More Signs of Rate Shock and Awe

Last week, I reported on my informal survey of health insurance companies and their estimate for how much rates will rise on account of the Affordable Care Act (“Obamacare”).

Today, there are press reports quoting the CEO of Aetna with their estimate. The Aetna estimate is worse than mine.

From Bloomberg:

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”

Bertolini’s prediction is at odds with Congressional Budget Office estimates that the law will have little effect on small and large-employer plans and the Obama administration’s projections that middle-class families will actually save money. The 2010 law is expected to extend health care to about 30 million people who otherwise couldn’t get insurance, paid for by new taxes and fees on companies and wealthier individuals.

Those taxes will make coverage more expensive for insurers, as will other provisions such as a ban on discriminating against people with pre-existing medical conditions, Bertolini said. Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

You might recall that I found baseline individual rates are likely to rise 30% to 40% with younger people’s rates doubling because of the change in age-rating to 3:1 that will drive substantial rate compression. I found small group rates increasing by about half this.

My sense is that rates in a few states that have already had significant market reforms and already have the most mandates––Massachusetts and New Jersey, for example––will see little change. But for the vast majority of states there will be rate shock.

I can also tell you that, so far, I have detected no serious effort on the part of Democrats to delay anything. Frankly, I think hard core supporters of the new health law and the administration are in denial about what is coming.

I expect more health insurers to be echoing the Aetna’s comments in coming weeks. There is a real concern in the industry they need to get out ahead of this telling people why rates are shooting up to counter the “shoot the messenger” attacks that will be sure to come.

And, while the administration is beginning to understand the disruptive effect of converting to 3:1 age bands, they have not been able to find a way to phase it in or cancel it––the statue is very clear that we have to go to 3:1 age rating on January 1, 2014.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

56 replies »

  1. I think it is important to point out that Aetna’s Medicare Supplement business is not expected to be affected by the Affordable Care Act.

    Obviously they will have normal market rate increases that keep up with Medical inflation, but if you go t Medicare Insurance Finders you view their rates in 2012, 2013 and in 6 months from now you will be able to see 2014 rates to confirm they are not giving astronomical rate increases.

  2. Why have so many journalists under-estimated the subsidies in ACA, and made the ACA sound like just a price-raising frenzy?

    Here are some possible reasons, other than just mendacity:

    a. the writers have high incomes and will not get subsidies themselves;

    b. the Democrats themselves have undersold the subsidies, to carry on the pretense that the ACA will not add to federal spending.

    The backers of the ACA used many rather tortured fees and assumptions to get the bill to “pay for itself” without raising taxes. Downplaying the subsidies falls into that group.

    One last point about European taxes. Based on my reading, their personal and corporate income taxes are not very different than ours and in some cases are lower.

    The difference is in the Value Added Taxes. They are enormous money-raisers.

    If you add up all business purchases in the USA excluding health insurance, you get a total of 6 to 7 trillion a year.

    Even a 5% value added tax wouild pay for national health insurance with ease. Not having foreign military bases or Star Wars weaponry would also pay for health care.

  3. Bob Hertz- (and Barry)

    You are right: the U.,S. is the only developed country in the world that charges older people more for health insurance.

    “Ageism” is a major problem in the U.S.

    Barry ” a somewhat higher rate for those older than 25″ is very, very different from charging people in their 50s and 60s 3 times as much as we charge a 25-year-old for the same policy.
    In other countries, most people respect the elderly. Here, a great many younger Americans simply resent them.
    Thus, all of the carping about the cost of “end of life care”.

    Bob– you’re right: end of life care is Not the major cost. Care for
    chronic diseases is the biggest cost (costs twice as much because, by
    definition, people with chronic diseases are sick for a long time.)

    We could, and I hope will, do a better job of managing chronic diseases with more preventive care, and more “patient-centered care” that involves the patient. (Not lecturing him, not bullying him, but finding out what he feels able to do to improve his health. Maybe he has found that diets don’t work–he can’t lose weight. But would he enjoy taking a long walk after dinner every night? )

    Finally,Bob, you’re actually right about global budgets for hospitals. They do work. But what a country has to do is to create a global budget for all hospitals in the country, putting a cap on total spending on hospital care.

    The ACA takes an important step in that direction by trimming Medicare’s
    annual inflation adjustments for hospitals by 1% a year—for 10 years.
    Compounded, this adds up, and it puts pressure on hosptials to
    become more efficient, and reduce waste.

