Welcome back everybody. Workers across the nation are in the thick of changing, renewing, or signing up for certain health care plans under the current open enrollment period. Millions of people could and actually very likely will see their insurance premiums rise pretty sharply next year. Joining us right now with insights on the current state of the health insurance industry is Mark Bertolini. He is the CEO of Oscar Health. He's also the new chairman of Verizon and the former chairman and CEO of Aetna, a longtime friend of the show. Mark, thank you for joining us.
Great to be here, Becky. Thanks for having me.
We spoke earlier this year when you came in about the problems in the healthcare industry. Nothing changed, nothing happened, but here we are and we're probably at a moment where it's going to be getting a lot more attention because of what just happened with the government shutdown.
Yes. There's a lot of confusion out there about premiums going up and how much of that is related to the subsidies ending, how much of that is related to a broken health care system that sees inflation far outpace inflation in other arenas. So what's happening currently in the Affordable Care Act and the enhanced subsidies is that there's a lot of rhetoric about who's getting access to these funds. Like one half trillion dollars being spent on illegal immigrants. Not true. 50% of American small businesses use the Affordable Care Act. Small businesses are 50% of our GDP. They're the engine of our economy. 27% of farmers use the Affordable Care Act. And the average farmer makes $60,000 a year gross. Their current premium is $75. With enhanced subsidies, it's going to go up to $300. So, $225 a month more out of 60,000 gross is going to pretty much make it difficult for them to do other things like put food on the table, buy seed, do all those other sorts of things that operate their farms. So we're talking about the very basis of our economy and the people that make our economy work. 75% of the people in the ACA today are from red states. 100 million Americans don't have access to employer sponsored health insurance in this country. And so with all of those characteristics coming together and the high cost of healthcare, drug development, skyrocketing healthcare costs in facilities everywhere else. We have a system built 80 years ago that has built into it inflation. Everybody gets, they're not price sensitive to their benefits for the most part and we build hospitals in every nation in the country, every city and state in the country so that we created a demand pull into the system that has driven cost up inexorably. Now what the Affordable Care Act has done that most people don't understand is it's reduced uninsured from 15% to 8%. That has saved $10 billion a year in uncompensated care and charity costs that used to go to hospitals. $10 billion a year. That will reverse to an $80 billion problem over the next 10 years if we start moving that uninsured rate back up.
The answer isn't simply subsidies though.
There are so many broken things in the system and so many reasons that health care costs go up annually with or without the subsidy.
So how do you get at that and what kind of problem solving can we actually do in the next, oh I don't know, two months?
So we should create a qualified account. And there has been some concern about fraud, waste, and abuse in the system and there has been some, not as much as people would put on the table. 2.4 million was the number last year of people that are cheating the system. It was really 450,000. At Oscar it was 27,000 people out of 2.1 million people that we cover, so it was 1.3% when we got down to the actual understanding of each of those people. But let's create a qualified account that is the basis, the doorway to employers, government, or individuals putting money into a qualified account that allows them to spend healthcare their way. So if we put consumers in charge of buying the product, you're going to have an impact on price. Every time consumers get control of what they purchase, they have an effect on the underlying costs and the price of the services they buy.
When you say an HSA account like that, an account where money goes in, I think of a defined benefit going to defined payouts on what you can see with some of these things, much like we did when we got rid of pensions in favor of 401ks. It puts a lot more of the freedom in the hands of the individual buyer, but it also puts a lot more of the potential burden if you mess it up that there's no safety net there to catch you.
Currently, 95% of people that buy in the individual market today use a broker who have the tools to help them understand which plans they should pick. So, I think the first order of business is do we have the technology and the support to be able to help people pick the right plan? Have money left over after they pick their plan and turn around and be able to pay their out-of-pocket cost.
Replacing Obamacare or in addition to Obamacare, would you use...
I would redo the whole thing. I would use the individual market as a single risk pool. I would use the risk adjustment that's used to allay all the critical costs or catastrophic costs that go through the system get spread over many more people than it can happen to any one employer.
This is the Republican holy grail, what they want to try to do. It sounded like you started with making an impassioned plea for Obamacare, but you'd really like to do what Republicans would like to replace it with.
But we would like to allow people to get subsidies where they need it, the farmer, the small business owner.
But couldn't they get subsidies and then buy the HSAs?
Yes. Well, no, you put the subsidies into the HSAs.
You put the employer money from your employer into an HSA.
Right. And you could put your own money into an HSA.
And then when you own it, you're not going to be, well, you don't care about what anything costs. You're going to watch very closely what everything costs.
That's exactly right. And 40% of Americans last year, two out of five Americans borrowed $74.9 billion from banks to pay their out-of-pocket costs for healthcare. It's a giant suck on the economy. And so if we allow people to buy the network they want because in the individual market we have narrow networks. I can find my network instead of my employer deciding what it is. I can buy my benefits. If I'm going to have a family, I want better obstetrics. If I'm going to have surgery, I buy my benefits using the funds that are in my account, leaving me money to either pay my out-of-pocket costs depending on the plan design I pick or to buy other products like dental, vision.
But Mark, Obamacare is a sacred cow. You're never getting rid of it at this point.
All we have to do is evolve it. I don't care what you call it. Just use the concept of the network of the risk pool.
But this is what Republicans have been saying and people just roll their eyes that that's what they want to do.
Well, nobody's actually put a real plan on the table.
But they say HSA, find your own help, get the middlemen out, get the insurance companies out.
Well, no, the insurance companies have to be there.
By the way, you guys are working with people on both sides of the aisle to try and bring this about. And I have to say there are times when I think it is just an expansion of Obamacare. There are times when I think it is an evolution to the HSA program that the Republicans are pushing. But what you're really looking for is every American to be covered.
And that's almost universal healthcare, but with the choice in the hands of the consumer on which...
What I'm trying to figure out is where the margin is going to get taken from. Somebody has to lose in all of this.
So what will happen just like in automobile sales and in books and in other things people buy online is that they're going to compress the margins by buying what is valuable to them. They're going to make that value equation.
Right. I understand that. But you're effectively arguing this more competition should compete away margin. But I'm trying to understand where the margin gets competed away most. Meaning is it ultimately that actually it's going to come out of the hide of the doctors? It's going to come out of the hide of the hospital systems? It's going to come out of the hide of the insurance companies? It can't just be that more money comes into the system and the same amount of profits and less consumers are paying more.
But right, but and it's not all margin. It's actually inefficiency, gross inefficiency in the system. If you look at the hospital systems across the country, most of them are losing money.
It could be somebody's profit in some way.
It could be right. But you have...
I'm not discounting what you're suggesting. I'm just trying to understand if we looked at a pie chart of where all the money is.
We've tried everything else to solve this problem other than put the consumer in charge of what they buy.
Let me ask you one more question that always kind of worries me. I understand the concept of putting it into millions and millions of people so you offset the risk. But if every consumer who is healthy and young opts for the minimum, very bare minimum plan, as I would have done in my 20s, doesn't that just mean that the bigger pool is a pool full of far more expensive people who are therefore going to have to pay much higher premiums? If you're not offsetting the older people who need more help or the families with young really healthy people, how...
