Category: New Health Care Law

Obamacare’s Unintended Consequences: People Buy Short-Term Policies

woman-with-childObamacare has driven individual health insurance premiums up so high people are forgoing comprehensive coverage in favor of short-term policies:

Robin Herman, the 34-year-old owner of a marketing firm in San Francisco, bought a short-term policy in December. The monthly cost of her short-term coverage, plus conventional ACA-compliant plans for her two children, is roughly one-quarter of what she would have paid for conventional health plans covering all three of them, she says.

“This is saving me a ton of money for the year,” she said, despite the penalty. Plans that comply with the health law’s rules cost more than her old pre-ACA policy and are “just not affordable,” she said.

(Anna Wilde Mathews,” Sales of Short-Term Health Policies Surge,” Wall Street Journal, April 10, 2016.)

Sales of these policies have doubled or more since 2014, according to sources cited by Ms. Mathews. This surely feeds into the problem that Obamacare enrollees are sicker than expected: The healthy candidates are choosing these policies.

Blue Cross Blue Shield Association Confirms Obamacare Death Spiral

CAM00109The Blue Cross and Blue Shield Association, which represents 36 Blue Cross and Blue Shield plans covering 105 million Americans has released a study of its members’ claims data in Obamacare exchanges 2014 and 2015. It confirms Obamacare exchange enrollees are sicker and more expensive than enrollees in pre-Obamacare individual plans or employer-based plans:

Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who had BCBS individual coverage prior to health-care reform.

Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical care, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health insurance.

The new enrollees used more medical services across all sites of care—including inpatient admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

Medical costs of care for the new individual market members were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending per member was $559 for individual enrollees versus $457 for group members in 2015.

These health plans have not done a great job containing costs in employer-based health plans either. Those policies’ average monthly health spending increased 8 percent in the first nine months of 2015 versus 2014. However, costs in individual policies increased 12 percent, half again as much. This means the gap in medical spending between the two markets is increasing.

One Quarter of Obamacare Enrollees Dropped Out in 2015

people-in-waiting-roomThe administration recently announced 12.7 million people selected or were automatically enrolled in an Obamacare exchange plan at the end of the third open season – February 1. Except for special cases, anyone who missed that deadline cannot enroll in an Obamacare plan for 2016.

That is a few more people than the 11.7 million than at the end of 2015’s open enrollment. However, the administration also announced that only 8.8 million people remained enrolled in Obamacare on December 31, 2015. That is a drop of almost one quarter from the end of 2015 open enrollment.

Massive Fraud Likely in Obamacare Exchange Subsidies

HSAThe Government Accountability Office has just released a report detailing the massive opportunities for fraudulently getting tax credits in Obamacare’s health insurance exchanges. Obamacare sends billions of taxpayers’ dollars to health insurers which operate in these exchanges – $37 billion last year alone. These tax credits are used to discount premiums for plans offered in the exchanges.

During undercover testing, the federal Marketplace approved subsidized coverage under the act for 11 of 12 fictitious GAO phone or online applicants for 2014. The GAO applicants obtained a total of about $30,000 in annual advance premium tax credits, plus eligibility for lower costs at time of service. The fictitious enrollees maintained subsidized coverage throughout 2014, even though GAO sent fictitious documents, or no documents, to resolve application inconsistencies.

Obamacare’s Cost per Beneficiary Explodes with Shrinking Enrollment

CBOThe Congressional Budget Office’s latest budget estimate shows Obamacare’s costs per beneficiary have exploded, as enrollment in Obamacare’s broken exchanges collapses. January’s update estimates 2016 exchange enrollment at 13 million people (p. 69).  Although the Administration had previously downgraded its estimate of Obamacare enrollment, this is the first significant change by the non-partisan CBO.

What is really shocking is the January update still estimates tax credits, which subsidize insurers participating in exchanges, will cost taxpayers $56 billion this year (p. 182). That amounts to about $4,308 per enrollee (although not all are subsidized). Back in March 2010, CBO estimated that 21 million people would be covered in exchanges in 2016, for a total cost of $59 billion in tax credits (pp. 20-23). That would amount to about $2,810 per enrollee.

Who Pays Obamacare’s “Slacker Mandate”? Workers with No Kids!

LGBT-ACA-ADThe “slacker mandate” is the provision in Obamacare requiring employer-based health plans to offer benefits to adult dependents of their workers, up to age 26. I previously discussed research showing the mandate reduced work among adults, aged 19 to 26, and increased the time they spend socializing, sleeping, and exercising.

What about the financial costs of the mandate? Speak to an insurance agent or benefits consultant and they will tell you the cost are fully borne by working parents. In the old days, employer-based health insurance was offered to workers in three sizes: Single, couple, or family. It did not matter how many kids you had. Today, each dependent adds to the premium. So, the “slacker mandate” is paid for by the working parents. That is not really a problem for society. However, there is more to the story.

A remarkable study published by the National Bureau of Economic Research concludes this happened. The slacker mandate reduced wages among workers without children by $211 a month, but did not reduce wages among workers with children (either minor or adult) by a statistically significant amount.