    We spend way too much on hospital care. Private insurers over-pay hospitals and if you look at the numbers, it turns out that many private hospitals turn a profit on Medicare’s payments. (Public hospitals are underpaid, but private hosptials are, by and large, overpaid.d)

  4. Matthew Holt & Spike:

    Spike quoted Bob L.: “We’re going to see some markets go up as much as as 100 percent.”

    and added:

    “That swiss cheese policy we were selling in South Dakote for $49 a month will definitely be a lot more expensive now that we actually have to start covering services!”

    Matthew Holt then replied: ” Duh–this is precisely the point. If you ban underwriting, the average cost will go up. BUT you’ll get a subsidy to buy it. How is this news???”

    You’re right Matthew. It’s not news.

    One question: If it’s not news —and not correct (see below) then why has THCB run essentially the same post, twice, back to back. I realize your mandate is to air a variety of opinions, right or wrong, but twice?

    And by ignoring subsidies Bob L. greatly distorts the picture.
    CBO projects that “About 57 percent of people buying individual insurance
    would receive subsidies via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium, Thus, the amount that subsidized enrollees would pay for nongroup coverage (a.k.a. individual coverage) would be roughly 56 percent to 59 percent lower, on average, than the nongroup premiums charged under current law.”

    The other 47% will face premiums that may be “10% to 13% higher CBO says. Though they’ll be getting richer coverage than most have now, and lower out of pocket costs. As a result, they too may find themselves spending less on health care.

    Families USA has done some good work on this which shows the average family paying less for health care–not just in guaranteed issue states, but in Texas.

  5. Bobby, you failed to address my point. 0.045% of revenue is not a significant cost driver for private insurance. Relative pay of public and private sector is another matter.

  6. Many may somehow conclude from your remarks that europeans’ total per capita outlays for health care exceed our own here. That may be due to your reference to that reviled word, “taxes”.

    Here in the US we are ALL taxed by our “system” of health care, just not at all systematically. We’ve tried (endured) this asystematic approach for decades; why so much resistance from otherwise intelligent adults for trying a systematic approach, however initially marginally crappy it may be?

  7. ” A friend told me her late father-in-law who lived in one of the large Canadian cities had a tumor on his groin. He was placed on a waiting list for surgery but emergency cases kept jumping ahead of him. He ultimately died two years later and never did have the tumor removed.”

    Amazing how many people have Canadian friends who’ve had significant care experiences with the Canadian health care system – and almost all of them unfortunate. Positively defies the statistical odds….

    Bob, just so we all don’t misunderstand, you and your friend are sure the deceased actually died as the result of the abovementioned tumor?

  8. bob,

    even a cursory examination of comparative national health costs tells you that your notion that “the actual cost of care in the European hospital may be $5,000 just as it is in America” is pure fiction.

    Please remove your tinfoil hat before posting

  9. Barry, I’m surprised you of all people are unaware that “most” medicare beneficiaries don’t buy medigap policies, which by the way are practically worthless.

    between 25 & 30% of medicare beneficiaries have medigap coverage. another 25% or so have Medicare Advantage coverage, which of course is not “gap” coverage.

  10. You should read more carefully. I said the 2400+ pages in the bills. I contend it is about 200 times easier to spew out ridiculous legislation and even more ridiculous regulations than it is to comply with them and deliver a product someone voluntarily purchases at a modest profit. Please note a substantial portion of the U.S. Secretary of Defense’s compensation is in the form of a very generous lifetime pension as well as lifetime medical coverage which could be valued in the millions of dollars. It’s a bit easier to order folks to do things under penalty of imprisonment than create a product or service of value that is voluntarily purchased.

  11. Hmm, read this article in my local paper today, so found the link and forward to all you supporters of this legislation and are awaiting with spell bound breathlessness how such observations will save the country money and resources:


    I love this quote in the middle of the article especially:

    “”As a nation, we’ve made extraordinary gains in longevity over the past decades, but as individuals we are regressing in our health,” said Dr. Reed Tuckson, a medical adviser at the United Health Foundation and chief of medical affairs at the UnitedHealth Group.”

    Hey, but Obama the savior will pass his hands over each and every one who is suffering and lay waste to disease and dysfunction.

    Again, the disingenuous and dishonest intent with the Democrats is beyond repair. Your party is even more disgusting than the Republicans. At least they tell you they don’t care about society in general if you don’t contribute. It’s easy to not trust nor vote for them!!!

