Select Page

HHS Attempting to Frame Obamacare Losses to Insurers as a Government Obligation

A must read from the Washington Examiner today on the subject of Obamacare, insurance companies, and bailouts. I republished the article in full.

The Department of Health and Human Services attempted to reassure private insurers on Thursday that they’ll be able to recover losses from participating in Obamacare by claiming it was an “obligation” of the U.S. government to bail them out.

At issue is a provision within the law known as the risk corridors program. Under the program, which runs from 2014 through 2016, the federal government is to collect money from health insurers doing better than expected and use those funds to provide a federal backstop to other insurers who incur larger than expected losses from rising medical claims. The idea was to provide training wheels to insurers in the first years of Obamacare’s implementation, and to take away any incentive for insurers to cherry pick only the healthiest customers.

Republicans, fearing that this could turn into an open-ended government bailout in the event of industry-wide losses, included a provision in last year’s spending bill that limited the program, requiring HHS to pay out only from the pool of money collected, rather than supplementing it with other sources of government funding. President Obama signed that bill.

Now that insurers have been able to look at medical claims, what they’ve found is that enrollees in Obamacare are disproportionately sicker, and losses are piling up. For the 2014 benefit year, insurers losing more than expected asked for $2.87 billion in government payments through the risk corridors program, but HHS only collected $362 million from insurers performing better than expected. Thus, the funds available to the federal government only amounts to 12.6 percent of what insurers argue that they’re owed.

So insurers are not happy. And now the industry lobbying group America’s Health Insurance Plans — which happens to be helmed by Marilyn Tavenner, who previously oversaw the implementation of Obamacare as head of the Centers for Medicare and Medicaid Services — is aggressively fighting for more money.

In a statement issued Thursday, the same day that the nation’s largest insurer, UnitedHealth announced it may exit Obamacare due to mounting losses, Tavenner said, “We’ve been very clear with the administration about the serious challenges facing consumers and health plans in this Exchange market. Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program. When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result. The administration must act to ensure this program works as intended and consumers are protected.”

In an effort to reassure the industry, CMS, the HHS agency Tavenner previously led, issued guidance reiterating that HHS would use money collected from insurers in 2015 and possibly 2016 to make up the $2.5 billion shortfall that exists in 2014.

But what happens if there still isn’t enough money, and after 2016, the program is taking in less than the money sought by insurers?

HHS said it, would “explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments.”

The agency further added: “HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers, and HHS is recording those amounts that remain unpaid following our 12.6 percent payment this winter as fiscal year 2015 obligation of the United States government for which full payment is required.”

In reality, this doesn’t mean much at all. Risk corridor payments for 2016 won’t be due until mid-2017, and by that point, it will be an issue for a future Congress and future president. Nothing that a previous administration’s HHS said in 2015 will really matter.

That said, this is another demonstration that for all of Obama’s sanctimonious rhetoric about taking on insurance companies. In reality, his signature legislative achievement was to put government in bed with private insurers. And now that his pet project backfired, he wants taxpayers to take care of those very insurance companies he spent years railing against.

NYT: Affordable Care Act Becoming Unaffordable

In an effort to encourage people to sign up for the Affordable Care Act, the Obama Administration has boosted the low cost of premiums — the part that is subsidized. What they aren’t mentioning is that in exchange for low monthly costs, enrollees face high deductible costs.

“Most Americans will find an option that costs less than $75 a month,” President Obama said. Additionally, Sylvia Mathews Burwell, the Secretary of Health and Human Services, issued a report analyzing premiums in the 38 states that use HealthCare.gov. “Eight out of 10 returning consumers will be able to buy a plan with premiums less than $100 a month after tax credits,” she said.”

The trade-off for low-ish premiums means that many Obamacare plans have high deductibles. “The Internal Revenue Service defines a high-deductible health plan as one with an annual deductible of at least $1,300 for individual coverage or $2,600 for family coverage.”

