THCB

Obamacare Premiums Are Going To “Skyrocket”? Forget About It.

Being against Obamacare has been the keystone, the capstone, the mighty sledgehammer, the massive metaphor of your choice for the right for five years now. They couldn’t stop it from being passed. They couldn’t stop it at the Supreme Court.

They weren’t able to choke it off by “defunding” it. They rejoiced at the rubber-meets-the-sky rollout of Healthcare.gov, but then the kinks got worked out of that.They railed at the administration using discretionary powers built into the law to help it work better. Every horror story of Obamacare ruining people’s lives they came up with turned out to be false.

Almost all of the people cynically cancelled by the insurance companies as a way to sell them more expensive insurance got insured again fairly quickly. Then 7 million people signed up on the exchanges, and altogether some 10 million formerly uninsured people now have medical coverage.

But the right still needs to call it a “train wreck.” The magic mantra has to work for them. Just this morning, here’s a Republican Congressman saying that we have to cut Food Stamps because: Obamacare. Say that again slowly?

It’s getting harder and harder on the right to come up with new ways to say it isn’t working when it actually seems to be working. I have to hand it to them, though: Those spin factories are filled with hard-working creative people. Get to work early, stay late, trash Obamacare. Hey, it’s a living.

So what’s the latest? This fall, Obamacare premiums are going to “skyrocket”!

Health and Human Services (HHS) Secretary Kathleen Sebelius went before a House Ways and Means Committee hearing a few weeks ago and claimed outrageously that premiums on the exchanges are likely to rise for 2015, but not by much, and certainly more slowly that in the past.

What? How can this be? Yet another Administration figure has been trotted out to claim baldly to Congress and the American people that Obamacare is basically going to do all right.

TheHill.com got right to work and managed to come up with what they claimed were health insurance company officials eager to forecast that they would have to triple their premiums or more — and they would be rolling out those jack-ups right in time to deal a blow to Democratic chances in the fall elections. TheHill then published it under the breathless headline: “O-Care premiums to skyrocket.”

Neat, huh? Maybe a little too neat. Let’s see whether this claim makes sense.

Capped MLRs: Under the ACA, insurance companies must pay out at least 80% to 85% of premiums for actual medical costs, depending on the type of plan. These are “medical loss ratios” (MLRs). That’s the law. The other 15 to 20% is all they get for administration, advertising, executive bonuses — and profit. If they arbitrarily jack up rates, so that they are paying out a lower proportion in medical costs, they have to give the excess back to the rate-payers. The federal government has already forced some insurance companies to do this.

Those anonymous company officials who complained to TheHill claimed that “everybody knows” that higher costs imposed on the insurance companies by the botched Obamacare rollout will have to be passed on to consumers. Is this is true? Were there huge costs to the insurance companies? Doesn’t matter. Unless they plan to break the law and falsely report their MLRs, these alleged extra costs still have to be absorbed in that 15 to 20%.

So the only reason that they would be able to make premiums “skyrocket” is if the actual healthcare costs per person “skyrocket.” So how are healthcare costs doing?

Healthcare costs: Yes, healthcare costs (National Medical Expenditures) are continuing to go up — at a rate lower than 2%, the lowest rate that has been counted in the 50 years that they have been counting. Not a skyrocket.

But maybe they mis-guessed on 2014, and holy moly, they’re suffering! Or maybe they purposely under-priced their offerings in 2014 to gain market share. So they have to make up for it in 2015?

Price war: Talk to insurance marketing and sales people. I do a lot. They’ll tell you that you really don’t want to be the low-price leader. If you purposely under-price the market, you get the people who buy on price alone, and these are not anybody’s favorite customers. They will buy the cheapest product you offer this year, then drift away for someone else next year, when you have to raise the premiums. And you will have to raise your premiums, because your MLR came in at 110% — you’re spending more on medical care than the premium brought in, and you just can’t do that year after year.

So no, price wars are not the thing to do in healthcare insurance.

But maybe they guessed wrong on how expensive these new people are going to be with their new medical insurance?

Actuarial risk: It would be reasonable to assume that the insurance companies took their best shot at the actuarials for 2014. These are new markets and new customers, and there are lots of them. It’s a “bet the company” deal to get it wrong by any major amount. They have already figured in the really sick people who couldn’t get insurance before, and the bump in utilization from not-sick people who are newly insured and getting various problems taken care of, and so on. Looking forward to 2015, there is no new, extra actuarial bump in the offing, except that more of the uninsured, having missed the window this year, are likely to sign up when the window opens again in the fall.

But what about the balance of young and old?

Death spiral: What about the dreaded “demographic death spiral,” with too few healthy young people signing up to balance out the 50-somethings and the chronically ill? Didn’t happen. Apparently a pretty good percentage of young healthy people signed up, especially in the last surge, enough to come close to the Administration’s projections and hopes. Now, of course, you can always just claim that the Administration is “cooking the books,” that’s an easy out. But my read is that the Administration, having been seriously burned on the “you can keep your insurance, you can keep your doctor” misstatement, is actually being quite cautious in its claims. I am not seeing any dancing in the end zone here.

But what if a particular insurance company got it wrong in a particular market? Won’t they get burned badly and have to jack up rates to make the loss back?

The Three Rs: The insurance companies are back-stopped by each other and the federal government if they guessed seriously wrong through the provisions in the law called the “Three Rs” (reinsurance, risk corridors, and risk adjustment). No one is going to be “forced” to make their rates “skyrocket.” If they want to stay in the market, they will be looking for very moderate increases.

Still, aren’t the insurance companies themselves saying that things are way out of whack, they are taking it in the shorts, and they are going to have to jack up premiums for 2015? Actually, no, they are not.

How the insurance companies really see it: There are plenty of reasons to believe that running most citizens’ healthcare financing through for-profit public companies is a bad idea. But it does have at least one advantage: unlike not-for-profits, for-profit public companies by law have to show a certain amount of transparency. They have to open the doublet and show us what they’ve got. In annual reports, in 10Ks, and in conference calls with Wall Street analysts, what CEOs and CFOs say has legal weight. Of course they want to sound positive, because they would like to drive the stock price up. But material forward-looking misstatements can get you sued by your shareholders. So unlike in alleged anonymous unattributed whines to political blogs, public company executives have some care about what they say.

And what are they saying? They’re doing fine. Wellpoint, one of the nation’s largest health insurers (it operates many of the for-profit Blue Cross/Blue Shield plans) recently raised its earnings projections. Why? According to CEO Joseph Swedish, mostly because way more people signed up for its Obamacare plans than it expected. Think about that: This also clearly means that Wellpoint expects to make money off of all those new customers at the prices they were quoted. Absent some huge demographic or actuarial bump, they don’t expect that they will have to “skyrocket” premiums next year to make up for some mistake.

This is just the latest in a string of positive financial projections since the first of the year from all the big for-profit insurance companies, including Aetna, Cigna, Humana, and UnitedHealth Group. Swedish at least doesn’t think this is temporary. In the same analysts call, he predicted that Wellpoint is currently in a position to “drive profitable growth over the next several years.”

So: Actual healthcare costs are almost flat. Healthcare insurers don’t really do price wars. They were serious about their actuarial guesses for 2014, including all the new expenses of really sick people and the previously uninsured. The “demographic death spiral” did not really appear. The Three R’s protect the insurance companies from getting the risk seriously wrong. And in public, when misstating things could get them into big lawsuits, they say they are doing fine, they can handle the risks, and they expect to make money.

So no, there is no reason to believe that rates for 2015 are going to shoot up, “skyrocket,” explode, use metaphor of your choice here. None.

There is plenty to find fault with in the ACA, and plenty of room to debate about the perfect way to reform healthcare. But I would expect people who want to add to that debate to come armed — with things like research, logic, facts, real quotes from real people, and an understanding of how this industry actually works.

With nearly 30 years’ experience, Joe Flower has emerged as a premier observer on the deep forces changing healthcare in the United States and around the world. As a healthcare speaker, writer, and consultant, he has explored the future of healthcare with clients ranging from the World Health Organization, the Global Business Network, and the U.K. National Health Service, to the majority of state hospital associations in the U.S.

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109 replies »

  1. The lies are all coming due. I hope everyone remembers what Democrats did to them in 2016.

  2. Out of network has a 20% deductible with no cap after you pay the $8,000 deductible. Obamacare sucks in every way. Also no eye doctors will accept our blue cross vision benefit at all. Soon expect all doctors to refuse Obamacurse.

  3. There are many Democrats that are willing accomplices to the criminal lies told about this liberal infection of our healthcare. For the rest of my life I will work to get as many Democrats out of office at all levels. Not that happy with every Republican, but I do despise every Democrat for what they did to my healthcare.

  4. My insurance just got cancelled.
    –Was: We paid 383.00 per month with a 2000.00 deductible. Our birth control was covered 100 pcnt. 30.00 co-pay on meds.
    –Now: we MUST pay 866.00 per month. 12000.00 deductable. No meds at all. Birth control not covered!!!
    FACT.
    You should be ashamed if yourself Flowers! You are carrying water and lie.

  5. I’ve always been a democrat and voted for Obama, twice. I feel like a sucker.

    Before a couple weeks ago, I wasn’t really against or for Obamacare. I didn’t feel I understood it well enough to take a side. Well, I sure know about it’s ramifications now and fear this is only the beginning.

    I am unemployed due to major mental illness. I don’t take any government assistance. My wife works while I take care of the home and we get by. She makes enough so that we are not in poverty, but for 2 people, we are low income. I have always been insured by her employer. Early this year she took another job that doesn’t pay for family insurance, just (most of) hers. We were told that my coverage would be $3,000 for the year. The salary being offered was what she made at her old job, therefore we wouldn’t have enough to cover my insurance. The place really wanted her and agreed to up the salary $3,000 so we could afford the insurance. We were happy with that and she took the job.

