Skip to main content

There are tradeoffs to Obamacare

By Aaron Carroll, Special to CNN
updated 10:46 AM EDT, Wed September 25, 2013
STORY HIGHLIGHTS
  • Lower-cost insurance could come at the cost of fewer choices of health care providers
  • Aaron Carroll: Insurance companies have been doing this for years to keep costs down
  • He says just as there's no policy that is perfect, there are tradeoffs to Obamacare
  • Carroll: One way to fix this is to have a public option, which might have a larger network

Editor's note: Dr. Aaron E. Carroll is a professor of pediatrics at the Indiana University School of Medicine and the director of its Center for Health Policy and Professionalism Research. He has supported a single-payer health system during the health care reform debate. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.

(CNN) -- It seems difficult to open a paper, turn on TV or visit a website these days without hearing some awful new "discovery" about Obamacare and how it's going to end the world. More often than not, these claims are overblown, designed to get attention and score political points.

This week, the New York Times published an article explaining that the savings many people hope to see in lower-cost insurance could come at the cost of fewer choices with respect to health care providers. This is very true.

If we want to be realistic about health care reform, we have to acknowledge that everything comes with a tradeoff.

Aaron Carroll
Aaron Carroll

In order to make insurance cost less, private insurance companies have to make use of the tools available to them.

In the past, they could have tried preferentially to cover healthier people and refuse coverage to those with chronic conditions. That leaves a cheaper risk pool, which results in lower premiums.

But Obamacare no longer allows that. If we want guaranteed issue and community ratings (so that no one can be denied insurance and no one can be charged more for being sick), then insurance companies must use other strategies to save money.

In the past, insurance companies could have tried to issue policies that didn't cover as much. Policies with skimpier benefits are cheaper, too. But Obamacare sets minimums with respect to what qualifies as comprehensive coverage. So that tool was taken away as well.

Obamacare: Everything you need to know
GOP plan links Obamacare to shutdown

In the past, insurance companies could have set lower annual or lifetime limits, which confines their risk and allows them to sell insurance at a lower price. Or, they could have set really high deductibles or out-of-pocket maximums. These, too, are now more tightly regulated.

So what's left? How can insurance companies make health care cheaper so that they can deliver lower premiums to people and attract more business?

Well, one thing they could do is limit their administrative costs. But if you ask insurance companies, they tell you that they are already running pretty lean. They also like to make a nice profit, and they like to pay their executives well. So they are left with one really good option: Pay less for care.

How do they do this?

One way they've been doing it for years is to contract with certain doctors and hospitals to provide care for their beneficiaries for less money. Providers will agree to this because it guarantees them a certain amount of business. Insurance companies like it because it means they can pay less, charge lower premiums and sell more policies. And that is how many plans in the health care exchanges will compete for your business.

Please understand that this is nothing new with respect to health insurance. At my job, there are a number of different plans offered to employees. The most expensive plan allows us to see the widest range of physicians. There's a cheaper plan available, but my kids' pediatrician (whom we revere) isn't in that network. So we pay for the more expensive plan. That's a choice we make as informed consumers.

Problems will arise if people don't understand what they are getting into. There's no such thing as a free lunch.

If you buy the cheapest plan, it may not include the doctor you want. If choice is your No. 1 goal, then you will probably have to pay for it. What makes this a problem for Obamacare, though, is that some health exchanges aren't offering a choice. For instance, in New Hampshire, only one insurance company is offering exchange plans, and it has a rather limited network.

If you were previously uninsured, then the most straightforward argument is that the plan you're getting, probably with subsidies to make it cheaper, is better than nothing. But some people, who might have had individually issued policies before Obamacare with larger networks, will not be happy with their new plans. They may be cheaper, but they may have preferred to pay more for choice, and now they won't be able to.

No policy is perfect. On the whole, I believe far more people will benefit from Obamacare than will be hurt by it. Any change will inevitably make someone unhappy. This is one of those situations.

We shouldn't ignore this deficiency. We should fix it. One way might be to have a public option, run by the government, which might have a larger network. Medicare has perhaps the largest national network in the country, as more doctors accept it than just about any other form of insurance.

So it's totally possible to offer more choice. But that will require politicians to work together to amend the law to make it better.