  12. “sweeping and all knowing expansion of its powers. It’s like those Pacific Islander’s weird “cargo cult” religion.”

    tcoyote, judging from the 1000s of corporate lobbyists infecting government and writing legislation business certainly thinks government is the solution. The difference is they get to realize the “truth” of their cult.

    You are right in that “Medicare for all” would require less of everything in healthcare, but judging from the “solutions” from the right they also think that less healthcare is the solution – at least less for patients and more for health business and the wealthy.

  13. I am not an expert on the European countries, but my understanding is that France, Germany, and the Scandinavian nations do not have large waiting lists and also do not have stratospheric insurance premiums.

    As noted earlier in this blog, they accomplish this by:

    a. higher taxes on everyone, at least 15% for health care………..


    b. health care regulators who are not bought and paid for by the industry.

    The issue of how to pay hospitals is not without conflict in any country….but in these nations, the health care budget comes first and the hospitals agree to it. There are no Rick Scotts making millions off hospitals.

  14. What about those who have another infarction when they see the bill, only to be denied care then?

  15. Interesting choices there, Bob. How come all of developed countries in Europe don’t have to face such choices? Let’s leave out Canada and the UK, because they are different…. What about the others?

    What exactly are those “values and culture” that we must deffer to?

  16. I appear to stand out voted on the efficiency of global budgets for hospitals.
    That is all right, live and learn.

    We appear to have an ugly choice between user fees that drive patients broke, although there are almost no waiting lists………….

    , versus government budgets that drive governments broke due to turf wars plus generous pay for civil servant nurses, plus the waiting lists.

    I would rather have my heart attack stopped and later declare bankruptcy, versus dying from delays in care. I have been through bankruptcy and it is much lless onerous than dying.

    We may be best advised to muddle through with our user fees.

  17. Great, first mandated purchase of insurance, next capitation of expenses by providers and hospitals.

    I think it would be easier just to have a weekly lottery and the winners get health care coverage for some period of time. In the end, isn’t that sort of what goes on now? By the way, as things stand now, the premise of the movie “Logan’s Run” looks more viable every time new revelations about PPACA come to be known.

    I’ll keep saying it until the consequences finally affect most PPACA supporters as painfully possible: mandates never work in the end, at least when it comes to money.

  18. Who cares? Good question… I had lunch a few years back with MDs from the UK’s NHS and they told me budgets for Acute, sub Acute, Long Term, etc units were set by different bureaus and it was hard to get funds re allocated for different levels of care because these different groups of Government Officals cared plenty about their little pots of money. So they had all of these bottle necks, overages, and underages, because they had so many units mismatched to their severity. Any time money is involved, somebody cares plenty! Nobody reprograms their budgets just because the projections of how many patients presented at different treatment levels. Government funds according to a jealously protected budget, not reality.

  19. Bob –

    One of the key cost control strategies in Canada is to restrict supply. People wait for lots of things besides elective surgery. If it’s not immediately life threatening, expect to wait. If you need a hip replacement and you’re in pain, too bad. It could be six to twelve months before your procedure can be scheduled. If your doctor suspects you may have a brain tumor and wants you to get an MRI, you may wait several months for an image that could be had with little or no wait in the U.S. A friend told me her late father-in-law who lived in one of the large Canadian cities had a tumor on his groin. He was placed on a waiting list for surgery but emergency cases kept jumping ahead of him. He ultimately died two years later and never did have the tumor removed.

    We’ve talked before about how much Germans pay in payroll taxes for health insurance, unemployment insurance, long term care insurance and pensions. If Americans thought high taxes for a more comprehensive social safety net were worth the money, they would vote for politicians who would make that happen. They’re not willing to make the tradeoff no matter how desirable you personally think it would be. Roughly 10 million people without health insurance today are illegal immigrants. There are young people who make over $75K but don’t think they need insurance and are unwilling to pay for it. Most of the rest are low income folks who make too much to qualify for Medicaid but can’t afford insurance. The ACA will address much of this problem with subsidies and no longer allowing insurers to exclude people with pre-existing conditions. We’ll see how it works out starting in 2014.

    In the meantime, to reduce utilization and get better value for our healthcare dollars, we should pass safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence guidelines where they exist. Even some liberals support this idea. We should make contract rates transparent so both patients and referring doctors can know what services, tests and procedures cost before patients receive them. We should charge Medicare beneficiaries an extra $5 or $10 per month for their Part B coverage if they fail to execute a living will, advance directive or POLST. We should make full use of modern technology and analytics to combat fraud.