    Now, the numbers came in for next year’s insurance. We went from no deductible to $1,000 each. $30 copays are now $50 and my premium went up almost $1,800 for the year. We are in shock. Not only can I no longer afford mental health care, because of the deductible and higher copays, we don’t have the money in our budget to cover the nearly $2,000 premium increase.

    I’ll just get Obamacare, right? It’s so much cheaper and I’ll get a credit since we are low income, right? NO. I looked into it. Because my spouse’s employer offers me the option to buy insurance, I can’t get Obamacare. Not unless they don’t offer a plan that meets certain requirements. Well, they do, but it’s awful. However, no more awful than the like-priced plans I see offered through Obamacare. $6,000 deductibles? Health insurance you can’t afford to use.

    I am now forced to choose a bottom plan through my wife’s employer because it’s premium will be the $3,000 we have in our budget for my insurance. I just can’t afford to ever be ill now. It has a $5,800 deductible.

    This past year (and for many previous years), I was someone who could afford the care to keep their mental health in check. Now, I am not. Not because we make less money than before, but because of the changes to the health care system.

    We don’t have a lot of nice stuff, I don’t even have a cell phone or cable, but we were stable, had the essentials and an insurance that allowed us the ability to afford care for my illness. I am now devastated. I really don’t know what I am going to do.

    I’m expecting some “Get a job” replies and I could’ve easily told this story while leaving out that fact, but I’m being honest. I would love to “get a job” but it’s not that easy. Especially when you have no college education and haven’t held a job in many years (and don’t have a car). I am not proud of myself and would love to be a normal person with a job, but battling my illness is a full time job that costs money rather than makes it. We can no longer afford that battle.

    Think about how many other similar stories must be out there. How many more people with mental illness might be having to give up treatment. Think about how that might affect society.

    Btw, I am not a smoker or drinker, not overweight, am younger than middle-age and have no physical health issues. My coverage was not changed due to anything having to do with me. This was simply the new pricing and policy changes.

  6. I am self-employed and was forced by Anthem Bluecross to switch to Obamacare in starting Jan 2014. As a result, my insurance premium more than doubled, and it comes with a very high deductible.

    In addition, my family doctor told me they are not accepting new patients with Obamacare, and the only reason he agreed to see me is that he’s been my doctor for more than 10 years. He urged me to change my insurance coverage.

    I am also told that I cannot get specialist care as they will not be accepting new patients with Obamacare.

    Recently, I received notice from Anthem Bluecross saying that the insurance premium will increase again for 2015.

    I am in a hole that I cannot escape, thanks to Obamacare!!!

    I am sure there are millions of people in similar hole!

  7. This article must be joking.
    I have had wonderful health insurace via a PPO through my employer for the past 5 years. The premium increases have been so low, in fact, that my employer absorbed them entirely during that time and continued to pay 95% of the total for all of us.
    This year? As as direct result of ACA, the healthcare company we buy from will increase the premium 50%. Think about that. FIFTY percent. In one year.
    Even with bad years and bad increases, that is shocking.

    A committed of our employees reviewed the available ACA plans and concluded that none of them came close to the coverage our PPO had, and in fact, even the best of them would leave us with less coverage, higher deductibles, and even more than a 50% jump in cost. So no, this wasn’t some big bad insurance company comparing these costs. It was US. Our own employees, who had nothing to save but our own skin by finding the best deal that we could.

    The final move will be to take an alternate from our old PPO provider that hits us with a significant increase,but not 50%. We will have to jack up our family deductible from $2000 to $4000, the company will have to cut back on how much they pay on our behalf by 10%, and we will have to contribute about an extra $200/month… all to keep what we had before ACA.

    You may feel free to dismiss this as another “phony” anecdotal story, but I can only promise you that it is not. ACA is clandestinely, insidiously, tranferring the burden of insuring millions and millions of people onto the backs of working Americans through increased insurance costs, reduced choices, and increased taxes. If everyone would just step back and face reality, they would realize that it could be no other way. You cannot insure millions of uninsured and hand out massive insurance subsidies to millions more by magic. The money has to come from somewhere.

    I’ve said it numerous times before: Obama can just quit the bull and come clean. ACA is nothing more than a big fat tax levied on America to pay for free health insurance for a millions of people. If he wants a social welfare system to provide free insurance, fine. He’s got it. He should have simply been honest enough to admit that that’s what it was all along.

  8. I just divided my new monthly premium for a “bronze” plan by what I was paying before. Both are HSA-eligible high deductible plans. My increase is 164% in 2015 over what I was paying in 2014. I am young, healthy, and have no pre-existing conditions. In fact, aside from dental cleanings and regular checkups, I haven’t visited a physician in over five years. As a consequence of the new law, my largest fixed monthly expense is now health care. My health care premium exceeds housing, transportation, clothing and food expenses. Every month my health care premium costs more than dining out every day, joining two or three country clubs, or buying a new large-screen television. If I wanted to spend that amount of money every month on something I didn’t need, I would have a larger abode, drive a two-seater sports car, or buy a boat. If I saved the increase in insurance premiums for a year I could take a two-week vacation in Europe or take a month off of work to serve as a missionary. Putting that money in a college fund would ensure that when I am ready to have children, their higher education expenses would be covered. As it stands, my efforts at being a responsible citizen are being undermined by legislation that is intended to benefit folks like myself, and I am in greater danger of financial insolvency due to required insurance payments than I would be if my plan didn’t cover contraceptives or maternity care.

  9. Hi there just wanted to give you a brief heads upp and let yyou know a ffew of the images aren’t loading properly.
    I’m not sure why but I think its a linking issue.

    I’ve tried it in two different web browsers and both show the same outcome.

  10. I have the facts, our plan went up $6,000 (school district). This is just more redistribution, taking from working people and giving to Obama Voters. I’m going to find a way to get out of it as our deductible is now about what it will cost us to pay the doctors we no longer have access to directly, the $6,000 we pay for our work (school) subsidized premiums is wasted. The good doctors and hospitals don’t accept Obamacurse. I’d like to do my part to help make the whole thing collapse. The limited network and shoddy care aren’t worth paying for under Obamacare. Everything Democrats do makes the original problem look like the good old days.

  11. My wife is a school teacher and we have always had excellent insurance. Our insurance runs July to June, so we have the Obamacare plan. Most others will get screwed after the election as the shyster democrats pushed corporate plan changes to after 11-15-14. . Last year we paid $500 a month and had $5 to $25 copays and no limits on our network. This year we pay $650 a month and now have a $4,000 deductible and a very limited network. The deductible for out of network care is separate $8,000. The two closest hospital networks just sent us a notice that they will no longer accept our blue cross plan starting the first of next month; Oct 1, 14. The Democrats and Obama ruined our healthcare and I just volunteered with the republicans to help make Democrats pay by firing Democrats in office everywhere. For the rest of my life I will work / donate to get every democrat I can out of office.

    Everything Democrats touch ends up worse than the original problem.

  12. Funny how the feds are saying there will be a 10% increase, higher deductibles and increases in copays

    I am guessing this is an Obamacare propaganda site

  13. I’m all for everyone having affordable coverage. Sadly my parents, who worked their whole life, did not qualify for subsidies and were paying what they could afford. After ACA deemed their insurance as not good enough, they now pay twice what they were paying, and with a deductible that could bankrupt them should they ever be hospitalized.

  14. In 2011, Medicaid was flailing with its cost. Voila, the 2010 ACA was presented. Problem: upping eligibility for Medicaid assistance [so a lot of folk would have to buy into ACA for getting any health insurance, so that Medicaid would not go bankrupt] and hoping that the government’s double dipping [taxpayer money towards spiraling Medicaid cost would be alleviated by forcing Americans onto ACA would be the solution] would then alleviate the Medicaid problem by another dipping means that would be costly to all except those receiving 100% Medicaid. Which means our economy is so bad that taxpayer monies just could not sustain those getting Medicaid without other resources and voila, we are pushed into and unto ACA. Problems will continue to plague the ACA because of the economy and younger folk not supporting the ACA and taking a fine rather than buying into ACA. For those up to age 26, that leaves the lower middle class and the middle class vulnerable to what is happening. It is what it is. Will no premium insurance be yet with us. As for ER, most of these folks cannot get weekend doctor services and many are eligible for Medicaid and/or are destitute or receive Medicaid anyway. So, now let’s charge those with insurance for it. In the end, it does add up. And there are yet those who fall through the cracks by one reason or another, one being over eligibilities by even $100 in income. Just my opine.

  15. I have been in ER’s as a visitor about 10 times in MN. I never saw a patient who was not in clear pain and distress. Of course that is not very scientific.

    One solution would be to levy an initial charge of $75 for all ER visits, i.e. about the same as an urgent care clinic might charge.

    ER’s can also do triage, though as you say it will not be easy to then turn a patient away.

    As for health plan coverage— I sure seemed to run across a lot of plans that had the same high deductible for anything, broken leg or common cold.

  16. Bob,

    There are safety net hospitals that treat large numbers of low income and uninsured patients that tell us that as many as half of their ER visits are unnecessary meaning they could have been dealt with perfectly well by a primary care doctor, urgent care clinic or an NP in a retail store clinic. If people knew that emergency room treatment offered first dollar coverage, many more would use if rather than go to a much less costly setting where they might have to pay a deductible or co-payment.

    Lots of better health plans do cover emergency treatment for a modest co-payment at most but people need to be responsible. If you have chest pain, severe pain elsewhere, broken bones or are bleeding profusely, by all means, go to the ER. If you have a cold, sore throat, mild fever, etc. give it a chance to resolve itself or go to a primary care doctor, walk-in clinic or retail store clinic.