It will be instructive to watch how people react to news like this. If they are truly concerned about fixing this problem, then they will seek solutions to do so. If they use this issue only to demagogue against the entire law, though, it's likely that they care more about politics than policy.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Aaron Carroll.

ADVERTISEMENT
Part of complete coverage on
updated 8:37 AM EDT, Tue October 28, 2014
Errol Louis says forced to choose between narrow political advantage and the public good, the governors showed they are willing to take the easy way out over Ebola.
updated 2:03 PM EDT, Mon October 27, 2014
Eric Liu says with our family and friends and neighbors, each one of us must decide what kind of civilization we expect in the United States. It's our responsibility to set tone and standards, with our laws and norms
updated 7:45 AM EDT, Mon October 27, 2014
Sally Kohn says the UNC report highlights how some colleges exploit student athletes while offering little in return
updated 3:04 PM EDT, Sun October 26, 2014
Terrorists don't represent Islam, but Muslims must step up efforts to counter some of the bigotry within the world of Islam, says Fareed Zakaria
updated 9:02 AM EDT, Fri October 24, 2014
Scott Yates says extending Daylight Saving Time could save energy, reduce heart attacks and get you more sleep
updated 8:32 PM EDT, Sun October 26, 2014
Reza Aslan says the interplay between beliefs and actions is a lot more complicated than critics of Islam portray
updated 7:19 AM EDT, Mon October 27, 2014
Julian Zelizer says control of the Senate will be decided by a few close contests
updated 8:12 AM EDT, Fri October 24, 2014
The response of some U.S. institutions that should know better to Ebola has been anything but inspiring, writes Idris Ayodeji Bello.
updated 5:01 PM EDT, Wed October 22, 2014
Paul Callan says the grand jury is the right process to use to decide if charges should be brought against the police officer
updated 12:19 PM EDT, Thu October 23, 2014
Theresa Brown says the Ebola crisis brought nurses into the national conversation on health care. They need to stay there.
updated 6:35 PM EDT, Tue October 21, 2014
Patrick Hornbeck says don't buy the hype: The arguments the Vatican used in its interim report would have virtually guaranteed that same-sex couples remained second class citizens
updated 12:30 PM EDT, Fri October 24, 2014
The Swedes will find sitting on the fence to be increasingly uncomfortable with Putin as next door neighbor, writes Gary Schmitt
updated 12:32 PM EDT, Fri October 24, 2014
The Ottawa shooting pre-empted Malala's appearances in Canada, but her message to young people needs to be spread, writes Frida Ghitis
updated 9:48 PM EDT, Sat October 25, 2014
Paul Begala says Iowa's U.S. Senate candidate, Joni Ernst, told NRA she has right to use gun to defend herself--even from the government. But shooting at officials is not what the Founders had in mind
updated 6:08 PM EDT, Thu October 23, 2014
John Sutter: Why are we so surprised the head of a major international corporation learned another language?
updated 5:54 PM EDT, Thu October 23, 2014
Jason Johnson says Ferguson isn't a downtrodden community rising up against the white oppressor, but it is looking for justice
updated 12:21 PM EDT, Fri October 24, 2014
Sally Kohn says a video of little girls dressed as princesses using the F-word very loudly to condemn sexism is provocative. But is it exploitative?
updated 4:06 PM EDT, Tue October 21, 2014
Timothy Stanley says Lewinsky is shamelessly playing the victim in her affair with Bill Clinton, humiliating Hillary Clinton again and aiding her critics
updated 10:14 AM EDT, Thu October 23, 2014
Imagine being rescued from modern slavery, only to be charged with a crime, writes John Sutter
updated 12:00 PM EDT, Tue October 21, 2014
Tidal flooding used to be a relatively rare occurrence along the East Coast. Not anymore, write Melanie Fitzpatrick and Erika Spanger-Siegfried.
updated 7:35 AM EDT, Tue October 21, 2014
Carol Costello says activists, writers, politicians have begun discussing their abortions. But will that new approach make a difference on an old battleground?
updated 9:12 AM EDT, Tue October 21, 2014
Sigrid Fry-Revere says the National Organ Transplant Act has caused more Americans to die waiting for an organ than died in both World Wars, Korea, Vietnam, Afghanistan and Iraq
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT