A few months ago we spoke with our next guest about some of the problems in the health insurance industry and the issues with employer insurance. This time we're going to try and focus a little more on potential solutions. Joining us right now is Mark Bertolini. He's the CEO of Oscar Health. He recently wrote a letter to the House Ways and Means Committee imploring them to consider some of the solutions that he's going to talk about with us today. Mark, by the way, is the former chairman and CEO of Aetna. And Mark, most of our viewers know you, but you are now involved with a small insurance company that looks at younger, healthier people that it's covering. But you've done Aetna, so you know the broad spectrum of what's been happening. We know pretty well that there are lots of problems. You've got some solutions. I want to dig into it because I've got questions about the solutions too. It's a little scary what you're proposing if you already have health insurance from your employer that you kind of like. Why don't you just discuss what you think is a solution to some of the problems you see out there?
One of the things is employer-sponsored insurance. They buy it for everybody in their group, which means a larger network, which gives you higher costs because a lot of providers in the system. Secondly, what it does is gives everybody an average benefit. So interestingly enough, last year Americans spent $74 billion to pay for their medical debts even though they had coverage. And one in five people under 39 had problems with their medical coverage and had to borrow money.
Can I just ask though, when you have a large pool, you do that so that the people who are the sickest don't wind up getting completely bankrupted. If you're talking about smaller pools, automatically I think, okay, you're going to take all the healthy people and the young people and leave the people who either are older, have cancer or some other disease, have children who need coverage because of special needs, and they get left out and they're going to be the ones who are left holding the bill literally.
Well, number one, the largest pool in America is the individual market with 24 million people, the Affordable Care Act. And in that marketplace, everybody gets the same right regardless of their illness. So there's no underwriting of the individual based on their illness, and they get subsidies if they're under certain levels of income of the federal poverty level in order to help afford that. And so when you look at all of that together, a sick person doesn't get penalized. Healthy people get to buy what they want. 75% of all physicians in America are in the ACA, so I can find my doctor. I can buy a plan design that fits me, where often with a large employer I'm overinsured.
Employers decades ago for the most part got rid of pensions. Those were costs that they couldn't figure out, unknowable costs that were growing at a much more rapid pace than inflation. Healthcare is the new place for that, where companies look around and say, it's outpacing inflation every year, definitely. I don't want to deal with this. It costs too much. I would much rather pay a set fee and say I know this is what my expenses are going to be every year. That sounds awesome for them. It sounds a lot scarier for the employees. And I go back to President Obama when he was talking about the Affordable Care Act saying, if you like your plan, you can keep it. Well, not necessarily. That hasn't been the case. Well, I mean, a lot of people have kept their plans, but their plans keep going down because employer costs keep rising, right? In small business, middle market, and small group, which is one to a thousand employees, their costs for healthcare are double what a large employer has. And that has been... I mean, what I was surprised when we spoke the other day, you said that at least in your area and in some places, we have managed to keep healthcare costs within the rate of inflation or below.
No, if you look at the overall ACA and its rate of increase over the last five years, it's been at or below CPI. And in the 1980s, that was what we called nirvana in healthcare reform. If we could ever get to a point where our healthcare costs rose at the same rate or less than CPI, we had a good program.
How can that be with the way Medicaid's been?
Well, Medicaid's not part of the ACA.
So that's where the issue is right there, is it not?
Well, how do you fix that? Why the ACA and Medicaid are related obviously. Why do so many people need Medicaid and why do so many states abuse what it's used for? Well, the funding mechanism, the sharing between the states and federal government isn't very efficient. Not only that, but they get twice as much, so they start saying we're using it for this, that, and the other thing, and they're getting reimbursed at twice the rate for these crazy programs that have nothing to do with healthcare. And the networks are not as strong as the networks in the ACA. You don't have that level of participation. And so if we could add more individuals to the current ACA marketplace, 75 million people in small group of middle market employers, 20 million, 21 million gig workers in the economy, if you can put those people into that pool, it gets larger and it gets more stable.
Why do you have to go to the House Ways and Means Committee to get this? Why can't you just go employer by employer and say come to us and do this?
Because there are certain tax subsidies you lose as an employer when you do defined contribution. So part of what we put in that bill was that conversation: let's make it possible. Secondly, there were restrictions back in the beginning because the Obama administration was concerned that if they allowed small businesses to put employees in there, they would put the sick employees in and leave the healthy employees out, and as a result the risk pool would get worse. And that hasn't happened.
Didn't the ACA expand Medicaid by extending eligibility to nearly every adult under the age of 65?