    Taiwan has a single payer system that uses a smart card to pay providers and keep track of care. However, if you are deemed to be making excessive and inappropriate use of the healthcare system, you get called in for a “talking to” by the authorities. How well do you think that approach would go over in the U.S.? I don’t think it’s unreasonable though.

  17. If we were truly paternalistic about emergency care, we would just put ER’s into the federal budget like police stations or fire departments. I know this would be hard to do in accounting terms, but not impossible.

    Instead we are mandating the purchase of insurance that generally has high deductibles, even for emergency care.

    I have been involved in several cases involving young nieces and nephews of mine. They had insurance with deductibles in the $2,500-$5,000 range, and they needed ER care.

    So they wound up with bills for $1,800 or $2,700 that they could not pay, and had to make adjustments with the hospitals.

    This most certainly does not solve the problem of cost-shifting that you correctly describe. All we have done is get a little more revenue into the hands of insurance carriers, but left the hospital billing mess alone.

    The ACA was very proud of inserting first dollar coverage for $80 contraceptives or $50 screening tests into the 2009 legislation.

    I would rather have had first dollar coverage of ER visits!

  18. Bob,

    I think society is more paternalistic, as you put it, toward health insurance because of the so-called free rider problem. We passed legislation called EMTALA in the 1980’s which requires hospital emergency room personnel to at least try to stabilize patients who need care whether or not they can pay. We’re not willing to just let them die outside (or inside) the ER. The cost of treating people who can’t pay gets built into the bills of those who can and do. The Kaiser Family Foundation estimates than uncompensated care adds at least 6% to hospital bills vs. what they would have otherwise been. The more people that have adequate health insurance, the less uncompensated care the rest of us will have to pay for.

    With respect to life insurance, if I don’t buy it to protect my family and I die prematurely, society doesn’t step in to provide what adequate life insurance would have. The relatively modest children’s benefits from social security are helpful, of course. I don’t think widows can collect SS benefits until they’re at least 60 but I’m not sure about that. Spousal benefits are also helpful but far from adequate by themselves.

    Regarding health savings accounts, I think these are oversold by conservatives. They work OK for the upper half of the income distribution but I don’t think they reduce medical claims by all that much in the end. Lower income people can’t afford the high deductibles in HDHP’s and they can’t afford to contribute to a health savings account either if they don’t have an employer to make a contribution on their behalf. For those with chronic conditions like CHF, diabetes, asthma, COPD, hypertension and depression, the HSA’s probably aren’t all that helpful even if the individual can afford to contribute to them. That all said, I do think high deductible plans should be available for people who are able and willing to self-insure more of their potential medical claims in exchange for a meaningfully lower insurance premium. As you previously suggested, I think they should have to prove they have the financial wherewithal to actually do so if they have to pay claims up to a high deductible like $10K or more.

  19. Barry, my own background is life insurance, and it sometimes leads me to think that I also know a lot about health insurance.

    But life insurance is much simpler. There is only one kind of claim– the whole death benefit. Therefore premiums go up or down in lockstep with the death benefit. A $500,000 20 year term policy is always twice as expensive as a $250,000 20 year term policy, at the same age.

    So I start thinking that a $2 million maximum benefit in health insurance is twice as expensive as a $1 miliion max benefit. As you point out, it is not.

    Life insurance is different in other ways. People make poor choices in life insurance all the time– wrong amount, wrong duration, or not buying at all.
    But there is no national policy to force them to make good choices.

    (We do have spousal benefits and child benefits in Social Security, which act in effect as modest life insurance policies if a worker buys no coverage of their own.)

    Why are we more paternalistic about health insurance? (I am not saying that all paternalism is bad….I am just noticing the contrast.)

    Arnold Kling (who is very conservative) reviewed a column by John Cochrane that praised individual HSA’s……and Kling pointed out that no large nation in the world organizes its health insurance system around personal choice. No nation wants to face the consequence of bad choices.

  20. Bob,

    You’re correct about the amount of commercial insurance premiums attributable to medical claims as opposed to administrative costs and profit.

    As for Paul2’s policy, I think there are probably a number of moving parts and one would have to see the actual policy to make a judgment. I can think of several things that could cause the premium to increase significantly independent of the elimination of the coverage cap. They include the following:

    Scope of coverage – A lot of less comprehensive health insurance plans don’t include coverage for maternity, chiropractic care, mental illness and substance abuse treatment. There may also be limits on hospital coverage for non-emergency care aside from the coverage gap. We also don’t know what the drug coverage is. It may only cover generics or even not cover drugs at all.

    Age rating impact – Before the ACA, older folks could be charged as much as 5-6 times what younger people pay for similar coverage. Under the ACA, that limit fell to 3 to 1 with the difference made up by charging younger people more. I don’t recall if Paul indicated how old he is.

    Population risk – If the new pool of covered members skews older or if the younger portion includes more women likely to use maternity benefits, premiums will be higher other things equal.

    If an insurer can expect to shed 10% of its claims risk by purchasing reinsurance, the premium might not change at all if the cost of the reinsurance is roughly the same as the expected risk to be shed. Even if the reinsurance were covered by some new tax, I wouldn’t expect premiums to decline by more than 10% which would also include lower claims costs and lower broker commissions attributable to a lower premium.

    I get that young, healthy people may not want to pay for some of these more comprehensive benefits including the elimination of a coverage cap. Most employer coverage includes comprehensive benefits with very high coverage caps or none at all. They are also purely community rated. People accept the arrangement because those are the rules that have been in place for decades. Also, since the employer is paying most of the cost on the employee’s behalf, the true cost of the insurance is not visible even though most economists will tell you that employees are actually paying it in the form of lower wages than they would otherwise be paid. The same is true, by the way, for the employer share of payroll taxes.

  21. Two points, one rather minor and one major:

    Minor — I assumed that private insurers did indeed collect $1 trillion in premiums, but that they paid out $800 billion in actual claims.

    Major — based on the post from a couple of days ago by Paul2, I was thinking that a national reinsurance fund which paid 10% of claims would cut premiums by much more than 10%.

    Remember that Paul2 lost his $150,000 cap on pre-ACA insurance, and his premiums actually doubled!

    Now the tough question is whether removing the annual/lifetime cap is what caused Paul’s premiums to double. Where is an actuary when you need one?

  22. Bob,

    I always appreciate your comments. Thanks.

    I think Medicaid spending now is closer to $450 billion or a bit more for the federal and state share combined. Private insurance for those with employer coverage plus those who purchase policies in the individual market is in the $900 billion to $1 trillion range, now I think. So, we’re approaching $2 trillion for Medicare, Medicaid and private insurance combined. Then you have out-of-pocket payments for individuals which total 12% of healthcare costs in the U.S. but, amazingly, 30% in Switzerland. Then there are all the other things I mentioned in my previous comment – public health initiatives, medical research, hospital construction, administrative costs, etc.

    Regarding the impact of a 3% payroll tax to mitigate insurance premiums, I think you’re comparing apples and oranges. If a $50,000 earner who needs single coverage would have to pay between $4,000 and $5,000 annually for a policy today and a 3% payroll tax cut that premium by 10%, he would save $400-$500 on his premium but pay $1,500 in payroll taxes (3% of income). For those with income between 300% and 400% of the FPL, they would need to pay 9.5% of income before subsidies kick in. With the payroll tax, they would still have to pay 9.5% of income before subsidies but now would also have to pay the new 3% payroll tax. The government would capture all or most of the premium reduction through lower subsidy payments.

    A family making $100K needing family coverage at a cost of $15,000 would save $1,500 from the 10% premium reduction but would pay $3,000 in new payroll taxes. It’s also worth noting, that at least in NJ and other high cost states with strong public sector unions, the gold plated coverage that these employees receive cost taxpayers well north of $20,000 per year for family coverage. If the employee receives a wage of $80K, the health benefit is worth 25% of income to which at least some of these employees still contribute nothing. More recently, NJ employees now contribute 1.5% of their income toward the cost of the premium. They also get very generous pension benefits which are also hugely expensive to taxpayers. They know what their salary is but they have no clue how much they receive in total compensation which is unfortunate.

    Regarding the difference in spending on healthcare among countries, I’ve never seen a good definition of what is included in healthcare costs in other countries. I see it every year for the U.S. in Health Affairs magazine. For the 150 million people in the U.S., including family members who get their health insurance through an employer, the employer’s share of the premium plus the employee’s contribution can easily exceed 40% of base wages for those who receive family coverage and are paid a middle level salary. In France, it presumably doesn’t matter if you need single coverage or family coverage. The payroll tax is still the same 13% of income though the supplemental coverage is probably priced on an individual basis just like Medicare supplemental plans are.

  23. Thanks Barry.

    I think that you are right about a $150K maximum covering 90% of claims costs.

    Now let us assume that in a given year, Medicare pays $550 billion in total claims, Medicaid pays $350 B in total claims, and private insurers pay $800 billion in total claims.

    That is a total of $1.7 trillion. One tenth of that is $170 billion.

    So the new payroll tax would be about 3% of payroll, in exchange for which health insurance premiums would go down because carriers would not have to reserve as much for blockbuster claims.

    Now for a lot of individuals and businesses, their premiums would drop by a lot more than 3%. They would come out ahead by paying the tax.

    I realize that this kind of quick calculation does not always survive actuarial reality. (or political reality.) Still I find it an interesting thought.

    On a side note: Your comments about France with a 13% payroll tax plus supplemental policies brought up an old question I have had for years.

    Everyone dumps on the USA for spending 17% of GDP on health care, and praises European nations for spending 8-10% on health care and covering everyone.

    Something about this has always puzzled me. Relatvely few US corporations pay more than 17% for health care, and plenty of small businesses pay nothing. Our Medicare taxes and the taxes for Medicaid probably eat up no more than 5% of GDP.

    Whereas every single business in France or Germany pays the 13-14%.

    How can their spending be lower than ours?