    If we can reduce unnecessary care, especially in hospitals, hospital bed capacity will shrink over time and so will the nation’s healthcare bills or at least they will grow at a more sustainable pace in line with GDP growth. We need an American solution that fits our values and culture. There is no reason to assume that just because something seems to work in Canada or Western Europe that it will work here. It probably won’t.

  20. Good points, Barry.

    As for increased utilization- if a hospital is fully supported by taxes, who cares if doctors use it more for minor issues? The nurses are paid for, the building is paid for, the pharmacy is stocked anyways.

    I used to manage a public library. Once we got our tax revenues, we did not care if we were circulating hot rod magazines or the plays of Shakespeare.

    I realize that hospitals are complex entities and I know that I tend to glide over their internal problems. Still, I think that Americans are so fixated on a user-fee approach to hospital funding that we ignore simpler solutions.

    Here is another way to phrase my thoughts:

    No one walks out of a Canadian hospital with a bill that bankrupts them. No one walks out of a VA hospital will such a bill either.

    No one in Canada faces a health insurance premium that they cannot afford to pay.

    This is worth a lot! Is it worth the occasional bad care and frequent waiting lists for discretionary surgeries? Is it worth the higher taxes?

    I sense that the higher taxes are worth it. I welcome any suggestions you or others might make of writers who have explored this systematically. My guides are Uwe Reinhardt, Joseph White, and Dr Robert Evans incidentally.

  21. Bob –

    I don’t think the fire department analogy holds up for several reasons. First, we’ve seen a long term secular decline in the number of fires (utilization) and very few fires are deliberately set. Moreover, in most of the suburbs, at least where I live, fire and first aid responders are mainly unpaid volunteers because it would be way too expensive to pay for a full time staff. At the same time, an event like the recent Hurricane Sandy or Hurricane Katrina which stressed first responders beyond their limits could never be paid for through a global budget. Federal financial help is needed to help cover those costs and to rebuild.

    Hospitals resist capitation or global budgets because they can’t accurately estimate their costs a year in advance. Estimating such costs is no easy task even for insurers who cover millions of people. Under your proposal, hospitals would either need to carry large reserves to cover costs in years when budgets were exceeded or the government would have to step in with supplemental appropriations like the defense department gets when it needs to fight wars.

    If hospitals were financed with dedicated taxes as you suggest, utilization could increase significantly as doctors would be more inclined to send patients to the hospital for imaging or to get checked out or diagnose even minor complaints rather than wait for them to resolve themselves or visit an outside physician who will bill for services rendered.

    While Medicare uses the DRG or case rate approach to pay for much of the hospital care used by beneficiaries, there are significant outlier payments for complicated cases and providers have become increasingly sophisticated at upcoding and finding other ways to maximize payments. Medicare is, at its core, unmanaged indemnity insurance with relatively low dictated reimbursement rates that often don’t fully cover hospital costs, especially for outpatient care. Whatever it costs, it costs. There is no budget per se. The best way to reduce healthcare spending is to find ways to reduce utilization, including wasteful end of life care. There is lots of unnecessary care in the U.S. due to a combination of defensive medicine and patient expectations. Much expensive end of life care patients don’t even want but they can no longer communicate and don’t have a living will, advance directive or POLST.

    That all said, I fully support using general revenues to cover the fully allocated costs academic medical centers incur to educate the next generation of doctors rather than build at least some of those costs into medical bills. I also think academic medical research should be funded largely by NIH grants, partnerships with drug companies, and philanthropy.

  22. To Determined MD:

    I used to think as you do, i.e that end of life interventions were driving up the cost of health care.

    Now I am less sure that this is true.

    a. Most end of life cases come into Medicare… but. Medicare plays a flat fee based on the diagnosis.

    Hospitals may send out a bill for $4000 a day in the ICU, but they do not collect nearly that much from any insurance plan, including Medicare.

    Most hospitals execs will tell you that they lose money on ICU care for the dying.

    b. If we slashed the reumbursements for the dying, at the cost of stupendous public debate, hospitals would just raise their rates on some other kind of care.

    I still think the answer is to fund hospitals the way we fund fire departments.
    They would get one check a year, funded by broad based taxes.