But in many states, deductibles are even higher than that. According to Hot Air, “in many states, more than half the plans offered for sale through HealthCare.gov, the federal online marketplace, have a deductible of $3,000 or more. Once you add in several hundred dollars per month for your plan premium, a rate that may or may not be lower than it used to be and add in a $3,000 or more deductible, the average individual could be paying over $5,000 out of pocket in a year before their ‘affordable’ insurance kicks in. This is true for employer sponsored plans as well.”

These costs are exorbitant for working class families. If they are already needing to seek health insurance and subsidies through the Obamacare exchanges, how can they possibly have the capability to find several extra thousand dollars in their budgets in order to pay out-of-pocket costs to meet their deductibles before their insurance really kicks in. With unemployment high and wages flat, these rising deductibles (and also premiums in many cases) hit Americans hard.

And don’t forget, plans purchased are for 2016. The Obamacare penalty fee continues to ramp up for those who decide to forgo health insurance coverage entirely for this coming year. Those considering opting should be reminded of what the financial costs will be to do so.

Your penalty tax is the greater of either 1) a flat-dollar amount based on the number of uninsured people in your household; or 2) a percentage of your income. If you are able to go by the flat-dollar amount, the fee increases to $695 in 2016 plus half that amount for each uninsured child under age 18. Your total household penalty is capped at three times the adult rate. If you qualify for the percentage of your income, it is 2.5% for this coming year.

It is increasingly clear as we continue along the path of the Affordable Care Act that this legislation truly is not affordable.

Opinion: Obamacare Is On Its Way Out

Rich Lowry over at National Review pointed out some hard realities of Obamacare as we enter in a new enrollment season.

“Yes, ObamaCare has covered more people and has especially benefited those with pre-existing conditions (to be credible, Republican replacement plans have to do these things, as well), but the program is so poorly designed that, surely, even a new Democratic president will want to revisit it to try to make it more workable.

Enrollment is falling short. The Obama administration projects that it will have roughly 10 million people on the state and federal exchanges by the end of next year, a staggering climb-down from prior expectations. The Congressional Budget Office had predicted that there would be roughly 20 million enrollees. If the administration is to be believed, enrollment will only increase about another million next year from its current 9 million and only sign up about a quarter of the eligible uninsured.

Premiums are rising. Not everywhere, but steeply in some states. Indiana is down 12 percent, but Minnesota is up 50 percent. Health care expert Robert Laszewski points out that it’s the insurers with the highest enrollment and therefore the best information about actual enrollees that have tended to request the biggest increases — a sign that they don’t like what they’re seeing in their data.

Relatedly, the economics are shaky. According to a McKinsey Co. analysis, last year health insurers lost $2.5 billion in the individual market that ObamaCare remade. ObamaCare co-ops that were supposed to enhance choice and lower costs have been failing and almost all of them are losing money, a victim of the absurd rules (no industry executives on their boards, no raising capital in public markets, etc.) imposed on them by the law.

The problem with ObamaCare in a nutshell is that on one hand, by imposing motley regulations and mandates, it increases the price of health insurance, and on the other hand, by providing subsidies, it tries to hide the cost — but not enough.

According to an analysis by the health consultancy Avalere, the poor or near-poor have been signing up, but enrollment steeply drops off further up the income scale as the subsidies fall away. It found that three-fourths of uninsured people earning less than 150 percent of the federal poverty level got coverage through Medicaid or the exchanges, while almost none of uninsured making more than 250 percent of the federal poverty level have enrolled.

For them, it’s just not a good deal. A study of the ObamaCare exchanges by researchers at the Wharton School found that “even under the most optimistic assumptions, close to half of the formerly uninsured (especially those with higher incomes) experience both higher financial burden and lower estimated welfare.”

Even the success that ObamaCare has had enrolling people should come with an asterisk. The Department of Health and Human Services announced earlier this year that nearly 11 million people have signed up for public health insurance — Medicaid or the children’s health program, CHIP — since 2013. If Medicaid is better than nothing (although this is harder to prove than you might think), it is substandard coverage that locks the poor into second-class care with limited access to doctors.

