Bailing Out Health Insurers and Helping Obamacare
8:01 AM, JAN 13, 2014 • BY JEFFREY H. ANDERSON
Robert Laszewski—a prominent consultant to health insurance companies—recently wrote in a remarkably candid blog post that, while Obamacare is almost certain to cause insurance costs to skyrocket even higher than it already has, “insurers won’t be losing a lot of sleep over it.” How can this be? Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
For some reason, President Obama hasn’t talked about this particular feature of his signature legislation. Indeed, it’s bad enough that Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that’s $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers,through Washington, to health insurance companies. It’s even worse that Obamacare is trying to coerce Americans into buying those same insurers’ product (although there are escape routes). It’s almost unbelievable that it will also subsidize those same insurers’ losses.
But that’s exactly what it will do—unless Republicans take action. As Laszewski explains, Obamacare contains a “Reinsurance Program that caps big claim costs for insurers (individual plans only).” He writes that “in 2014, 80% of individual costs between $45,000 and $250,000 are paid by the government [read: by taxpayers], for example.”
In other words, insurance purchased through Obamacare’s government-run exchanges isn’t even full-fledged private insurance; rather, it’s a sort of private-public hybrid. Private insurance companies pay for costs below $45,000, then taxpayers generously pick up the tab—a tab that their president hasn’t ever bothered to tell them he has opened up on their behalf—for four-fifths of the next $200,000-plus worth of costs. In this way, and so many others, Obamacare takes a major step toward the government monopoly over American medicine (“single payer”) that liberals drool about in their sleep.
Laszewski adds, “The reinsurance program has done and will continue to do what it was intended to do; help attract and keep more carriers in Obamacare than might have otherwise come.” Thus, Obamacare is being aided by having taxpayers subsidize big insurance companies’ business expenses. (Who could ever have guessed that big government and big business might be natural allies?)
But, amazingly, it doesn’t stop there. Laszewski writes that Obamacare also contains a “Risk Corridor Program that limits overall losses for insurers.” So insurers not only don’t have to pay out all of their costs; they also don’t have to swallow all of their losses.
Laszewski explains that if an insurance company expects its costs in a given year to be X, and those costs end up being more than X plus 2 percent, taxpayers will come to that insurance company’s rescue—thanks to Obamacare. In fact, once an insurance company covers that initial 2 percent in unexpected costs, taxpayers will cover at least 80 percent of any additional costs the insurer accrues.
Laszewski provides a couple of examples to help illustrate taxpayers’ unwitting generosity toward these “participating health plans” (plans sold through Obamacare’s government-run exchanges):
“[I]f the health plan has costs at 110% of the medical cost target [the costs that the insurer expects to accrue], it will be responsible for only 102.4% of the target (a 2.4% shortfall)—only about a quarter of its losses.
“If the health plan’s medical costs come in at 120% of the expected claim cost target level, the health plan will only be responsible for 104.4% of the target (a 4.4% shortfall)—again only about a quarter of its losses.”
It’s actually only about a fifth in this example, as taxpayers would cover 78 percent of the losses, with the insurer covering just 22 percent.
Importantly, Laszewski (who’s in a position to know) says that “my sense is that health plans, because they are so insulated from big losses, will generally stand pat with their 2014 rate structures for 2015—no matter how bad the early claims experience looks. I expect that the health insurance industry will be content to give the Obama administration one more chance to reboot Obamacare in the fall of 2014, when the 2015 open enrollment takes place.”
In other words, because taxpayers will bail them out (through both the “Reinsurance Program” and the “Risk Corridor Program”), insurers won’t raise their premiums as much for 2015 as they otherwise would in response to the sicker, older risk pools that Obamacare is clearly attracting. This in turn will make Obamacare look better going forward than it should and will give its government-run exchanges another good swing at the “young invincibles,” who so far don’t seem too enamored with the product that Obama and his insurance cronies are hawking.
All of this puts two things in sharp relief: First, Republicans should attach a no-bailout provision to any debt-ceiling increase—as Charles Krauthammer has suggested—along with a provision delaying Obamacare’s liberty-sapping individual mandate (the delay of which would further undermine Obamacare’s exchanges). Second, Obamacare needs to be comprehensively repealed in January 2017, not modified or “fixed”—and Republicans need to advance a winning alternative to pave the way to that crucial result.
January 12, 2014
January 12, 2014
The Obama administration, which describes itself as the most transparent in history, announced its opposition to two House bills calling for transparency in the administration of the Affordable Care Act.
The first, approved Friday by a wide margin, would require administration officials to inform people when their personal information has been compromised. The second, slated for a vote next week, would require the administration to provide Congress with weekly updates of Obamacare’s implementation, according to The Hill.
The House approved the first, H.R. 3811, the Health Exchange Security and Transparency Act, by a 291-122 vote, including 67 Democrats. In its writtenpolicy statement, dated Thursday, the White House claimed that the legislation would impose “costly paperwork requirements.”