    No one knows or cares how much the fire department spends on wood stove fires, garage fires, fires in apartments, etc. In the same way, if hospitals went onto global budgets, no one would know or care how much they spent on broken legs vs congestive heart failure.

    Everyone in the community would pay a fixed percent to fund the hospital.
    No one would face a financial risk for going into the hospital. Private insurers would have no role here.

    The concern over expenses of the dying is an unfortunate product of funding hospitals by user fees.

  23. Doubt anyone here would agree with this opinion, but, another example of a mandate out of control: the right to bear arms. While not everyone HAS to own a firearm, the fact that everyone has the right to one shows not everyone has the ability to handle one. The premise how it relates to PPACA? Why should everyone have to buy insurance when some will not benefit at all from having coverage? Who knows, maybe when this legislation really negatively impacts on some, it might encourage someone to react in a very negative way. Yeah, that last sentence will spark some outrage, but, when you step back and think about how this culture is so polarized, forcing people to do things they don’t want to do will create risks in extreme rejection of forced “choice”.

    But, do the loyalists really consider individuality in the first place? NO! That is so contrary to the agenda, everyone is equal. NOT! Not that I support inequality, but, it is the reality of life. How many reading this are squirming!?

  24. I’ve only read the 906 pages (w/2″ margins) actually IN the law. I somehow missed the other 1,500 or so.

    I could send you a copy of my PDF.

  25. If you had read the 2400+ pages of the bills, you would know that thankfully, obama has limited the tax deductibility of earnings paid to these evil, greedy, do nothing insurance executive to $500,000. I am sure Mr. Bertolini and Mr. Hemsley will work (steal) just as hard for 1% of the money. I guess it’s ok to be one of these are 1%ers. Or better yet we can these guys and hire someone that will take the $500,000 per. Then these companies may run almost as well as your average government program. Shoot, all they really need to do is one calculation…what is $500,000 times all my co employee buddies divided by 15%. That’s what will charge the exchange.

  26. General Revenues from Value Added Taxes I suspect… that’s the only way to generate the kind of money to finance a Social Welfare model they have. (and a method getting pretty creaky)

  27. I still don’t see anything more than assertion and assumption in these arguments. Please give us details on which plans will double in costs. How many of them are there? Are we talking about the mini-med plans where employees pay $1500 to get $3000 worth of benefits?


  28. ” Health insurance is expensive in the U.S. because healthcare is expensive. Hospital prices are part of it but so is defensive medicine, patient expectations and yes, an entitlement mentality that’s embedded in the culture here. People want what they want when they want it and they expect someone else to pay for it.”

    Perfectly said to me. But, doesn’t fit the sound bites to sell this legislative assault, does it? And your assessment of life styles in Europe also are on the money. But, once people taste independence and freedom of choice, they won’t go back, not when it hits them personally.

    Funny, to me, the people behind this rhetoric of every one else has to “chip in”, “give their fair share”, et al, you really don’t see and hear the loudest proponents practicing what they preach as a whole. Biden’s charitable contributions are pathetic, and I haven’t heard what Nancy and Harry Lame have to show, but I bet equally pathetic too.

    But, you get the representation you pine for. Just remember this little fact, all you unbiased and objective readers, it wasn’t even 60 years ago that the Democrat party had little to no interest in equal rights, at least in the South, but when they figured out it could mean a voting block to clinch elections, boy did they do an about face! Not that Republicans have much to offer as a defense otherwise!

  29. Oh, and by the way, this in a Washington Post editorial yesterday:

    “But the underlying fiscal problem is that federal expenditures are slated to rise faster than economic growth because of rising health-care costs and an aging population. The long-term drivers are Medicare, Medicaid, Social Security and subsidies for the health-care exchanges established by the Affordable Care Act.

    That’s not a partisan statement. It is reality. The nonpartisan Congressional Budget Office estimates that, without reform, spending on Social Security and federal health-care programs will rise from 10 percent of gross domestic product today to 16 percent 25 years from now. If that sounds manageable, consider this: Over the past 40 years, the entire federal budget has averaged 18.5 percent of GDP.”

    you know, it is nothing less than spectacularly dishonest for the Democrat machine to just blurt out about 20 microseconds after the republicans ask for real entitlement reform these sound bites of old(yeah, like 50 years old) that “no, that puts seniors, vets, and children at risk” and “people have a right to their entitlements”. Yeah, it puts only their voting blocks at risk? Memo to Nancy and Harry Lame at the Hill, not every person in the military, over 65, and certainly no one under 18 votes Democrat only. And where is the logic with less people having children these past 10 or so years, who the hell is going to pay for these benefits being cashed in now by the boomers!?!?