If the goal was to expand this deeply flawed program, it could have been achieved without the expense, disruption and economic irrationality of the rest of ObamaCare.
(emphasis added).

As Laszewski points out, on the individual market, ObamaCare is a monopoly. It gives money to people to buy its product and through the individual mandate punishes those who don’t. And yet it’s still having trouble making the sale.”

WSJ: Obamacare Decline Will Force a Rewrite in 2017


With open enrollment for Obamacare beginning in a week, the Wall Street Journal outlines some of the major failures of this legislation to attract enrollees. Obamacare is severely behind target, which in turn affects costs for premiums for subscribers and costs to the government for subsidies. The Wall Street Journal suggests that within a year, by 2017, the need to overhaul and/or replace Obamacare will be necessary. Read their thoughts below:

ObamaCare’s image of invincibility is increasingly being exposed as a political illusion, at least for those with permission to be honest about the evidence. Witness the heretofore unknown phenomenon of a “free” entitlement that its beneficiaries can’t afford or don’t want.

This month the Health and Human Services Department dramatically discounted its internal estimate of how many people will join the state insurance exchanges in 2016. There are about 9.1 million enrollees today, and the consensus estimate—by the Congressional Budget Office, the Medicare actuary and independent analysts like Rand Corp.—was that participation would surge to some 20 million. But HHS now expects enrollment to grow to between merely 9.4 million and 11.4 million.

Recruitment for 2015 is roughly 70% of the original projection, but ObamaCare will be running at less than half its goal in 2016. HHS believes some 19 million Americans earn too much for Medicaid but qualify for ObamaCare subsidies and haven’t signed up. Some 8.5 million of that 19 million purchase off-exchange private coverage with their own money, while the other 10.5 million are still uninsured. In other words, for every person who’s allowed to join and has, two people haven’t.

Among this population of the uninsured, HHS reports that half are between the ages of 18 and 34 and nearly two-thirds are in excellent or very good health. The exchanges won’t survive actuarially unless they attract this prime demographic: ObamaCare’s individual mandate penalty and social-justice redistribution are supposed to force these low-cost consumers to buy overpriced policies to cross-subsidize everybody else. No wonder HHS Secretary Sylvia Mathews Burwell said meeting even the downgraded target is “probably pretty challenging.”

The HHS survey shows three of four ObamaCare-eligible uninsured people think having coverage is important—but four of five say they couldn’t fit their share of the premiums into their budgets even after the subsidies. They’re not poor; they tend to have jobs in industries like construction, retail and hospitality but feel insecure financially; and they prioritize items like paying down debt, car repairs or saving to buy a home over insurance.

The law’s failure to appeal to the young and rising middle class is already cascading through the insurance markets. Researchers at the Robert Wood Johnson Foundation and Urban Institute recently published a remarkable study of the industry barometer called medical loss ratios, or MLRs, and the pressure is building fast.

MLRs measure the share of premium revenue that flows to reimbursing medical claims. ObamaCare sets an MLR floor of 80% for patient care, with one-fifth left over for overhead like administration and profits, and the pre-ObamaCare 2010-13 historical trend for the individual market ranged from 79% to 86%.

The researchers found that in 2014—the first full year of claims experience in ObamaCare—average MLRs across all health plans sold on 16 state exchanges roamed from 90% to 99%. Average MLRs in 11 states climbed to 100% or more, reaching as high as 121% in Massachusetts. A business can’t stay solvent for long spending $1.21 for every $1 that comes in.

The 2014 MLRs are used to set rates for 2016 premiums, which are still under regulatory review. But the researchers estimate that to rebound to an MLR of 85%, premiums in the 11 money-losing states need to rise by 10% to 36% in the best estimate and 23% to 52% in the worst scenario. The familiar danger is that as rates rise, more people drop out, and thus rates must rise still higher, as the states that attempted ObamaCare-like regulatory schemes in the 1980s and 1990s discovered.

