Insurance Costs and Progressive Tears for Mr. Zupan

By Merrill Ring

Some people have had huge rates increases under the ACA.  And they blame the act for that.  Is that blame justified?  Here is the analysis of one person’s rate increase.

One of the chief claims of DJ Trump and conservatives about why the ACA must be repealed (and replaced with something better) is that it is driving up health care costs.  We on the progressive side of things, who strongly focus upon a completely different issue, namely how many millions of formerly uninsured people have been able to acquire health insurance under the ACA, need to confront that claim by the right about the harmful consequences of the law.

In large measure, that needed response must a statistical matter and by someone who knows the ins and outs of the law in detail.  How many people face rising costs for their insurance and who are they such that that happens to them?

I am not in a position to answer either of those questions, not being an expert in the law and its consequences for the American public.

The best I can do is to confront, with clear limitations, one instance of the conservative complaint.

The following paragraph occurred in the NYT (Health story by Katie Zernicke, July 8 2017):

David Zupan helped organize Tea Party groups in Ohio against the Affordable Care Act, which he blamed for driving up health care costs and forcing him to shutter his technology support business.  Before the law, he said, he paid $910 per month to insure him and his wife, with a $750 annual deductible.  When he renewed his policy last year, he said, the rates had increased to $2,845 per month, with a $3,500 deductible.

We progressives, being sympathetic to human beings and their troubles, are likely to respond to that story with sadness:  every law has negative consequences for some people and poor Mr. Zupan took the hit in the progressive project of insuring many millions of people who previously could not afford health insurance.

But let’s read the story a bit more carefully and ask some questions before we really feel bad for Mr. Zupan.

Let us assume that the numbers are correct. 

Notice first that Mr. Zupan is not just some person who has found the ACA to hit him hard.  He is first of all a Tea Party activist and as such has a serious bias against the ACA (and other things.)  Secondly, he was active against the ACA before it was passed.  What the precise nature of his animus against the act was prior to its passage and implementation is not mentioned here.  The story misleadingly implies that his opposition was based on its driving up health care costs and affecting his business.  But those things can only have happened after the law went into effect in 2011.  So whatever dislike he had of the law before its passage cannot have been that.  What is important to remember it is not as though he were initially neutral about the ACA or was in favor of it but has come into his present situation with a very strong opposition to it.  Still we are assuming that the numbers are correct and not a result of bias.

Secondly notice that Mr. Zupan was (and perhaps still is) a businessman.  I have no idea whether his technology support business was doing well before the ACA or whether that was the straw that broke the camel’s back – nor do we know why the ACA had the effect of forcing him to “shutter” the business.  But those unknown’s are important in justifying his claims that the ACA is what harmed him – and they give us pause to think before we continue feeling badly for him.

We progressive readers (actually readers generally) have no idea what kind of policy he had prior to the ACA coming into effect, whether the $910 insured him and his wife in a way that was adequate.  What we do know is that insurance companies offered (and would offer) a bunch of very inadequate policies to people and that the ACA (at last) set standards for what health insurance policies must cover.  Perhaps he and his wife had a junk policy prior to the law and yet had the good fortune to not have a serious medical situation arise.  As a consequence we have no idea whether he had to acquire a better policy under the ACA and thus that it was of benefit to him.  Let’s hold off on how badly we feel for Mr. Zupan pending that information.

It must be pointed out that Mr. Zupan has had a whopping big increase in his health insurance costs over recent years.  We are not informed whether there have been any other changes in his and/or his wife’s situation that would explain some of the increase.  He wants to blame the ACA (remember his Tea Party activism) and so makes no mention of what else in his circumstances might be different. 

Notice also that despite having to shut his business (which he blames wholly on the ACA) he does not mention that the new monthly $2800 bill has caused him to drop his health insurance altogether.  We are left with the clear impression that he can currently afford that amount.  He does not say that he has fallen, as a result of the ACA, into the uninsured category.  And surely if that had happened he would have told the reporter.

Now since the overwhelming majority of people could not begin to afford that size of monthly insurance cost and so would become medically indigent in those circumstances, there must be something in Mr. Zupan’s circumstances that enables him to pay the vastly expanded costs.  We are given no clue as to how he can do it – we have to hypothesize that the is (however it happened) among the 1% or in a nearby income level. 

Our progressive inclinations to say ‘Poor Mr. Zupan’ should be now be considerably diminished.

There is one last item not having to do with Mr. Zupan.  Why did the cost for his policy go up so much even if we assume that nothing in his personal circumstances is the explanation?  Here, given my lack of expertise, I asked a medical administrator why that might have happened.  The answer (an informed guess): 

            “Most people will not realize this type of increase because they are covered under group plans by their employers.  However even [those people] did see increases over the last year.  The significant increases as outlined below, are being seen by those who purchase individual plans.  There are two reasons for this type of increase.  1.  More people are using insurance dollars to cover their healthcare.  Prior to the ACA, much of this care was doled out as charity care by the health care institutions.  Now the insurance companies are being asked to pay out more dollars.  2.  The insurance companies underestimated the cost of providing this added care to these additional recipients.  Even though the pool of participants increased, the dollars that were collected were not enough to support the dollars paid out.  The insurance industry is now applying a correction to adequately cover their expenditures (and profits.)”

Notice the explanations:  what was previously given as charity by health care institutions has been shifted by the ACA to insurance companies and those companies failed to appreciate how much those new costs were going to be and so are now raising rates to cover both the added costs and their own original mis-estimates of those costs.

Now while those matters are in fact consequences of the ACA, they are not flaws in the ACA.

In correcting a flaw in our health care system, one that required medical institutions to be charitable, costs were rationally shifted to where they belonged.  Moreover, it was the insurance companies, not the ACA, that were responsible for a mistaken estimate of how much of what was being shifted to them (and thus to those insured by them) would cost; having made that mistake they are now scrambling to cover the earlier losses and raising rates sufficiently to reflect the reallocation of burdens as well as to cover past losses from their mis-calculation.

Supposing those the correct explanations of Mr. Zupan’s whopping rate increases, ignoring any changes in his personal situation, we must stop feeling sorry for him:  his personal political bias has led him to charge the ACA with serious flaws that it does not have.  That failing in his political view is quite over and beyond the fact that his reason for wanting repeal completely ignores the fact that millions of people are better off under the act nor does it attempt to estimate how many others than himself are worse off and why. 

Shed no tears for Mr. Zupan.