“For example, the indiscriminate reporting requirement in H.R. 3811 may seriously impede the law enforcement investigation of a breach,” the White House said in its statement. “Unlike existing requirements, H.R. 3811 requires expensive and unnecessary notification for the compromise of publicly-available information, even if there is no reasonable risk that information could be used to cause harm.”
Banks inform their customers as a matter of course whenever they believe there’s even the possibility that an account has been compromised, and they don’t complain that it’s “unnecessary notification.” It’s all the cost of doing business in an electronic information age.
The administration published a similar policy statement for the bill scheduled for next week.
The White House complained that the reporting requirements of H.R. 3362, the Exchange Information Disclosure Act, would place an undue burden on the administration.
“It would require the reporting of data on a weekly basis that is generally being provided on a monthly basis. Few major indicators — from job growth to Medicare Advantage enrollment to private shareholder reports — are provided more frequently than monthly; this bill would hold the Marketplaces and State Medicaid programs to unprecedented standards,” the White House said in its policy statement.
“To implement this new reporting system, contracts may need to be modified and new staff would need to be hired on an expedited basis, adding millions of dollars in costs to States and the Federal Government,” the White House added.
If it’s not already present, a counter can be easily added to the software. It would keep a running tally of the number of visits to the site, number of individuals who created an account, number of those who selected a plan and the number who have actually paid for their plan.
It certainly wouldn’t require a new reporting system, additional staff or millions of dollars in implementation costs. It would only require a desire to make good on its promise — to be the most transparent presidential administration in history.
This article was posted: Sunday, January 12, 2014 at 7:48 am
January 12, 2014
January 12, 2014
For the current administration, now with a fresh developer to fix all the problems (with the website), the reality of public perception over Obamacare has gone from worst to worster-er this week. AsGallup polls show, nearly half of Americans say the Affordable Care Act will make the healthcare situation in the U.S. worse in the long run.
When asked more broadly if they approve or disapprove of Obamacare, Americans come down on the disapprove side by 54% to 38% – a new record low for ‘approval’.
So despite the full court press marketing of this great new must-have product – and in light of the fact that the ‘risk-pool’ looks to be disastrous, things are not improving at all.
Perhaps not surprisingly though, Gallup concludes,
…remarkably, there has been little fundamental change in most of these attitudes over the past year or two — and especially in recent months, despite the highly contentious and visible introduction of the ACA’s major features. Americans’ views of the healthcare law seem to be fairly well established, and largely rooted in partisan politics.
Of course, we look forward to the next month as bills come due and people realize that “affordable” means something different than they were promised (i.e. not free)…
This article was posted: Sunday, January 12, 2014 at 7:46 am
Humana Warns Of "Adverse Obamacare Enrollment Mix"
Submitted by Tyler Durden on 01/11/2014 11:03 -0500
Submitted by Michael Krieger of Liberty Blitzkrieg blog,
Thought the incredibly unpopular Obamacare health plan (the most epic disaster story was the woman who was touted as a success and then later kicked off her plan) had put most of its problems behind it? Think again. Yesterday, after the stock market close, health insurer Humana warned that the “risk mix” of those who have signed up for the program will be “more adverse than previously expected.”
In plain english what this means is that only old and sick people are signing up, while younger generations with piles of student debt, a couch in their parents’ basements and no jobs decide to ride things out uninsured.
Honestly, I can’t blame them, as I just received my own 12% rate hike the other day. Happy New Year to you too Barry.
From Investor’s Business Daily:
Humana said the “risk mix” of its ObamaCare exchange members will be “more adverse than previously expected,” the latest evidence that the health reform is attracting older, sicker Americans than originally projected.The health insurer, in an SEC filing late Thursday, cited the Obama administration’s 11th hour decision to let people stay on plans that had been cancelled due to ObamaCare regulations. The White House was reacting to political anger of President Obama’s “if you like your plan, you can keep it” vow.Humana made no mention of the administration’s late December decision to let people with cancelled plans avoid the individual mandate tax penalty in 2014.Those who choose to forgo insurance presumably will be younger and healthier.The White House has refused to give any information regarding the age or health status of people signing up on the federal healthcare.gov site. Data from some state-run exchanges have suggested fewer “young invincibles” are signing up.The ObamaCare exchanges need young, healthy people to make up a significant share of enrollees. If not, the plans may be more costly for insurers, potentially creating a premium rate death spiral. But the Obama administration plans to use “risk-corridor” and “risk-adjustment” payments to offset much of insurance companies’ unexpectedly high costs. Such taxpayer bailouts may keep insurers from hiking premiums in 2015 or simply bowing out of the exchanges.
“Premium rate death death spiral.” Call me crazy, but I’m not itching to find out what that means…
Full article here.
