Healthcare insurers in the CNMI and other U.S. territories are expected to be in a bind come January 2014 when the full brunt of the Affordable Care Act takes affect.
ACA, otherwise known as healthcare reform or Obamacare, is a federal statute that aims to increase the quality and affordability of health insurance, lower the uninsured rate by expanding public and private insurance coverage, and reduce the costs of healthcare for individuals and the government.
However, Eric Plinske, Staywell Insurance branch manager for Saipan, said the Commonwealth, Guam, and other U.S. territories are at a disadvantage because a conflict in the definition of what constitutes the United States excludes them from some of the important mandates of the law while requiring them to not discriminate on coverage.
“We have a huge dilemma here in the territories where a lot of things don’t apply and, unless it’s challenged in court, we’re stuck with it,” he said Tuesday as guest speaker of the Rotary Club of Saipan’s weekly meeting at the Hyatt Regency Saipan.
Plinske said he actually likes the ACA if the territories were treated the same as U.S. mainland states.
“The whole purpose of healthcare reform was to tell insurance companies to stop doing a lot of things and start covering more things. However, you can’t tell the industry to do that without giving some balance to it. That’s where the mandates come in so we could have all these new people in the market—younger and healthier who say they don’t need insurance—and ACA will make them get it to spread risk across this healthier bloc of business and having exchanges with premium subsidies from the federal government to help people better afford healthcare.”
The problem with the territories, however, is that none of these apply here, he said.
“You got a teeter-totter on this side that went like that and all our protection and ability to spread risk because of this inconsistency on the law and conflict on definition of states.”
He said another challenge facing the territories is that the federal government gave all the states and the District of Columbia a lot of money to set up exchanges and operate them with subsidies to help people between 100-400 percent of the federal poverty level afford their premiums and sometimes even pay for them completely.
For the territories, they only gave the CNMI and Guam $9 million and $24 million respectively, Plinske said.
He said Guam did a study on what it would cost if they set up an exchange and they estimated that they will need $70 million a year for subsidies.
“Each of the governors on the territories had a choice—take the money and set up an exchange and run it or don’t set up the exchange and take the extra money from Medicaid. So, guess what all the governors are doing? They said forget the exchange we can’t afford it.”
Plinske said the ACA was based on three foundations: individual employer mandates to get all people insured, the premium cost sharing subsidies with the exchange to make it easier and more affordable, and insurance companies add benefits and stop doing practices like denying pre-existing conditions.
However, in the CNMI, Guam, and other U.S. territories, insurance companies are forced to implement the law unevenly
“So what we have here is a one-legged stool and that is rife for what we call in the insurance industry as adverse selection.”
In layman’s terms, adverse selection is when people get an insurance policy only because they are unhealthy.
Plinske said a perfect analogy is when a person gets into a car accident that amounts to $10,000 in repairs but he has no car insurance. Under the ACA, he is still allowed to apply for car insurance even after the fact that he almost totaled his car and the insurance company would still have to foot the repairs. What’s worse, he is allowed to cancel that insurance anytime he wants to after the insurance company already fixed the car.
“So we have no exchanges and we have no mandates for everyone to get insurance but the insurance companies are told to do all of this new things and take on that risk. That’s where we’re in. Anyone with common sense knows it doesn’t work. We’re just plowing through it and it’s what I call a perfect storm.”
All bets are off
It gets worse as under the ACA, benefits such as transplants and air ambulance can jack up premium rates to as much as 50 percent. He said air ambulance costs $45,000 a roundtrip.
“Next year all bets are off and expect at least a 20-25 percent increase in your premiums.”