Category: Health Insurance

Australia Will Raise $5 Billion by Privatizing its Biggest Health Insurer

Australia’s federal government is about to raise almost $5 billion by privatizing its largest health insurer:

Australia hopes to raise up to Aus$5.51 billion (US$4.82 billion) through the sale of the country’s largest health insurer in an initial public offering, Finance Minister Mathias Cormann said Monday.

Cormann said the sale would remove the current conflict where the government is both the regulator of the private health insurance market and owner of the largest market participant. Medibank provides cover to 3.8 million people.

The government has previously said Medibank is one of 34 competing funds in the private health insurance market in Australia and that a scoping study had found no evidence that premiums would rise as a result of the sale. (AFP via Yahoo! News)

A Business Group Reacts Strangely to the Rise of Private Health Exchanges

This blog has discussed the rise of private exchanges for health benefits, describing them as “getting ready for individual health insurance to be the standard.” A private exchange allows an employer to make a defined contribution to employees’ health benefits, which they can use to choose one of many policies within the exchange.

AON Hewitt has a thriving exchange practice, and it recently announced significant growth:

Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), today announced that it expects more than 1.2 million employees, retirees and their eligible dependents from more than 100 companies to choose individual and employer-sponsored health benefits through Aon’s suite of private health exchanges. This is up from more than 70 companies and over 750,000 employees, retirees and their eligible dependents.

Crowd-out Effect of CHIP Expansion 44 to 70 Percent

In 2009, Congress reauthorized the Children’s Health Insurance Program (CHIP), providing states added resources and options to insure children. About 15 states expanded CHIP eligibility to families with incomes up to 400 percent of the federal poverty level (an income of $94,000 for a family of four) with a median upper limit for coverage at 250 percent of poverty, the highest since CHIP’s inception in 1997. Federal CHIP funding is up for reauthorization in 2015 and some argue that CHIP is unnecessary because of Obamacare’s subsidies, which kicked in this year.

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Source: “The Impact of Recent CHIP Eligibility Expansions on Children’s Insurance Coverage” from Health Affairs.

Are Insurers Bailing in to Obamacare?

Obamacare’s supporters cheered a report by the U.S. Department of Health & Human Services, which claimed, based on preliminary evidence, that more insurers will participate in Obamacare exchanges next year:

  • In the 44 states for which we have data, 77 issuers will be newly offering coverage in 2015.
  • The Federal Marketplace states alone will have 57 more issuers in 2015; a 30 percent net increase over this year.
  • The eight State-based Marketplaces where data is already available will have a total of six more issuers in 2015, a ten percent net increase over this year.
  • Four of the 36 states in the Federal Marketplace will have at least double the number of issuers they had in 2014.
  • In total, 36 states of the 44 will have at least one new issuer next year. And some of the nation’s largest insurance companies will be offering coverage in more than a dozen new states, joining the hundreds of insurance companies already participating in the Marketplace.

60 Percent of Health Plans that Could Meet Obamacare’s Essential Health Benefits are Illegal

According to Obamacare’s regulations, a health plan must pay at least 60 percent of the actuarial value (AV) of its costs. That means that if the cost of your health care for a year is expected to be $8,000, a plan which pays 60 percent (called a bronze plan in Obamacare), will cover $4,800 of the costs. You’ll be expected to pay $3,200 in deductibles and co-payments.

Our colleague Linda Gorman defines AV as “the average amount a plan with a given set of benefits is likely to pay given a standard population.” I’ve also discussed that because Obamacare’s regulations define AV relative to a “standard population” health insurers can design plans that cause the sick to have extremely high out-of-pocket costs.

Professor Bob Graboyes, in the compelling and entertaining video presented below, explains another big problem with Obamacare’s AV regulations: They outlaw 40 percent of possible AVs above the 60 percent minimum. That is because the AVs defined as floors in the law for the four “metallic” plans (60 percent for bronze, 70 percent for silver, 80 percent for gold, and 90 percent for platinum), are interpreted in regulations as narrow corridors of 4 percentage points.

Are There 1.3 Million More Uninsured in 2014?

Kudos to Joe Antos of the American Enterprise Institute for discovering a datum that the government neglected to promote: By one of the government’s own measurements, the number of uninsured Americans increased by 1.3 million during February through April 2014 versus the same three months of 2013.

I previously wrote about the estimate of the uninsured generated by the Centers for Disease Control (CDC). However, I did not discuss the Census Bureau’s Current Population Survey, because its concurrent press release covered only 2013. Antos discovered 2014 data that was quietly posted on a government website.

The two results contradict each other: CDC estimated a small reduction in the uninsured, whereas the Census Bureau’s estimated an increase. That is confusing, but contradictory and incoherent information about Obamacare’s effects is something we are getting used to.

32 Percent of Employers May Move to Private Health Insurance Exchanges within 3 Years

Mature Businessman Seated at a TablePricwaterhouseCoopers has released new results from its 2014 Touchstone survey of employers. The major take-away is that one third of employers are considering moving their active employers to private health insurance exchanges in the next three years.

I have been excited about private exchanges for a while now. Private exchanges are a way for us to solve a problem that we’ve been beating our heads against for years: Employers’ monopoly control of our health dollars is the “original sin” of U.S. health care. Nevertheless, it is so deeply embedded in our culture and business practices that anyone who threatens it by advocating individual choice in health benefits faces fierce blowback.

Number of Uninsured Americans Aged 18-64 Down 2 Percentage Points

The number of uninsured Americans, aged 18-64 has dropped by two percentage points from the first quarter of 2013 to the first quarter of this year, according the Centers for Disease Control (CDC).

As shown in figure 2, that brings the proportion of uninsured down to where it was about ten years ago. In other words, Obamacare has not managed to overcome the results of the recession that began in December 2007. Plus, much of the reduction in uninsured is a result of more people becoming dependent on Medicaid, which is welfare, so should not be viewed as the same type of benefit as individually owned or employer-based health insurance.

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Employer-Based Health Insurance Costs Up 3 Percent, Share of Covered Workers in High-Deductible Health Plans Steady

The annual Kaiser Family Foundation/Health Research Education Trust Employer Health Benefits Survey has been released. As many expected, the increase in employer-based health costs from 2013 to 2014 was moderate:

In 2014, the average annual premiums for employer-sponsored health insurance are $6,025 for single coverage and $16,834 for family coverage. The average family premium rose 3% over the 2013 average premium. Single coverage premiums rose 2% in 2014 but are not statistically different than the 2013 premium amounts. During the same period, workers’ wages increased 2.3% and inflation increased 2%. Over the last ten years, the average premium for family coverage has increased 69% (Exhibit A).  Premiums have increased less quickly over the last five years (2009 to 2014), than the preceding five year period (2004 to 2009) (26% vs. 34%).

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Only 2 Percent of Small Businesses Have Checked Out Obamacare’s Small Business Exchanges

business-dealAs well as health insurance exchanges for individuals, which have suffered much criticism for their failings, Obamacare created exchanges especially for small businesses: Small Business Health Options Program (SHOP).

SHOP is a bigger failure than the exchanges for individuals. SHOPs were supposed to open up nationwide on October 1, 2013, alongside those exchanges. However, the deadline was deferred, and only 15 states currently have SHOPs.