Healthcare costs in the United States have continued to grow over the decades despite healthcare outcomes that are often worse than they would be in poorer countries. Politicians have proposed a number of different ways to combat these rising costs, though no one has successfully solved the healthcare crisis yet. The Affordable Care Act attempted to improve the overall health of the American population by allowing for more people to get coverage and preventative screenings. But now premiums are still rising, and in some places they are rising too much for consumers to keep up. So what happened?
A number of factors led to the increases in premiums, which in Arizona reached 116%. Enrollment is less than what was projected because some people figured out paying the penalty is cheaper than buying insurance. Patients have also been discovered to be sicker than initially thought, draining more money from insurers than they initially expected. Plans were mispriced because of incorrect cost estimations, which has also caused some insurers to pull out of healthcare exchanges. This has left fewer choices and less competition, which is driving prices up.
Another problem is that many people are ineligible for subsidies, which is making affordable health care not so affordable for them. Even though more people buy their coverage directly from insurers, the small percentage of people who buy through exchanges but don’t qualify for subsidies are going to see significant rate increases that they may not be prepared for in their budgets. In short, health care premiums are growing at a higher rate than wages, leaving less money in the discretionary budget.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
Michael Mauboussin's notes from his presentation at the 2020 Morningstar Investment Conference, held on September 16th and 17th. Q2 2020 hedge fund letters, conferences and more Michael Mauboussin: Challenges and Opportunities in Active Management Michael Mauboussin is Head of Consilient Research at Counterpoint Global in New York. Previously, he was Director of Research BlueMountain Capital, Read More
Health Care premiums are going up for the 1.4 million people who can’t get subsidies under the Affordable Care Act, though this doesn’t take into account the premiums for anyone who has health insurance through a job. With the new administration coming in, the question of what will happen to healthcare is still up in the air.