Remain Very Afraid of the Impact of Obamacare

Frightening news is starting to trickle out about health insurance premium rate increases for 2017, and that is just the beginning of ongoing concerns about how Obamacare adversely affects individuals, families, businesses, insurers, and the healthcare market.  The numbers reported to date by several states belie the promise that the Affordable Care Act (ACA), more commonly referred to as Obamacare, would, according to the President, “reduce insurance premiums by $2,500 per family per year.”

• In Alabama, Al.com, an on-line newspaper, stated on August 8, 2016, that Blue Cross Blue Shield is seeking an average rate increase of 39 percent on individual plans in the state’s Obamacare marketplace.
• On July 27, the Baltimore Business Journal reported that “CareFirst BlueCross BlueShield is seeking a higher rate increase than expected – asking for a 27.8 increase to its HMO plan and a 36.6 percent increase in its PPO plan,” while Cigna requested a premium hike of 29.8 percent.  According to the article, the Blue Cross rate increases “would bring monthly premium prices for a mid-level plan for a 40-year-old Baltimore resident to between $382 and $478,” or an annual cost of $4,584 to $5,736.
• Health Care Policy and Marketplace Review blogged on July 19 that Californians are expecting to see premium increases of 13 percent on average, with the two largest carriers, Blue Shield and Anthem increasing premiums by 19.9 percent and 17.2 percent respectively.
• The Detroit Free Press reported on July 31, 2016 that health plans found on Michigan’s insurance exchange may jump by 17.3 percent.
• Binghamton, New York radio station WSKG reported on August 7 that its state regulators have approved the new insurance rates; that small group plans will see an average increase of about 8 percent, while those who purchase individual policies will see a 17 percent rise.
• The Tennessean reported on August 12 that Cigna and Humana have raised their initial requested premium rate increases from an average of 23 percent to 46 percent and an average of 29 percent to 44.3 percent respectively.  While the Tennessee Department of Commerce and Insurance will approve all rates on or before August 23, it has allowed other insurers to revise their rates.  Blue Cross Blue Shield has already indicated it will not revise its requested average hike of 62 percent.

Individuals and families affected by these substantial rate increases can check what is happening in their states at the Rate Review section of the Center for Medicare and Medicaid Services (CMS) website.  By clicking on “Search ACA-Compliant Products,” picking one’s state, and then typing in an effective date range of January 1, 2017 to December 31, 2017, all of the insurer-requested rate increases in the state will be accessible.  While the rate increases are being discussed in news reports, many consumers may not know their approved rates until just before the 2017 open enrollment begins on November 1, just one week before Election Day on November 8.  If the premium cost trend being discussed in some states continues, it will not be helpful for Obamacare apologists.

With continuing premium hikes and growing deductibles, Obamacare exchange healthcare plans are becoming increasingly unaffordable.  The likely result will be healthy people, particularly young adults, will take the risk of not having coverage and paying the law’s tax penalty instead of the monthly insurance premium.  (Currently, the tax penalty is $695 a year or 2.5 percent of taxable income, whichever is greater.)  The end result is adverse selection, a situation where fewer and fewer healthy people buy health insurance and the chronically ill, which do purchase it, become a larger percentage of the total.  Costs increase for insurers, leading to higher premiums, leading to even fewer healthy people purchasing insurance, and the “death spiral” for healthcare insurance coverage begins.

Together with the insurance problems, other Obamacare policies and mandates have created the perfect storm to push the entire program into a death spiral.  They include the following:

• Guarantee issue, which requires insurers to offer insurance to any individual or group, regardless of health status, and community rating policy, which requires insurers to adjust the cost of a premium based on only four factors: tobacco use, geographic area, age, and individual or family enrollment.  This means younger, healthier people in particular are paying much more for insurance than they would have pre-Obamacare.  But it is precisely these individuals that need to be in the exchanges to balance out the costs of those that are sickly.  Actuaries stated Obamacare needed 18-to-34-year-olds to be 40 percent of market-place exchange members for the healthcare reform law to work, but according to the Department of Health and Human Services, only 28 percent signed up for coverage in the coveted age group.

• The 10 essential mandates that must be in every Obamacare compliant plan have also driven up costs.  This means people must pay for coverage of services they do not want or need, such as single men being forced to carry maternity or pediatric care.
• Two of the three risk-sharing programs, risk corridors and reinsurance, are due to expire at the end of 2016.These programs, as discussed in a December 2015 Waste Watcher, were supposed to provide a financial backstop to insurers through the first few years of operations to cover any losses, since no one knew who would be enrolling in the new marketplaces.  Since Obamacare has performed far worse than anticipated, risk adjustment program funds have been insufficient to cover losses.  Insurers have not only raised premiums, some have also demanded that the administration bail them out with more taxpayer money.  Others are cutting their losses by dropping out of some Obamacare exchanges in various states.

Obamacare supporters often argue that while premiums may be skyrocketing, they really are not a problem because consumers that purchase health insurance in the exchanges are entitled to advanceable premium credits and cost-sharing subsidies, provided their income is between 100 and 400 percent of the federal poverty level.  They conveniently do not mention that taxpayers are the ones that pick up the subsidy costs and that millions of Americans who do not qualify for the subsidies must pay full freight.

Prior to Obamacare, 85 percent of Americans had health insurance and satisfaction with it was high.  The ACA has churned the entire healthcare system, putting Washington bureaucrats in charge of people’s lives.  It was promised that ACA would reduce the number of uninsured from 50 million to 22 million in 2016, but that has not happened.  There are still 31 million that have no insurance and the Congressional Budget Office projects that number will not go below 29 million.  A better solution would have been to implement policies that would have helped the 15 percent of Americans without insurance get access to care, such as robust high-risk pools to help those with pre-existing conditions and tax credits to assist low income people purchase insurance.  Some of these ideas can be found in the House Republicans’ replacement for Obamacare, “A Better Way.”

As a result of Obamacare, the nation has faced a litany of challenges that are hard on taxpayers, patients, and the U.S. economy. The law that was supposed to put patients first and help consumers access quality health care has done the exact opposite for millions of Americans, who have lost the plans and doctors they liked.Over the course of the past year, insurance premiums have risen into double digits, and competition has deteriorated within the marketplace exchanges because many insurers have decided to no longer participate.

Furthermore, 16 of the 23 CO-OPs, which ironically were created to provide competition to private insurers, have collapsed and left thousands of citizens scrambling to find new health insurance.  The ACA’s over-prescriptive requirements helped doom CO-OPs from the start, and taxpayers and policy holders will ultimately pay the bill.

Holman Jenkins got it right in his August 5, 2016 Wall Street Journal op-ed:  “From Day One, defenders of the Affordable Care Act pooh-poohed the ‘death spiral’ predictions that sober analysts, being realistic about the law’s incentives, voiced.  Yet the outcome was always implicit in the program’s design.  The death spiral would have been a non-birth spiral if ObamaCare hadn’t originally offered direct, temporary subsidies to insurers to offset their losses.  ObamaCare wouldn’t be with us today if insurers weren’t hanging on in quiet expectation that Washington somehow will come up with more funding to keep the jalopy going.”