    This does not change any arguments, but I honestly wonder how these numbers are measured.

    thanks

  24. Bob,

    I hear you except that I’m not sure how one would administer such an approach. I’ve personally seen low birth weight premature baby cases generate bills well into seven figures. Cancer treatments can exceed $100K just for the drugs. Then there is the need for hospital and physician services plus other care. Even long term care in high cost states can cost more than $14K per month just for the custodial care before any drugs or medical services that might be needed. CHF patients can be in and out of hospitals quite frequently. That all said, it would be interesting to learn just what percentage of care is attributable to bills in excess of $150K for a given patient in a particular year.

    I’ve read that if we just take the first $5K of bills incurred by each patient, including the very expensive patients, we would be looking at between 25% and 33% of medical claims. The first $150K of spending might already account for 90% of claims costs even at U.S. reimbursement rates except that Medicare and Medicaid combined probably account for at least 40%-50% of provider revenue with private insurance plus out-of-pocket payments accounting for most, but not all of the rest. Total medical spending also includes such areas as R&D, hospital construction, public health initiatives, administrative costs incurred by payers among other things. At the same time, in any given year, half of the population uses few medical services or none at all.

    Large self-funded employers average at least $5K of spending per covered life unless they have an especially young and healthy workforce. The French pay 13% of income for their Medicare for all system which only covers 70% of allowed charges. Most people also have to either get a supplemental plan to cover the rest through their employer or pay for a policy themselves. At more than 17% of GDP, healthcare is very expensive in the U.S. but it’s also quite expensive in most other developed countries as well as a percentage of income most people pay in taxes to support their system. Young healthy people who don’t use or need much healthcare probably do not view it as worth its cost, but that’s the way most systems work. Like most forms of insurance, if you want health insurance to be there for you when you really need it, you have to be prepared to pay for it when you don’t.

  25. Thanks, Barry, but I do have one heck of a time with my proposal that if the cost of treatment (better yet, the bills for treatment) exceed $150,000, then the medical providers just accept $150,000 and be done with it. Other than the drug companies, I think that quite a few doctors and ethical hospitals would be OK with this.

    Then you would not need a reinsurance fund for costs in excess of $150,000, because in my world no bills would exceed $150,000.

    I am going to stick on this stubbornly, because as you correctly percieve, a large portiion of everyone’s health insurance premium goes to cover claims that would be laughed out of court, if you will, in most other nations.

  26. Paul2,

    You’re suggesting a reinsurance pool to cover high medical costs. The threshold above which reinsurance would kick in is called an attachment point. Even a $250,000 attachment point is considered low these days and is quite expensive as a result. Reinsurance with a $100K attachment point would be extremely expensive.

    If such a fund were financed by a flat tax on insurance policies, it would accomplish little to reduce costs because insurers would need to pass it on in premiums. If it were financed with some other dedicated tax like an increase in the Medicare portion of the FICA tax, it could be quite costly for the middle class as well.

    You need to remember that in any given year, the most expensive 5% of insured members account for 50% of medical claims and the most expensive 1% account for over 20% of claims. If we want to find ways to lower the cost of health insurance without materially cutting back on covered services, we need to reduce the cost of healthcare. Health insurance is expensive because healthcare is expensive. It’s that simple.

  27. Bob Hertz – I think there are some good ideas in ACA like a standard suite of covered services. Where they go wrong is with the catastrophic costs. I think there should be a catastrophic fund managed by Feds that might be fed by some tax revenue, maybe a premium paid by health insurance carriers and some other sources. Once the costs for a policyholder go over say $100k the fund would pick up the rest. This way the insurers, especially the smaller ones, wouldn’t have to be so worried about carrying a bunch of very sick policyholders. How can anyone save for retirement if they have individual policies and are paying up to $2k per month for a couple especially in their later years before retirement. The biggest laugh for me is the rhetoric in the ACA world where they say the younger person will pay a little more and the older person will pay a little less. Yeah, right. The difference between what a 22 year old and a 58 year old pays per month on average for a silver plan is $350 – $400 ($250 vs $650) at least in my state of Wisconsin.

  28. Paul2, this is a classic case of what may be wrong with the ACA.

    Your old plan had some caps, and there was probably one chance in a thousand that in some future year you would exceed the caps and have a serious problem.

    The ACA fixed your one in a thousand risk, but the cost to you is very large.
    In fact you would be closer to bankruptcy by paying the new plan premium than you ever were under the old plan.

    The drafters of ACA live in a cushy world where generous employers (like the federal government) cover nearly all the costs of improvements in the standard benefits package.

    My solution was always this: let people buy limited-benefits insurance if that was what they could afford. Then, when that one in a thousand cancer came up, force the oncologists and hospitals to accept the limits and refuse to allow balance billing. $150,000 is plenty of money to cure any disease with realistic price controls on drugs and on hospital fees.

    Bob Hertz, The Health Care Crusade

  29. Well, I didn’t believe all the Obamacare/ACA horror stories until it happened to me. My employer just announced that they are switching to a set of ACA compliant health plans. My current plan is a limited “budget” plan but it worked for me. My premium – that is my contribution will go from $308 a month to $710, deductible from $500 a year to $2500 for the just rest of this year after the new plans are implemented (June 1 to December 31). Maximum out of pocket from $2500 to $6500 for the rest of this year. I just can’t believe it. I’m going to have to waive participation because I just can’t afford it. I don’t qualify for any premium assistance and paying the IRS will be a bargain compared to the $8520 in yearly premiums.

    This comparison is not apples to apples, I realize that. The budget plan had an outpatient cap of $10,000/year and a $150,000 cap on all categories of medical expenses per year. The ACA plan is much more comprehensive but I will have gone from having something that took care of my basic medical needs to nothing at all. For me the premiums did skyrocket and ACA in my case is a complete disaster.

  30. Someone forgot to read…,.Its terrible how you sound . i have worked this industry for over 10 years and the things you say are idiotic! BE informed ask questions dont research for answers. Every household is different! Most Americans just so you will know qualify for an additional tax credit called COST SHARING that the idiots against never spoke of…and by the way it reduces the deductible and out out of pocket that you meantion is so high . Also to follow up most of those deductibles under the silver plans can be as low as a platinum plan deductible. Shhh until you get the facts! Toodles

  31. Well, i don’t get a subsidy and i said all because the healthcare reform is for everybody. If i am mistaken, i’m sorry but i’m seeing this as a positive thing. I have been sort of interested in what the american people are saying. If you can, please explain to me why people are against it…

  32. Well, i don’t get a subsidy and i said all because the healthcare reform is for everybody. If i am mistaken, i’m sorry but i’m seeing this as a positive thing. I have been sort of interested in what the american people are saying. If you can, please explain to me why people are against it…

  33. “I am in favour of Obamacare.”

    Andrei, do you get a subsidy?

    From your blog home page;

    “Obamacare provides affordabe healthcare for all american citizens,”

    Why do you “all”?

  34. Bob,

    According to Rand Corporation survey data published in the WSJ today and outlined in a more recent post on THCB, 8.2 million more people have employer sponsored health insurance as of March 2014 than had it in September 2013. The total insured population is now 9.3 million higher than it was six months ago while the uninsured population fell by a like amount from 40.7 million to 31.4 million and about 11 million of those are illegal immigrants who are not eligible for health insurance. The percentage of the population that remains uninsured is now the lowest it’s been since 2008. I would say that’s progress.

    There are lots of things happening throughout the healthcare system well in advance of specific ACA related (and Medicare) rules taking effect. For example, hospitals are working hard to reduce readmission rates because they soon won’t get paid for preventable readmissions. On the employer front, the Cadillac tax on high cost health insurance plans doesn’t take effect until 2018 but employers are already developing strategies to deal with it including working with unions on the matter.

    I don’t know why all of these formerly uninsured employees now have employer sponsored insurance. I don’t know to what extent, if any, the ACA influenced business decision making. My gut tells me, though, that the ACA probably helped to move businesses in this direction even though the penalties for not providing insurance don’t take effect until next year.

    Low income employees are heavily concentrated in the food service and retail trade sectors. This is where most of the gaming around driving hours below 30 per week is going on. These are also employees who would be eligible for the largest subsidies if they buy health insurance through one of the exchanges or, in some cases, qualify for Medicaid. Even here, though, most of the larger employers are providing at least single coverage for their full time workforce.

  35. Barry always adds value to the blog, but I cannot agree with his point that employers with over 50 employees suddenly started offering health insurance to avoid a penalty.

    a. There were no penalties this year.

    b. There were opportunities to shove some of the employees under the 30 hours bus.

    c. Paying the penalty, worst case, is still cheaper than buying a compliant policy.

    I think the employer mandate has been such a spectacular failure, that the total number of persons (and certainly families) with employer coverage has probably dropped.

  36. (Previous message seems to be snagged)

    Thanks, Perry. This led me to a couple of other links:
    http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3251220/
    http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8311.pdf

    What I got out of those sources was that in MA most of uninsured enrolled in the first year, and that the effect of the law was to raise premiums only a little (6 percentage points above trend).

    Given that individual insurance in MA was and still is expensive, I don’t understand why in MA most people signed up for it, while they have balked under the ACA (even in the blue states). Perhaps the penalties in MA are higher?

  37. By the way, I was simply replying to jbjones request for a report on Mass.’s experience. I think it’s good information to know.

  38. Perry, in this system access and affordability has always meant subsidies. Private insurance will not solve the cost problem.

  39. Did I say that? No, I don’t think I did. I’m just pointing out that it’s great to give people insurance, but that doesn’t necessarily mean access or affordability.
    Does that make sense to you?

  40. By “(at least in the blue states)” I mean why isn’t enrollment higher in the blue states?

  41. Thanks, Perry. This led me to a couple of other links:
    http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3251220/
    http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8311.pdf

    What I got out of those sources was that in MA most of uninsured enrolled in the first year, and that the effect of the law was to raise premiums only a little (6 percentage points above trend).

