will be?