ObamaCare liberals pose as what-works-and-what-doesn’t technocrats. So perhaps they’d care to explain what it says about their creation that so many rational adults are willing to pay a fine of $695 or 2.5% of their earnings, whichever is higher, for the privilege of not buying an ObamaCare-compliant health plan.

***
ObamaCare will almost inevitably be reopened in 2017, whoever wins the election. The good news is the emerging consensus among Republican candidates about a credible, pragmatic and optimistic alternative. Jeb Bush was the latest to release a plan two weeks ago—and this is a debate that has always deserved to be litigated at the presidential level to create a mandate for reform.

The basic approach is to deregulate insurance and medical practice while replacing ObamaCare’s complex subsidy schedule with a refundable tax credit for individuals who lack job-based coverage. Unchained from benefit and redistribution mandates, insurance products and prices would come to reflect what consumers want. The credit would be sufficient to buy at least coverage for catastrophic expenses if people get sick, and the trade-offs of such skinnier plans might look better to voters priced out of ObamaCare.

GOP reformers also recognize that the Cadillac tax on high-cost employer-sponsored health plans is a heat shield that might let them solve some of the problems of the pre-2010 health finance status quo. Substituting a cap on the tax-code subsidy that helps drive medical inflation is more politically plausible with the Cadillac tax in place than without.

Mr. Bush was shrewd to frame his proposal with the vocabulary of innovation and aspiration. ObamaCare is built on a 20th-century chassis that is ever less relevant to modern medicine and consumer finance. If the law continues to underperform, voters may be open to a new model that puts their choices and needs ahead of the political class’s.

Obama Administration Predicting Flat Enrollment for Obamacare in 2016


The next open enrollment period for Obamacare begins in a few weeks. “Health and Human Services Secretary Sylvia Burwell announced Thursday that an expected 10 million Americans will be covered by late 2016 by health plans they bought on the federal and state insurance exchanges created under the law.”

This is a far cry from the CBO projections when Obamacare was passed. Last year, we saw lower revisions for enrollment from 13 million to a hopeful 9.1 million. Obamacare may have barely hit THAT target; the Washington Post reports that the number looks to be around “9.1 million Americans the administration believes will have ACA health plans by the end of this year.”

This is stunning news. To say that 10 million will be covered by 2016 means that the Obama Administration predicts a mere 1 MILLION enrollees this year. As the Washington Post reminds us, 10 million is “just half the most recent forecast by congressional budget analysts, who have long expected 2016 to usher in the biggest surge in enrollment.”

CBO forecasts had predicted 21 million enrollees in 2016, and 32 million by 2019. As expected, there are a litany of excuses for the abysmal numbers:

Still, substantive forces are at work behind the calculation. According to HHS estimates, about 10.5 million uninsured people are eligible to buy a health plan on the exchange, and they are proving more difficult to reach than those who bought coverage early on.

In addition, federal health officials point out that the dynamics of insurance coverage have not been playing out as analysts expected. Fewer employers have dropped health benefits for their workers, and fewer consumers have switched from older policies they purchased on their own. Both factors, HHS officials say, play into their projection of how many people are likely to gravitate to the exchanges.

HHS contended on Thursday that exchange enrollment, originally pegged to reach 24 million within several years, is not plateauing but is instead on “a much longer path towards equilibrium,” as a senior official said.”

What’s even less clear is how how this affects the budget projections and funding of Obamacare. An article last month in the Washington Times outlined how the enrollees for 2016 needed to double to stay solvent. On top of that, the penalty for not having insurance increases begins to increase sharply. The penalty during the first year was $95 or 1 percent of income above the filing threshold — a relatively minor bite. For tax year 2015, the penalty will be $325 or 2 percent of income, and for 2016 it will be $695 or 2.5 percent of income. Per person.

Remember when we were told that Obamacare would help millions to have insurance and also save Americans $2500/family? Me too.