Before the Affordable Care Act, the most common cause of personal bankruptcies was the lack of insurance for health-related expenses. When insurance companies could deny coverage for pre-existing conditions, anyone with health problems was uninsurable and facing bankruptcy in the event of an accident or a serious illness.
Hospitals just spread the costs of unpaid bills out over their insured patients, and we all ultimately paid the bill in the form of higher insurance costs. For everybody, it was “lose-lose.”
Chapter 7 is a form of bankruptcy that allows people to keep their homes but allows them to walk away from credit card debt and hospital bills. Filing for Chapter 7, however, requires that you satisfy a means test requiring that your income, based on family size, is below the median income of the state. Otherwise, you’re relegated to Chapter 13, where you lose everything.
While this is an overly simplified explanation of the painful legal options set in motion by a health care disaster, it’s enough to know that this is what millions of uninsured Americans had to grapple with under our previous health system. They lost everything and still had no insurance -- while the rest of us absorbed the cost.
We’re not talking about just the poor. Those hardest hit were those with the most to lose. Middle-aged folks, years away from Medi-Care, who found themselves between jobs and uninsurable were especially vulnerable. A serious, prolonged health problem could wipe out retirement accounts and home equity.
Then there is the demographic I would call the “silent sufferers” -- those trapped in a job they couldn’t stand because it was their only hope for maintaining insurance for themselves and their dependents.
To his credit, President-elect Donald Trump seemed to be saying on CBS’s “60 Minutes” that he plans to keep some aspects of affordable care, such as coverage for pre-existing conditions, but it’s not clear how that will be accomplished in a free-market system. Everyone hates the mandate that we all buy insurance or pay a tax penalty for not signing up. In retrospect, it’s now clear that those gaming the system can just assess the cost of insurance versus the penalty -- save money by paying the penalty -- and then sign up for the insurance later when they have a serious illness or accident.
The headline on a recent New York Times article hit the nail on the head: “Why keeping only popular parts of the health law won’t work.” With examples in New York and Massachusetts prior to the Affordable Care Act, we learned that covering pre-existing conditions required that healthy people participate. In New York, where the law had required that pre-existing conditions be covered, premiums dropped 50 percent for individual coverage when the Affordable Care Act was enacted.
In Massachusetts, without the mandate, projections showed that only a third of the uninsured would be covered, so then-Gov. Mitt Romney went with the mandate, in addition to subsidies for those with lower incomes. Generally speaking, “the more the merrier” is the key to lowering premiums in the aggregate, but how we get there is the conundrum.
We have provided insurance to 20 million people who were previously uninsured, so that’s good. For reasons that are difficult to explain, corporate health insurance plans have seen relatively flat premium increases compared with previous years. This may be an unintended result of having 20 million more patients in the system -- patients who can now pay their bills so the rest of us don’t have to subsidize them.
What we do know for sure is that rising costs of health insurance are a product of an aging demographic bubble of baby boomers and an inefficient system that costs almost twice what other industrialized nations spend on a per capita basis. The Affordable Care Act and its 20 million beneficiaries should not be a scapegoat that prompts us to scrap the entire law and throw those folks back into the bankruptcy courts -- leaving their bills for the rest of us to pay.