    Given that individual insurance in MA was and still is expensive, I don’t understand why in MA most people signed up for it, while they have balked under the ACA (at least in the blue states). Perhaps the penalties in MA are higher?

  42. “Personally, I think health insurance should be separated from employment so that people don’t suffer from “job lock:””

    My wish too Legacy. Turning the entire market into the individual market would be the fastest way to single-pay.

  43. Although one could still question whether we need something as complex as the ACA to get more people to sign up for Medicaid and for more employers to offer insurance.

    Personally, I think health insurance should be separated from employment so that people don’t suffer from “job lock:”

  44. “Although the 2006 health law has expanded insurance coverage for Massachusetts residents, rapidly rising costs and expenditures pose a major threat to the sustainability of the health care system. For example, in 2006, Massachusetts spent around $1 billion on Medicaid and other health care programs. By 2009, this figure had soared to $1.75 billion. Additionally, in 2009, Massachusetts spent $9,278 per capita on health care, the highest total for any state in the U.S. These health expenditures, as illustrated below in Figure 1, have exceeded both the rates of economic growth and cost of living in Massachusetts. This is especially worrisome considering that health expenditures will consume 54% of the state budget in fiscal year 2012”

    Perry, do you think the strategy of denying access to millions of people is the way to fight rising health care costs?

  45. I think one could reasonably argue that the provision of the ACA that called for the federal government to cover the entire cost of new Medicaid beneficiaries for the next three years and 90% of the cost after that is responsible for much of the recent Medicaid enrollment growth.

    For employers with over 50 employees, the prospect of having to pay a penalty for not providing health insurance to employees probably induced a good many of them to offer insurance when they hadn’t previously.

    At the end of the day, some 9.3 million more people now have health insurance than before the ACA became law. Of the 31 million or so that still lack insurance, about 11 million are illegal immigrants who aren’t eligible for it. The botched rollout and confusion notwithstanding, it’s done a lot more good than harm, in my opinion.

    If Republicans think the ACA is so terrible, then offer something sensible as an alternative that will do at least as good a job in reducing the number of uninsured or support spending a ton of money on high risk pools for those who are uninsurable under traditional medical underwriting standards. Their naysaying is getting tiresome and I don’t think it will prove to be a winning strategy in November.

  46. Perhaps a dumb question but …

    If the majority of those newly insured are covered by Medicaid and Employer sponsored insurance, how much of the improvement in health care coverage can be attributed to the ACA.

  47. I sure would like an answer to my previous question about what we can learn from the Massachusetts experience, if anything.

  48. One huge positive factor that’s been going on in healthcare for at least four years now is the slowdown in medical cost growth. Medicare spending for the first six months of fiscal 2014 is up only 0.6% according to the CBO’s Monthly Budget Review released yesterday. This is despite probably 3% year-to-year growth in enrollment as the baby boomers are now turning 65 in droves.

    Aside from the botched rollout, the biggest negative factor from an insurer standpoint, I think, is that the percentage of young and healthy enrollees is probably lower than forecast. When the CBO estimated that 7 million people would enroll in the exchanges, they also suggested that about 40% of them or 2.8 million needed to be in the young and healthy demographic to make the numbers work. Insurers who priced their exchange products based on that demographic mix are likely to have disappointing results in the first year. Some of the larger players including United have hung back to wait to see how the market develops. They are only in four individual market exchanges and five SHOP exchanges. Wellpoint, which did move aggressively into the exchanges, assumed an older age mix which is why they suggested that their enrollee population is tracking with their expectations.

    I’ve said before that I think the ACA is a positive development especially for those able to acquire insurance for the first time or improve upon the meager coverage that they might have had before. There is plenty of room for improvement including price and quality transparency, sensible tort reform, better fraud mitigation analytics in the public programs and, perhaps, a new copper plan with thinner coverage with an actuarial rating closer to 50% than the 60% level of the bronze plans.

    I think Republicans, who I generally support on fiscal issues, would be better served to develop a more positive agenda and stop the Obamacare naysaying. It’s here. It’s the law of the land. It’s not going anywhere at least as long as Obama is president. As more and more people sign up and benefit from it, it will be here to stay. Get used to it and help to fix what needs fixing.

  49. Folks on Medicaid are not insured. Optimistic (lacqueys) can say they are covered, but welfare is not insurance.

    Folks that go to the exchanges are not getting insurance policies. GI with no PEC limitations and no underwriting consideration for medical conditions is not insurance. Throw in the subsidy and what you have is taxpayer subsidized, health care, quasi-welfare. Again, it can be described as coverage, but not insurance.

    I missed your quotes from the Aetna CEO…” Aetna CEO Mark Bertolini says Obamacare has failed in one of its primary goals — attracting the uninsured — and has managed mostly to simply move people who already had private coverage to public coverage where the government subsidizes their medical costs.”

    Will premiums skyrocket? Compared to the promise (lie, that is, not “misstatement”) of a $2,500 reduction in premiums, I’d say there is an excellent chance premiums will continue to skyrocket.

  50. Joe, I have little doubt about your good intentions. I do think you would better serve your cause by not being so overly enthusiastic about how well the ACA is performing and instead focus on fixing its problems. Excessive optimism might work with those that have little knowledge of the subject, but a lot of people here have been deeply involved in the field of healthcare for as long as you.

    “If you wish to dispute my facts, feel free, by offering citations, studies, something that has a better, stronger foundation.”

    Since this present government has chosen lack of transparency rather than transparency we don’t really have the best facts to quote. Quoting secondary and tertiary sources is not sufficient. I actually didn’t quote facts rather disputed yours based upon the fact we don’t yet know them, but because of the secrecy and prior history can infer that certain things are likely to be happening.

    “Changing it is not easy, and it is not a game to be kicked around by amateurs.”

    …And that is exactly what we got with the ACA. Yes, many have great degrees and have proven knowledge in specific fields, but that knowledge doesn’t translate to other areas where they may have no more specific knowledge than any other long term participant in the field. If you recall, the ACA was a political solution not a carefully drawn up plan. Politics dominated its passage.

  51. Everyone is indeed entitled to their own opinions, but not their own facts. This is not a hobby for me. This is not a pastime, some amusement. This is what I do every day, all day: Work toward better healthcare, for far cheaper, for everybody. If you wish to dispute my facts, feel free, by offering citations, studies, something that has a better, stronger foundation. The U.S. healthcare system is vast and deep, with many entrenched interests fighting desperately for their piece. Changing it is not easy, and it is not a game to be kicked around by amateurs.

  52. @Joe: “I am having a little trouble parsing your post through all the snark and condescension, Allan.”

    Did you read your opening paragraphs? I guess not.

    ” If they are poor their premiums are …”

    Yes, there is a problem since my quote didn’t say poor rather ‘lower income groups’ some of which receive no subsidies and others receive too little subsidy based upon the premium levels and of course Obamacare has hit them even harder with the deductibles, copays and narrow panels. This is horrendous and every bit of a train wreck that you refuse to acknowledge. The train wreck is not lessened by your private individual discussions that are not even good anecdotally.

    “So you have not read the sources I gave?”

    Isn’t it amazing how difficult it is to find out how many paid or the age distribution, yet suddenly specific figures are released, but not the raw data. …And this from the most transparent administration?

    “That’s in the LA Times article and in my comments. They don’t count?”

    I don’t know what you are trying to say. I also hope you realize that at best the LA Times is a secondary or tertiary source.

    Allan:”> Yes Joe, payment of the premium is necessary…”
    Joe: “Thank you for your condescension,”

    You are welcome but based upon the wild comments made in your op ed what are we to think…? That the number enrolled don’t have to first pay the premium before being considered enrolled? I enrolled in a gym, but they would let me in until I paid the fee. I am not guessing as I am not the one drawing conclusions based upon unknown facts. I simply stated that I wouldn’t count anyone until they pay the bill.

    “Everyone is entitled to his own opinions but not to their own facts” D.P. Moynihan

  53. I am having a little trouble parsing your post through all the snark and condescension, Allan. But this seems wrong:

    >The fact that many in the lower income groups have to choose high deductibles and high copays with a narrow panel…where their premiums are not matched by subsidies is a horror for them though perhaps not a horror for you.

    I don’t get the “not matched by subsidies.” If they are poor their premiums are matched by subsidies, and capped by the 9.5% maximum bite of their income (at the low end of the scale, it’s 2%, as I noted above). Perhaps you meant that the co-pays and co-insurance are not matched by subsidies, which is true. This is not a good thing. Is it a “horror” for them? My experience talking to a lot people who have now gotten insurance is that despite the costs, they much prefer it to not having insurance. Even paying a 20% coinsurance (20% of the insurer’s price, not the much higher “charge master” price) is a lot less than they would have paid before.

    > The fact that if we take the 10 million formerly uninsured (really?)

    So you have not read the sources I gave? Or you think snarking and question marks refute any data I might cite?

    > forget the fact that many will go on Medicaid

    Didn’t forget that. That’s in the LA Times article and in my comments. They don’t count? Medicaid is lousy insurance, but if we are counting who is insured, they count.

    > Yes Joe, payment of the premium is necessary…

    Thank you for your condescension, sir. I already mentioned that in the comments. Do you have a secret source of information about how many of them will not pay the bill? Or are you guessing like the rest of us?

    > we still have 40 million left to go

    46 million, as I said above. 10 million is a start, but it is not nearly enough.

  54. “There is no doubt that switching to an Exchange plan will switch people onto narrower networks, which may not include the doctors they want or the doctors they have been working with.”

    Or the procedures they want.

  55. “But the right still needs to call it a “train wreck”

    If you don’t recognize it as a train wreck then the Japanese tsunami that destroyed their reactor was just a pleasant wave.