State of the Union Post Mortem: Obamacare Not as Rosy as He Claimed in His Speech

During his last State of the Union address, President Obama hardly mentioned the Affordable Care Act. He did not mention the 7 million new Medicaid enrollees, many of which cannot find a doctor willing to treat them for Medicaid’s paltry fees. The president did not talk about the 9 million to 11 million Americans with coverage through the state and federal health insurance exchanges.  Nor did he mention enrollment is only about half what the Congressional Budget Office projected would enroll only a few years ago.

Here is what he did say “… the Affordable Care Act is all about… filling the gaps in employer-based care… so when you lose a job, or you go back to school or you strike out and launch that new business you’ll still have coverage.”

This all sounds well and good. But it’s more rhetoric than reality.

Unemployed: The reality is many people losing their job would not qualify for a subsidy because their most recent tax return would likely show income too high to qualify for a subsidy. After losing a job, the unemployed would have to be out of work for a year or more before they would qualify for a subsidy. In other words, they are likely no better off than they would be under COBRA.

Students: Unless they are middle-aged returning students with preexisting conditions, it’s likely a young person returning to school could have bought limited benefit coverage from their university much cheaper prior to Obamacare.

Entrepreneurs: As far as people who want to launch a business, they’d likely be better off without a mandate that forces them to have coverage or pay a fine. They would be better off with affordable pre-Obamacare coverage than the high-priced, mandated coverage now available. My wife launched her consulting business years ago. Her health coverage is now much more expensive (and her benefits lower) than ever before. If anything, Obamacare is driving would-be entrepreneurs to stay with employers.

Conclusion: The federal and state health insurance exchanges are suffering adverse selection as healthy people shun the costly premiums because the plans meet little of their medical needs. The next Administration will have to reform the ACA with more flexible coverage and allow consumers to exercise cost-control measures in ways that truly make health insurance affordable.

This post has been updated from an earlier version posted January 12 prior to the State of the Union speech.

Congress is Set to Repeal Obamacare: What Should Replace It?

The House is voting today on a reconciliation bill that would repeal much of Obamacare. It’s expected to pass easily – and be vetoed by President Obama.

Before we discuss what should replace Obamacare it would be a valuable exercise to revisit what needs to be repealed.

  • The employer mandate has to go. It’s hurting the very people it was designed to help.
  • The individual mandate has to go. It’s forcing people to buy something they don’t want.
  • Regulations guaranteeing coverage regardless of health status are not sustainable. Premiums are reaching the stratosphere and there is a perverse incentive to game the system.

Representative Tom Price reports a bill with a proposal to replace Obamacare will soon follow. The following are some of the elements that a new Obamacare replacement bill should include.

  • The open-ended tax exclusion should be converted to a fixed sum. This could be adjusted for age, health status or some other factor. But the government should subsidize core needs not marginal spending on Cadillac plans.
  • Community rating should be used only to create beneficial incentives; not to increase cross-subsidies. The right to buy insurance at modified community-rated premiums needs to be conditioned on continuation coverage. A regulation such as guaranteed renewability would not allow people go years without coverage and then expect others to subsidize their decisions.
  • Americans deserve the right to purchase the coverage of their choice; not the coverage Obamacare proponents believe Americans should have. This means affordable coverage with limited benefits, high-deductibles or coverage that rewards them for taking care of their health if that’s what consumers want.
  • Americans should be protected from surprise medical bills (but not necessarily from high medical bills) – ones where patients cannot ascertain prices in advance or verify that doctors providing care are even in their network. Public policy should encourage discussions about prices between doctors and patients — not reward barriers to competition.
  • The federal government should grant states the flexibility to design Medicaid programs that meet states’ needs. The federal government should not match state Medicaid funds. Rather, it should negotiate a block grant and a state contribution; and make states pay for all cost overruns. States should have the authority to design innovative Medicaid benefits, where some beneficiaries pay premiums, experience nontrivial cost-sharing, pay a penalty for inappropriate emergency room use and have work requirements. Moreover, states should have the authority to kick beneficiaries off the Medicaid rolls who break eligibility rules.

These are just a few of our ideas. What are your thoughts? Give us your comments and tell me what have we have missed?

Unpopular Individual Mandate Fails to Make People Buy Insurance

doctor-mom-and-sonJust before Christmas, Congress voted to deficit fund Obamacare by imposing moratoria on a number of Obamacare taxes that are unpopular with interest groups. Left in place was the unpopular individual mandate to buy health insurance, which has no organized interest to lobby against it. Nevertheless, it is the most unpopular part of Obamacare.

The New York Times reports that a number of relatively high-income earners are choosing to remain uninsured, or even drop Obamacare coverage, and pay the fine instead:

Congress Set To Deficit Fund Obamacare Almost $40 Billion

iStock_000007047153XSmallI had always feared that Congress’ alternative to Obamacare was deficit funded Obamacare, and it looks like that is coming to pass. This is being done through the so-called “taxibus”, a legislative package that combines popular “tax extenders” (items like research and development tax credits that are legally temporary but practically permanent) with funding the federal government through September 2016.

The bill proposes a couple of years delay in three Obamacare taxes: The medical-device excise tax, he health insurance fee, and the excise tax on high-cost employer benefit plans. All three taxes are bad. However, the bill just delays them without cutting any Obamacare spending.