    The scenes in Michigan this week show we are going to have Greece-like riots when reality finally wins out. The entitled, dependent, and narrow minded will be fodder for the mob kingpins. The only problem is, who is going to treat all those injured should the status quo stay as is? You all think every hospital will stay as is today by 2014?

    Ignorance ain’t gonna be too blissful around here in another year or so!

  30. “The difference of course is that the tourist has been paying $4.00 for coffee and $7.00 for a glass of beer, and similar sales taxes, to subsidize that hospital.”

    Bob –

    You put your finger on the key tradeoff implicit paying for a comprehensive social safety net. The European middle class accepts paying half of its income in a combination of payroll, income and value added taxes and probably some other taxes as well to finance their safety net that includes not only universal health insurance but heavily subsidized college education, generous unemployment and disability insurance, old age pensions and even long term care insurance. After paying the required tax burden, they accept living in tiny houses or apartments, they drive tiny cars or ride mopeds or bicycles, pay $8.00-$9.00 per gallon for gasoline, double or triple what we pay for restaurant meals, etc., etc. Unemployment is also higher in most of these countries than in the U.S., especially in Southern Europe. To duplicate the European safety net in the U.S., we would have to radically alter our way of life and pay far more in taxes.

    Americans are simply not willing to accept a similar tradeoff as far as I can tell and those who think all we have to do is soak the rich to pay for all this are sadly mistaken. At the same time, it’s no accident that innovative companies like Apple, Google, Microsoft, Intel, etc. were founded and thrived in the United States.

    As for insurance company executive salaries and bonuses, I’ve said numerous times before that even if the 25 highest paid executives of all these companies worked for free and the savings were used to lower health insurance costs, premiums might drop by a fraction of 1% at most. Health insurance is expensive in the U.S. because healthcare is expensive. Hospital prices are part of it but so is defensive medicine, patient expectations and yes, an entitlement mentality that’s embedded in the culture here. People want what they want when they want it and they expect someone else to pay for it.

  31. I wouldn’t be amazed that people pin for government to fix their ills, after all, what is the percentage on Food Stamps, and what is the increase in disability determinations for the past 4-6 year? People are entitled and narrowminded, hence the author’s comment about denial in the post.

    The issue NO ONE wants to discuss nor even entertain is Medicare and the expenses of end of life interventions. But, hey, I’m allegedly cruel and simplistic, let’s hear all these wonderful and realistic solutions that will decrease costs and still maintain full quality of care from these blind loyalists.

    What’s that you hear, silence? Thought so, can’t make that bridge over the desert more sellable, eh? Disingenuous to the end, these folks!

  32. Duh–this is precisely the point. If you ban underwriting, the average cost will go up. BUT you’ll get a subsidy to buy it. How is this news???

  33. The U.S. Secretary of Defense oversees an operation with a budget nearly 7x that of UHG’s yearly gross revenue. His annual salary is $199,700.

  34. There were maybe 30 Senate votes for single payer and maybe 40 for the “public option”, whatever that was. Obama didn’t “deal them away”; they were not politically feasible. And it’s going to be “Medicaid for all” if that ever happens. . .

    It amazes me that despite continuing and lavish displays of our political system’s incapacity to deal with our problems (see Cliff, Fiscal, etc.), some people continue pining for the government to fix all these problems with a sweeping and all knowing expansion of its powers. It’s like those Pacific Islander’s weird “cargo cult” religion.

  35. $48.8 million is 0.045% of United’s 2011 revenue. So, if you pay a $500 premium every month to United, less than 25 cents goes to Mr. Hemsley. Over the course of a year you are buying him one latte. You can argue it should be 10 cents a month, or whatever, but you can’t argue his income accounts for a significant part of your health care costs.

    The problem of exploding executive pay over the last 20 years is primarily located in Wall Street and finance (hedge funds, private equity, etc.).

  36. Barry – thank you for mentioning that European nations use general revenues to subsidize hospitals. This in effect takes a lot of the pressure off insurance premiums in the first place. Even in America, if insurance companies only had to cover the first $10,000 of care, the premiums would be cut in half.

    When an American tourist must use a European hospital and is stunned that his bill is only $100, this is not because their hospitals have some magic productivity cure that enables them to provide care for $100. The actual cost of care in the European hospital may be $5,000 just as is it in America.