    The fact that many in the lower income groups have to choose high deductibles and high copays with a narrow panel (not the best for good healthcare; excludes a lot of the major cancer centers, etc.) where their premiums are not matched by subsidies is a horror for them though perhaps not a horror for you.

    The fact that if we take the 10 million formerly uninsured (really?) and forget the fact that many will go on Medicaid and many others haven’t yet paid the premium (Yes Joe, payment of the premium is necessary for the insurance to start.) we still have 40 million left to go.

    This bill is a failure that if it survives as is will cause more hardship to the poor, tax the middle class families and provide worse care (not better) for almost everyone.

    Congratulations on your ability to dream a dream and then without realtime thinking think it can become a reality. For now I’ll skip commenting on the rest of your dreams.

  56. Joe,
    Appreciate your update re unconstitutional changes to the law (as noted above) and further appreciate your updates re Coburn and the other person….but I think the word “inconvenience” to millions forced into narrow
    networks is not right….although “disastor” and “ruinous” may also be overstated.
    Re the 10 million, I agree that at this point these are mostly guesses…..but your original comment was “altogether some 10 million formerly uninsured people now have medical coverage.”…..which I think is too declarative a statement…..at best premature and I suspect will turn out a huge overstatement (just speculation).
    Paul

  57. Finally, as to the 10 million: Let me add this, as I did further up in this comment stream.

    The latest Gallup poll shows that the percentage of Americans without health insurance peaked at 18% in the third quarter of 2013, just before ACA signups began. By the second half of March, 2014, it had hit 14.7%. 18% of Americans = 56 million. 14.7% = 46 million.

    http://www.gallup.com/poll/168248/uninsured-rate-lowest-2008.aspx

    Some of those people will fall off, and fail to pay their premiums. Some of them only think they are covered, and are mistaken. On the other hand, others will complete the process of signing up on the exchanges, and add to the total. And people are still signing up for Medicaid. So it’s hard to know exactly how many people have insurance right now that did not have it in the fall. These numbers are not just made up, or exaggerated. They are best guesses from the sources available.

  58. > Edie Sundby

    This is one of the many cases I read when it first came out. Courageous woman, tough battle – and her insurance canceled, it is implied or said, because of Obamacare. In fact, her insurance was canceled because UnitedHealth was getting out of the individual market in all but a few states. Was this “because of Obamacare”? Well, yes, but not because Obamacare made them do it. Rather because the ACA mandates insurance companies have to take all comers. In the individual market, that leaves insurance companies exposed to outliers like Ms. Sundby. So UnitedHealth likely only want to be in markets where they already had a large pool of customers across which they could spread the risk. In California, with over 30 million people, they only had 8000 customers. So they pulled out.

    Health insurers do this all the time. Probably more of them have done it in preparation for the ACA. UnitedHealth announced it over a year ago. If they had done it before the ACA, Ms. Sundby, with so dire a “pre-existing condition,” would have had little hope of finding another insurance policy in the individual market that would pay for care for her condition at all, much less the doctors and cancer centers that she wished to work with.

    We do not know from the articles the outcome of her situation. But we do know that when her insurance carrier decided to exit her market and dumped her, the existence of the ACA guaranteed that she could find insurance that would pay for her care.

    So no, I would not say that the ACA ruined her life.

  59. Thanks, Paul.

    > Coburn.

    I don’t know about Coburn’s specific case. Nor do I know the real context of Sen. Reid’s comment, which certainly sounds insensitive in the face of it.

    There is no doubt that switching to an Exchange plan will switch people onto narrower networks, which may not include the doctors they want or the doctors they have been working with. Sen. Coburn is in an unusual circumstance because despite his position of relative wealth and power, he cannot simply by a more comprehensive plan — because Congress made all its members and employees buy their insurance to the Obamacare exchanges. So if he really thinks he cannot find the care he needs under any of the plans offered in the exchange, he has to quit the Senate.

    I note that he is now 65, and so eligible for Medicare. I’m not sure how that interfaces with the rule of the Congress must get its healthcare through the exchanges. One thing that is quite clear about his case and its relation to the ACA is that if he were under 65, and this were before the ACA past, a retired or unemployed gentlemen with cancer (a “pre-existing condition”) would have little hope of finding insurance in the individual market that would cover his condition at all, much less the doctors and cancer centers that he preferred.

    So I would say that the ACA inconvenienced him. I would not say it ruined his life.

  60. Joe Flowers, I appreciate the intellectual honesty to note when you come across something that contradicts a postion you have taken:
    you said:
    “o I’m going to modify my own comment here. Nicholas Bagley, a lawyer, just came out with an article in the New England Journal of Medicine making the case that the selective delays of enforcement probably are outside the president’s discretion. And what is more, they weaken the legal basis of the law going forward, by setting a precedent under which a more hostile administration could just refuse to enforce the whole thing, or at least parts that it was hostile to:
    “The Legality of Delaying Key Elements of the ACA”
    http://www.nejm.org/doi/full/10.1056/NEJMp1402641

    I had raised 2 other issues with your piece. One, re your statement that all the disastrous stories about individuals were false….here are 2 you might wish to comment on:

    1. Did you look into Senator Tom Coburn?

    Coburn initially lost his cancer specialist when he was forced into the Obamacare system. But when Coburn voiced concern—from experience—about the lack of cancer treatment centers covered under Obamacare, Reid said he was just “getting into the weeds”

    His ACA/Ocare policy does not include his cancer doctors….Okay…this may not “ruin” Coburn….maybe he can pay out of pocket for his preferred doctor. But several million folks going into very narrow networks….via coercion…is more than an “inconvenience” I would argue.
    2. From Investors Business Daily
    … Reid coldly dismisses people such as Edie Sundby, a stage four cancer patient, who was told that the plan that had paid out $1.2 million and helped her survive all these years was substandard and would be canceled because it didn’t contain the one-size-fits-all coverage mandates of ObamaCare.

    The last issue I raised was your claim that 10 million previously uninsured now had coverage, based on an LA Times analysis. I have read it…..at this point I remain sceptical….and prefer to wait and consider more data and analysis before conceding or doubling down.

    I do note that I am perhaps like an amateur entering the boxing ring with professional (you)…..but what the heck…this is a blog and in the spirit of well intentioned debate I will go ahead and post this.
    Paul

  61. I’m going to modify my own comment here. Nicholas Bagley, a lawyer, just came out with an article in the New England Journal of Medicine making the case that the selective delays of enforcement probably are outside the president’s discretion. And what is more, they weaken the legal basis of the law going forward, by setting a precedent under which a more hostile administration could just refuse to enforce the whole thing, or at least parts that it was hostile to:

    “The Legality of Delaying Key Elements of the ACA”

    http://www.nejm.org/doi/full/10.1056/NEJMp1402641

  62. I gave the answer below, but I’ll repeat it here, since I just saw your dismissal:

    > “altogether some 10 million formerly uninsured people now have medical coverage”. Please provides sources for this one!

    Here you go. It’s a very solid article from the LA Times citing various surveys and sources. It counts 9.5 million, but that is conservative, since 1) it was written several days before the window closed on the law, 2) it mentions a number of likely sources of more people that were too vague to be counted in their total, and 3) people who started the process before the deadline can still finish it over the next few weeks.

    http://www.latimes.com/nation/la-na-obamacare-uninsured-national-20140331,0,6550360,full.story#axzz2xXi9QgVU

    Add this to that: The latest Gallup poll shows that the percentage of Americans without health insurance peaked at 18% in the third quarter of 2013, just before ACA signups began. By the second half of March, 2014, it had hit 14.7%. 18% of Americans = 56 million. 14.7% = 46 million.

    http://www.gallup.com/poll/168248/uninsured-rate-lowest-2008.aspx

    No whoppers. No exaggeration.

  63. Good point, Bob. To be clear, the cap is on premiums alone. So the premium would be capped, but the deductibles, co-pays, and co-insurance would not be.

    The range is like this: At the bottom, for a single person earning right at the poverty line ($11,490), the maximum premium is $20. For a family of four earning just under the 400% level ($94,200), the maximum premium would be $747.

    The info is here:
    https://www.fas.org/sgp/crs/misc/R41137.pdf

  64. “But the deductibles, co-pays, and coinsurance are another matter. We may well see the rise in premiums held down below 10% on average, because it is the premium that most people consider the “price” of insurance. But we may well see the other costs of insurance go up even more.”

    Anybody can tout a “low premium”, car dealers have always touted a low monthly payment, but the small print says lease, with no mention of the buy back value – where the money is made.

    Many people are made to think they’re buying income protection when they are not. I find that the real farce of the ACA.

  65. I believe that under the subsidy program, the cost of insurance to the insured is capped as a per cent of their income. (9.5 per cent as you get toward 400 per cent of poverty.)

    Therefore the premium could be $10,000 a month and it would not matter to the insured.

    The real pain then would be visited on the persons who are just over 400% of poverty and are now trapped in the individual market.

    Of course I maintained from day one that there should be no cap on subsidies. The numbers to make that expansion are in the $10-$20 billion range, which is not a huge amount in federal health care financing.

  66. Actually, groups in the 10-99 size ended up with 4 rates (ee,es,ec,& fam) that ranged by +/- 33% from average (67% total spectrum). Now they have 46. Groups that were discounted 33% for no medical issues, 15% for favorable industry, 15% for favorable zip code, and were at 1/5 best age bracket (i.e the ideal group) are now seeing rates increase by 70 to 90%. There are plenty of ways to avoid modified community rating. Up is down. Black is white. Enjoy.

  67. “But we may well see the other costs of insurance go up even more.”

    Concerning for sure, as well as what will happen to costs of health care in general.

  68. Perry, I don’t think we can make generalizations like that. As of now, most of the premiums available in the exchanges are affordable, especially when you take the subsidies into account. But the deductibles, co-pays, and coinsurance are another matter. We may well see the rise in premiums held down below 10% on average, because it is the premium that most people consider the “price” of insurance. But we may well see the other costs of insurance go up even more.

  69. Even if premiums don’t skyrocket, will they remain affordable for most people?
    Including the ones with subsidies?

  70. As Jeff Goldsmith suggests, the largest impact of the ACA may come in small group insurance, which covers over 80 million persons.

    It should be noted that the rule changes on small group insurance had nothing to do with the uninsurance problem. Small groups could have been left alone in the ACA, but were not.

    As I am in the insurance business, what I see so far in my state of MN so far is this:

    Group insurance used to have about 12 rate classes.

    Now it basically has one, which in terms of rates is set at about Class 8.

    The groups who used to have Classes 9-12 are delighted.

    The groups who used to have Classes 1-6 are very worried. Some will drop insurance.

    This is actually an old story in the US employer market.

    Healthy groups began to escape from Blue Cross community rating in the 1950’s, by going to commercial insurers.

    Large companies then escaped from commercial insurers by self-funding plans.

    The ACA can be looked on as an attempt by government to re-establish modified community rating.

    And again you will see attempts to escape. I think this is what Jeff Goldsmith was getting at.

  71. Sounds like a good guess.

    The incompetence has certainly been jaw-dropping. One tiny example: They relied on machine translation for the Spanish-language version of Healthcare.gov. “Premium,” for instance, came out as “prima” (female cousin) rather than “cuota” (fee), which would be the correct word. Whose idea was that? Government contracts tend to go not to those who are most competent at what the contract is for, but to those who are most competent at the very special skill of getting government contracts.

  72. There is no middle ground on this topic, unfortunately.

    What we do understand is that the continuing stream of “unintended consequences” and active incompetence (the October rollout) has damaged this administration as well as credibility of this program. There have been a ton of unforced errors. And a remarkable combination of arrogance, self-righteousness and paranoia that exists to this day. It’s a major reason why people believe that the intermittent flashes of good news are nothing other than spin. They have exhausted their credibility with most ordinary people.

    Don’t mistake me for one of the yobbos lobbing grenades at the ACA; we have NO EXCUSE as a society for having 50 million uninsured people. On that we agree. But misleading people (you can keep your health plan, ‘only the wealthy will pay more”, etc.) has a ton of political consequences. That was the main problem. They will probably lose the Senate over them.

    While I don’t think rates will triple, I wouldn’t be the slightest bit surprised by a rash of 12-20% rate increases in the individual and small group market, extending far beyond the Exchanges. What Wellpoint has done, unfortunately, by raising their 2015 estimates, is set the insurers up to take the fall for them. As you well remember, Wellpoint’s ill-timed California rate increases in early 2010 turned the political tide and played a major role in getting it passed. ACA should really be ABA- the Angela Braley Act. You can be certain that jihad will be declared on the big public plans sometime this fall. . .

  73. (BTW, h/t to Jeff for the phrase “rubber mets the sky” that I commandeered for this article. He used it 20 years ago in a speech to the Healthcare Forum Summit, describing the failure of the Clinton health reform initiative.)

  74. The question I have for the wise men of this forum: what can we learn from the MA experience (Romneycare)? How do the current ACA pools compare, in terms of fraction enrolled and composition, to the pool established in the first year in MA? (Recognizing that the ACA results vary greatly across states and are far from final.) If the ACA is under-performing relative to the MA experience, why? My uninformed guess is that MA had advantages in: (1) because it already had community rating, the price shocks were attenuated; and (2) political support and outreach worked well in attracting the young and healthy.

  75. I think the predominant weaknesses of Obamacare are that it is 1. Too complicated. This prevents people from easily working with it and being innovative and excited by it. 2. It does not have any significant price lowering or cost reductions devices in it. It says it does, but it really doesn’t. We deserved less banality here.

  76. Hey, Jeff!

    You’re certainly right about the rules changes being the big deal, and the systemic shifts that will spring from them a truly big unknown.

    But keep in mind that my analysis here is not that Obamacare is perfect, or that it will work totally as planned, or that these shifts will be easy on all concerned. My analysis here is solely to say that the continuing iterations and transmogrifications of the “Obamacare is a train wreck” theme are not to be taken seriously by anyone who is trying seriously to figure out how this thing is going to work, much less trying to nudge healthcare in the direction of “better and cheaper.” They are just propaganda manufactured by professional Chicken Littles.

  77. Joe, The 4-6% are the reported rise in their paid claims cost trend. The difference between that and overall national cost growth: cost shifting, shifts in the risk pool caused by healthy people not renewing or selecting out AND the underlying growth in costs, which are NOT growing at zero. There is still cost pressure from ambulatory services (mostly non-hospital) and post-acute care.

    You may have missed that all the big plans except United missed their 4Q earnings, and United made theirs by a few pennies by searching under the couch cushions. Be careful on Wellpoint’s statement. They didn’t raise their earnings “because” of exchange sign-ups, but a host of other factors.

    The exchanges are adding, what, maybe 3 million new people, e.g. previously uninsured, to a pool comprised of 160 million presently insured. That’s a drop in the bucket, and the larger players have hedge their bets on these folks thru network construction/lower rates and the huge deductible “fence” that will protect them from an immediate cost surge.

    I think your analysis is naive and premature. The private health insurance premium pool is a TRILLION dollars. It’s bigger than Turkey. No-one, especially including the folks at CMS, have the faintest idea how this pool is going to behave when you change a lot of its rules. It’s those rules changes, not the piddly 3 million new people, where the real uncertainty is.
    There are a lot of ‘end zone’ dances going on just now. Don’t get caught up in them.

  78. You mess with Joe, you get what you get. He’s the most broadly knowledgeable and most charitable observers and writers I’ve ever encountered in the healthcare space.

    Your polemical invocation of Senator Reid is telling.

    “Several of the changes far exceed any appropriate discretionary implementation powers and clearly needed congressional authorization.”

    Care to itemize and document the constitutional/case law underpinnings of these?

  79. Joe, review the earnings reports for most for profit insurers…Core trends are still expected to rise 46% before adjusting for case mix, demographics and plan designs. Remember medical trend is a combination of RX, inpatient, physician and outpatient/ambulatory. RX is up because of specialty drugs — eager to see what Gilead Sciences newly approved ( and expensive ) Hep C drug is likely to do to Medicare. Biologics will hit specialty drug trends hard. Inpatient and admissions are down but ambulatory has been up trying to make up shortfalls in inpatient services. If regulators forced non profit Blues to release their war chest of accumulated reserves, fully insured carriers had to chase Blues reduced pricing to maintain marketshare and a range of other trends took hold such as DC designs driving people to HDHPs, we could see sustained low single digit trend for a period. I don’t think the public exchanges are going to blow up – at least not until well after 2020 when the accumulated public debt resulting from deficient spending and underestimated costs of ACA catch up with up…I wrote an article handicapping Obamacare through 2020. Obviously one man’s opinion. Feel free to peruse and thanks for your thoughtful column.
    http://leadersedgemagazine.com/digital-edition/2014-01/

  80. > “altogether some 10 million formerly uninsured people now have medical coverage”. Please provides sources for this one!

    Here you go. It’s a very solid article from the LA Times citing various surveys and sources. It counts 9.5 million, but that is conservative, since 1) it was written several days before the window closed on the law, 2) it mentions a number of likely sources of more people that were too vague to be counted in their total, and 3) people who started the process before the deadline can still finish it over the next few weeks.

    http://www.latimes.com/nation/la-na-obamacare-uninsured-national-20140331,0,6550360,full.story#axzz2xXi9QgVU

    No whoppers. No exaggeration.

  81. > “Every horror story of Obamacare ruining people’s lives they came up with turned out to be false.”….

    I have read every one that I can find. Keep in mind that I am talking about “ruining people’s lives,” not inconveniencing people or surprising them or making them hot under the collar. The pre-ACA way we handled healthcare insurance regularly and by the thousands bankrupted people, put them through needless suffering, and even killed them. If you can find one story in which something as dire as that happened, and it truly was because of the passage of the ACA, not because of some screwup that can be rectified (like the many people who thought they were covered and discovered they weren’t), I would be very interested. I have not heard one yet.

  82. Whoppers and exaggerations, you say?

    > Discretionary powers…

    The question of whether the President can delay enforcement of provisions of a law is not theoretical or a matter for rhetoric. It has been thoroughly adjudicated. It is widely agreed and found by the courts that the Constitutional phrase “take care that the laws be faithfully executed” implies judgment and discretion on the part of the Executive, including delay to make a provision workable. They have generally foresworn interference in the discretion of the executive except in the case of a blatant “refusal to enforce,” not delay enforcement. In a leading case on this subject, Heckler v. Chaney, Chief Justice William Rehnquist wrote that courts must respect an agency’s presumptively superior grasp of “the many variables involved in the proper ordering of its priorities.”

  83. In my opinion Joe Flowers provides some valuable insights and analysis, but he wraps it all in inflammatory polemical attacks on ACA/OCare critics….and while accusing the right of whoppers and exaggerations he provides his own:

    “They railed at the administration using discretionary powers built into the law to help it work better”. Several of the changes far exceed any appropriate discretionary implementation powers and clearly needed congressional authorization.

    “Every horror story of Obamacare ruining people’s lives they came up with turned out to be false.”….channelling the ever thoughtful Harry Reid?

    “altogether some 10 million formerly uninsured people now have medical coverage”. Please provides sources for this one!

  84. There has been a school of thought that what American health care really needs to cut costs is a series of “disruptive innovations” that overturn all conventional pricing models……i.e. a Walmart, a Southwest airline, an EBay, etc. (John Cochrane is one such theorist.)

    Joe makes a fascinating point about how this ‘disruption’ will not happen in health insurance. No one wants to be the low price leader.