    The difference of course is that the tourist has been paying $4.00 for coffee and $7.00 for a glass of beer, and similar sales taxes, to subsidize that hospital.

    America does smuggle a fair number of dollars to hospitals in Medicare subsidies, but not in a way or in a volume that is enough to make hospitals lower their rates on everyone under age 65.

    So long as the hospital is seen as a financial danger to the patient, American insurance rates will be high. Only when we ‘man up’ to reality and treat hospitals as public institutions can insurance premiums come down.

  37. Thanks for stepping forward and illustrating exactly who and what I mean.


  38. Obama dealt away the “ace” of single-payer before anyone sat down to play, and to make matters worse, he dealt away the only other card that made sense “public-option” before anyone anted-up. What we’re left with is a band-aid on a limb seriously infected and oozing pus. Sorry for the graphic description, but I’m pissed-off.

    The only solution to this is to let the 1% keep their gold-plated, expensive and ineffective “private” insurance and let the rest of us have Medicare-For-All as a single-payer plan. Unfortunately we live in a country where politics rules over solutions. But I, for one, think that’s about run its course.

  39. Bob Hertz –

    In Switzerland, there is a low rate for children from 0-18, a higher rate for young people between 18 and 25, and a somewhat higher rate for those older than 25. People can buy policies with varying deductibles up to 2,300 CHF (about $2,500) per person. About 30% of healthcare costs are paid out-of-pocket in Switzerland (vs. 12% in the U.S.) and general tax revenue covers a significant percentage of hospital operating costs to keep insurance premiums low, at least by Swiss standards. 45% of the population qualifies for a subsidy to help them pay for health insurance.

    In Germany, there is a payroll tax of 14.5% of so, a good chunk of which is nominally paid by the employer and it’s capped at around €45,000 of wages. Higher income people can opt out and go into the private system where premiums are lower for younger and healthier people. However, if you go into the private system, you can’t reenter the public system unless you’re destitute. I believe France uses a similar approach at least in terms of the payroll tax structure.

    Since health insurance lends itself to being priced, I think the Germans and French are correct in capping the income subject to the payroll tax at a middle class level. If you make $1 million per year, I don’t think it’s fair or reasonable to expect that person to pay $150K for a health insurance policy that’s not worth more than one-tenth of that at most (for family coverage). By contrast, services like defense and law enforcement or environmental protection that don’t lend themselves to pricing to the individual are best financed by progressive taxation, in my opinion.

  40. “Frankly, I think hard core supporters of the new health law and the administration are in denial about what is coming.”

    Hey, if Harry Belafonte is a spokesperson for the Democrap movement (how ironic that sounds), in his comments recently if anyone does not blindly support Obama they should be jailed, what the hell does that say about hard core supporters!

    And I think the author here is being too respectful, these hard core supporters are not in denial, they are disingenuous, dishonest, and deceitful. Every time a new fact is revealed that shows true consequences of PPACA, the usual suspects come on to try to deflect, disengage, and minimize. And these are the same loyalists who would scream how inappropriate and outlandish Republicans were when Bush and company ran the show just 6 years ago. Man, hypocrisy does not discriminate party, let me tell you as a totally disillusioned independent!

    Frankly, I hope the legislation crashes and burns so fully that everyone who demanded full genuflection and obedience is scalded irrevocably. People don’t learn in the end, they all have to touch the stove and deal with the consequences. Just remember though, the bastard who wanted this done will be out of office and free of fall out when the crap happens.

    Oh, and the Democrats want the filibuster process eliminated so they can ram more partisan, one sided agendas down our throats. Just remember this, you partisan idiots, history of elections show that the pendulum will swing to the other side, and WHEN Republicans win a majority in the Senate down the road and then ram their equally offensive agenda down our throats later, damn all you Democrats screaming how unfair things will be then.

    Frankly, maybe the world ending in about a week is a blessing. Doubt there will be universal coverage in an afterlife if there is one.


  41. To my knowledge, no other wealthy nations have any age rating at all — not 3 to 1, 4 to 1, or any of the above.

    Insurance costs instead are determined essentially by income. A wealthy young person pays more than a poor old person.

    This is what Joseph White calls “The international standard” .

    The ACA attempts to create a shadow tax system, to accomplish what other nations do openly.

    First we let insurers charge an actuarially correct premium, based in large part on age, which is totally unaffordable to many taxpayers.

    So in come the subsidies, which try to reverse the effects of age rating by sending out tax credits.

    This will be a massively bureaucratic operation with lots of snafus.

  42. A seldom discussed provision of the PPACA allows for a 4 to 1 age rating band in the high risk pools. So, if too many young people opt to pay the penalty instead of purchasing health insurance, there would be some rationale to increase the regular rating band from 3 to 1 to 4 to 1.

    I think it’s also worth noting that Medicare spent over $550 billion last year of which about 12% was covered by beneficiary premiums, mainly for 25% of the cost of Part B coverage and IRMAA surcharges paid by high income beneficiaries. With roundly 48 million beneficiaries, of whom about 16% are under 65 years old and qualify because they are receiving social security disability payments for at least two years, spending works out to $11,500 per year or about $950 per month per beneficiary. That’s for a policy that requires a deductible of roughly $1,100 for each hospitalization, a 20% co-pay for all Part B services with no out-of-pocket maximum, and a $320 drug deductible plus 25% co-insurance until the donut hole is reached, several thousand dollars of out-of-pocket exposure in the donut hole and then 5% coinsurance in the catastrophic zone also with no out-of-pocket maximum. Most beneficiaries find it necessary to spend an additional $200 a month or so for a Medigap plan to cover the portion of the bills that Medicare doesn’t pay for.

    Payments per service, test or procedure are based on CMS’ relatively low dictated prices which often don’t even cover hospitals’ costs, especially for outpatient care. My understanding is that the actuarial rating for standard Medicare is 56% which is below the 60% rating mandated for the least expensive bronze commercial insurance plans under PPACA. There are no big executive salaries and bonuses in Medicare and no profit but care is largely unmanaged and there is plenty of fraud and waste. This is what single payer insurance looks like for the elderly and for taxpayers. It doesn’t sound very attractive to me and I haven’t even talked about the potential significant adverse impact on medical innovation if standard Medicare were expanded to the rest of the population.

  43. Bingo on the plan MikeTheGeek except it’s not financially doable, or operationally… speaking as a former HCFA (now CMS) Medicare/Medicad auditor and budget analyst. Obamacare simply isn’t going to fly because 20% of the Economy is just too much for the Gov to manage.

  44. Hemsley now owns everything under the “Optum” brand, including HIE platforms such as Axolotyl (which is our HIE vendor). My health coverage through work is United. I’m a United Health Group serf. Company town.

  45. I suspect that at least some of the hard core supporters do not care as they feel it will only push the country toward single payer anyway. The companies are greedy, the CEOs are overpaid, so let’s just make it impossible for them to exist, and blame something nice and ambiguous like “greed” for the high prices. Or is it something like Cloward-Piven? Gotta hand it to them, it is probably going to work.

  46. Mr. Hemsley the fellow at United who suggested buying up Quality Software Services, Inc. (QSSI) and created a massive conflict of interest for United and HHS? http://thehill.com/blogs/healthwatch/health-reform-implementation/265659-conflict-of-interests-concerns-raised-as-obama-races-to-implement-health-reform

    ACA’s drawfs the old Military Industrial complex and the CEO’s ill prepared to deal with the PR that comes from this massive Medico Gov Industrial Complex.

    Young people who could purchase care at a 1 to 5 ratio of costs to their parents now pushed into a 1 to 3 ratio. A massive shift of wealth from young to old.

    United and AARP thought they’d profit big time with Obama care selling to the young at a premium but I suspect they’ll find the young individual market just drying up.

    Sure the CEO’s will still profit (as will AARP) but they’ll find themselves twightly wound in with Government now, and more subject to investigations than they ever were, and with a public angry getting pushed into Medicaid.

    I’m guessing none of the insurance CEO’s ready for the storm headed their way.

  47. “We’re going to see some markets go up as much as as 100 percent.”

    i.e. “That swiss cheese policy we were selling in South Dakote for $49 a month will definitely be a lot more expensive now that we actually have to start covering services!”

  48. The reason for the increases is neither complicated nor inevitable: it’s greed. Health insurance companies are serving their shareholders, not the public. Our current system is both dysfunctional and immoral. Until we have single payer, insurers will be the trolls under the bridge, raising rates for any excuse they can come up with. What is Bertoluni’s salary and what was his last bonus?

  49. I’m guessing we’ll just see individual insurance disappear all together. It just won’t be economical to sell. Thoughts?