    That is because insurance is not a physical commodity where you make it, you sell it, and you walk away and make something else. Insurance is a multi-year product with enormous back end liabilities.

    Side note:

    I would contest just one of Joe’s points, where he says that insurance companies cynically cancelled 7 million policies to sell more expensive product.

    In many states if not most, insurers were ordered to cancel policies, in part so as to drive more healthy, recently-underwritten persons into the state exchanges.

    The government was at least as cynical as the carriers!

  85. YAWN! BIG YAWN! So biased it isn’t worth reading.

    Where exactly do you get this whopper of a lie from?

    “and altogether some 10 million formerly uninsured people now have medical coverage.”

  86. Michael, This was a really insightful post. Thank you for taking the time to lay this out.

  87. This is a really illustrative discussion, and I appreciate your thoughtful contributions to it, Joe.

    I think it is worth pointing out that the smart conservative policy types who specialize in health care — Avik Roy, Yuval Levin, Jim Capretta, Scott Gottleib, etc. — have all doubted that we’d get a death spiral. My guess is that the 8-10% range that Michael mentioned is pretty consistent with where they would make a guess.

    Still, though, there are a lot of exaggerated claims (on both sides!). The idea of a death spiral ever happening was really problematic in particular, given that the subsidies will shield something like 80% of consumers from premium increases as a % of their income.

  88. Thanks for the post, Michael, you bring some interesting stuff to the table, especially the part about the profits from subsidiaries.

    Now remember, though, I am not saying prices won’t rise. That’s very hard to predict. I am saying that predictions of “skyrocketing” prices and tripling premiums are just propaganda that we should not place much credence in.

    Yes, plan design will have a big impact on costs as more people become exposed to “skin in the game.” This is the largest trend across the board.

    Finally, where do you get the 4-6% rise in costs? NME has been rising at something like 2% for the whole of the Obama Administration, something like 1.8% (off the top of my head) in 2013. If you have other figures, I would love to see them. That would be a big jump from the last 4 years.

  89. Joe, I agree that costs are not likely to go up but I’m not sure I agree with all of your logic. First of all, no one, including the carriers knows what the likely costs are going to be because there will not be enough claim data to credibly underwrite the risk pools for 2015.

    1) Insurers must submit 2015 rates for approval by May and given the lag in claims, there is no way there is any actuarial basis to judge the true risk. Given the 3 R’s protecting them until 2016, the blind underwriting will likely have little impact on their bottom lines ( read any quarterly report from large public carriers participating in pools and see analyst forecasts on risk) They will want to get the maximum increases they can get without setting off a firestorm of controversy with regulators — so my guess is they will come in somewhere between 8%-10%. Maybe lower for plans they want to promote or that have good claims like HDHPs. HHS has already defined egregious as increases in excess of 10%.

    2) New entrants and second tier players seeking to opportunistically gain marketshare, may withdraw versus try to go for big increases. Insurance commissioners hate markets withdrawing from their states but if the carrier completely misread the tea leaves of risk they were getting in the exchange pool, they have to decide how to stem the bleeding. History teaches us that the reinsurance pools can’t keep up with bad underwriting or poor risk selection ( NY has had a small group minimum MLR of 75%, community rating plans and a risk sharing feature — that has not made losers in the small group market whole for some time. the pool dried up. Who wants to underwrite below 75% and give their competitor $$$ for pricing too aggressively to win marketshare. ) Watch the rebates there will be very few.

    3) The MLR regs capping SGA and Profit at 80% are a joke. Each insurer’s healthcare subsidiaries are allowed to charge their fully loaded costs to the claims portion of the MLR calculation and in doing so, can charge excessive transfer pricing with much higher margins to their sister company, the insurer. Example, United policyholders have an insured premium that includes services provided from United’s subsidiary Optum RX Services. Optum charges the claims it purchases as a PBM on behalf of the policyholders as “claims” but receives rebates from drug companies that are booked in the health services subsidiaries as profits and are not part of any MLR calculation. This is true for a range of services booked as medical claims costs that are provided by owned subsidiaries of the insurers. Insurer stocks are up to a small degree in anticipation of new members from public exchanges but are mostly up because of the money the insurers are making in their health services subsidiaries. The optics are perfect — the insurer looks to be making low margins while paying higher transfer pricing to a sister company who posts the higher growth and margin. Optically, the insurer is working off low margins and lower growth but the aggregated earnings are exciting because they include the other part of the house where the real dough is being made.

    4) Plan designs will do more to impact costs as people sign up for high deductible plans and as narrow networks remove high unit cost outlier providers from the billing mix. These plans are not open access PPOs, they are a cross between Medicaid and Medicare and are fine if you never had coverage. However, if you are going from private insurance to public exchange coverage, expect noise from people accustomed to flying first class. This coach healthcare — which may not be a bad thing for Americans and certainly drives lower trend than open access PPOs.

    I think you may be correct that in the near term prices may not rise but it has more to do with sleight of hand profit management, understood poor visibility on early stage enrollment risk, limited exposure by any one insurer in this pool of risks ( UHC is only in nine exchanges ) and the highly radioactive optics of trying to get double digit increases as a national insurer when your stock is at all time highs. Expect the lesser known regional and local insurers to stumble. The big boys know exactly what they are doing ! They will be fine. And as for costs, expect them to rise by 4-6% which is core medical trend. Unfortunately, it is twice the rate of GDP and will continue to corrode our economy.

  90. The deductibles, co-pays, and co-insurance are quite variable, and often quite high, especially on the Bronze and Silver plans, the two least-expensive levels. And the free “preventive” provisions are really pretty skimpy. So any health insurer or healthcare provider basing future strategies on how the newly insured are going to act have to think of them as seriously under-insured. To the extent that people can avoid treatment at all, they will. To the extent that they can find treatment in less expensive venues, they will.

    But this is one of these unknown variables. None of these plans is easy for the average person to understand. We will have to wait and see how people act. It may well be that we see a surge in utilization as people get things taken care of that they have neglected, but that the surge will fall off as people become more aware how much of the cost they are paying themselves.

  91. Joe Flower:

    Do you have any information regarding the high deductibles of the ACA/OCare plans? My guess from what I have read is that the deductibles
    may have doubled from the pre ACA/OCare plans.

    If the deductibles have increased substantially….that could well support your hypothesis that rates will not skyrocket….as patients will pass on treatments once they find they are paying the first 1-3 thousand dollars out of pocket.
    Thanks

  92. These are all good questions, and a good roundup of unknowns. Taken together, they are again an argument that we will see a lot of variability between markets and companies, especially in the smaller markets; that we may see some companies drop out of the markets, and others come in; and in general that it’s going to be a bumpy ride not only for the insurers but for their customers. None of it, though, argues for “tripling” of premiums or “skyrocketing” rates.

  93. Agreed on the point about the surge coming late (although the comment from Wellpoint came amidst the surge). Questions on my mind:

    (a) How much did the surge catch enrollment up to where the insurers thought it would be? If we figure a non-payment rate of 15%, then that puts total enrollment thru 3/31 at ~ 6 mil., which is what CBO estimated in February but less than what anybody had expected before the tech fail of the fall.

    (b) Will the insurers have time to evaluate the risk profile post-surge, esp. in light of 15-20% nonpayment (and will the non-payment rates skew toward the younger and healthier)?

    (c) To what extent did the grandfathering of non-compliant plans by the Obama administration affect insurers, and will this vary by carrier (e.g. insurers with heavy involvement in the small group will be more negatively affected)?

    (d) To what extent does the 4/15 extension create uncertainty, and is it going to skew toward older/sicker?

  94. Thanks for the response!

    Regarding the 3 R’s: one thing I have seen (and I think it was from Wellpoint) that their “problem” is that reinsurance is going to start sunsetting this year. And in general the 3 R’s disappear as of 2018 (?…I think that is the year). I think that has to factor into the analysis as well.

    “Problem” in scare quotes because, as I think we both agree, this is kabuki theater to some extent.

  95. Oh, one more thing:

    The dates of the articles make a difference. The surge in enrollments in the last few weeks, and their skewing to younger and healthier populations, is going to moderate how things look from the insurer’s point of view. If you did actually underprice the market, as Highmark seems to have done, more people is bad news, but younger healthier people is good news.

  96. There certainly will be variability in markets, both state and regional, partly because of differing populations signing up. And yes, there are some insurers saying publicly that they will lose money and may have to raise rates.

    A few things to note, though:
    o These statements to the press are just that, and as you point out are part of the ongoing public negotiations with the Obama administration, as well as setting public expectations.
    o When they say are will lose money on the policies from the exchanges, they are talking about an operating net, not what will end up on the bottom line after they invoke the “Three Rs.” So there is actually not necessarily a contradiction between what they are saying in the press and what they are telling analysts.
    o There is a big difference between “double digit” rises and the “tripling” of rates that one anonymous health insurance executive projected in TheHill piece, or the image of “skyrocketing” rates.

  97. Also the CEO of Aetna warned about big premium increases back in January.

    http://www.cnbc.com/id/101354183

    Also, in terms of who is making money from what, Highmark, Aetna, Cigna, and Humana all projected losses in the exchanges back in February:

    http://triblive.com/business/headlines/5884053-74/highmark-insurers-health

    I am not saying that Mr. Flower is wrong. Just that if we are going to look what the insurers are saying, these are things they are saying and they must be noted.

    My personal guess is that a lot of this is just the public side of negotiations between insurers and the Obama administration. It is not coincidental that some in the former came out publicly after Sebelius made her statement to Congress.

    One area where I do think this column was deficient is that we will probably see statewide disparities depending on variations in uptake on the ACA. CA and NY will probably do better than SD and TX. There are 51 markets, not 1, each with their own enrollments and risk pools (and therefore insurer bets from 2013 on what they would be).

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