White House opposes ObamaCare transparency as “administratively burdensome”
POSTED AT 1:21 PM ON JANUARY 10, 2014 BY ED MORRISSEY
I don’t have my Yiddish-English dictionary available, but this has to be the best example ofchutzpah yet. The White House announced its opposition to bills under consideration in the House that would require HHS to start reporting weekly on their incompetent rollout of ObamaCare and especially the data integrity of the exchange. The reason? It’s just too burdensome, the White House explains (via JWF and Instapundit):
The Obama administration stopped short Thursday of threatening to veto House bills to require officials to tell people if their personal data has been compromised through ObamaCare, and to require weekly reports on the health law’s implementation.The White House said in two Statements of Administration Policy that it opposed both bills, one of which is set for a Friday vote in the House.Weekly reporting requirements on both enrollments and the operation of the HealthCare.gov website would require “unfunded, unprecedented, and unnecessary reporting requirements” on the health insurance exchanges, it said in one statement.“It would require the reporting of data on a weekly basis that is generally being provided on a monthly basis,” the White House wrote. “Few major indicators — from job growth to Medicare Advantage enrollment to private shareholder reports — are provided more frequently than monthly; this bill would hold the Marketplaces and State Medicaid programs to unprecedented standards.”
Unfunded? HHS has its own revenue stream for ObamaCare, and has for years. Congress can’t touch it without rewriting the statutes, which would require Senate approval (not likely) and Obama’s signature (good luck with that) or two-thirds majorities for a veto override (not in this session of Congress). HHS had 42 months to put those revenue streams to work in delivering a web portal that most private-sector firms could successfully launch in six months.
Given the abject failures of the system, it’s hardly unreasonable for Congress to demand a closer accounting for what HHS is doing to rescue itself from its own incompetence. In fact, it’s a little surprising that the White House isn’t demanding these reports already from Kathleen Sebelius. Are they just checking in with Sebelius once a month? If they’re getting reports from Sebelius more often than that, why can’t they just share those with Congress?
The second statement is even more absurd than the first. In it, the White House objects to reporting requirements on security deficiencies, because notifying consumers of data breaches in a timely manner would “create unrealistic and costly paperwork requirements.” You mean like individual and employer mandates?
The Administration believes Americans’ personally-identifiable information should be protected wherever it resides, and that all Americans deserve to know if that information has been improperly exposed. Accordingly, the Federal Government adheres to extensive requirements for safeguarding against and responding to the breach of personally-identifiable information. Additionally, the Administration called upon the Congress in May 2011 to pass national data breach legislation reflecting a real solution to this complex issue.The Federal Government has already put in place an effective and efficient system for securing personally‑identifiable information in the Health Insurance Marketplaces and providing consumers notification if their personally-identifiable information has been compromised. When consumers fill out their online Marketplace applications, they can trust that the information that they are providing is protected by stringent security standards.The components of the HealthCare.gov website that are now operational comply with Federal security standards. Security testing is conducted on an ongoing basis using industry best practices designed to appropriately safeguard consumers’ personal information.The Administration opposes House passage of H.R. 3811 because it would create unrealistic and costly paperwork requirements that do not improve the safety or security of personally-identifiable information in the Health Insurance Marketplaces. For example, the indiscriminate reporting requirement in H.R. 3811 may seriously impede the law enforcement investigation of a breach. Unlike existing requirements, H.R. 3811 requires expensive and unnecessary notification for the compromise of publicly-available information, even if there is no reasonable risk that information could be used to cause harm.
Gabriel Malor of AoSHQ took to Twitter to expose the hypocrisy of this claim, especially in the context of compliance for religious organizations:
Robert Laszewski is president of Health Policy and Strategy Associates, a policy and marketplace consulting firm where he works closely with many in the heath industry as they try to navigate the Affordable Care Act. He's also the author of the excellent Health Care Policy and Marketplace Review blog, as well as Wonkblog's 2013 "Pundit of the Year". We spoke on Wednesday. A lightly edited transcript of our conversation follows.
Ezra Klein: Give me your status report on Obamacare. Where do you think the law stands now?
Robert Laszewski: They’re about where I expected them to be. HealthCare.Gov on the front-end is in pretty good shape. It’s where it should’ve been at launch. The back-end is still highly problematic. Clearly the administration put its emphasis on the consumer side. Insurers are still seeing errors in probably 5 percent of the files coming through. That’s compounded by the issue of all the people enrolling in the last few weeks. That’s a huge surge that would create customer-service problems in the best of circumstances, So I think it’ll take until about the end of January till everyone is straightened out and where they should be.
EK: You mentioned the continued problems with error-ridden files. What are insurers doing for these people?
RL: There are two things. There are some obvious errors you get and the insurer can go back to the customer and straighten them out. That’s a very laborious task. The other thing that the administration is doing is a manual reconciliation. There’s unfortunately no computerized check between who HealthCare.Gov thinks is enrolled and who the insurance industry’s computer systems think is enrolled. So it’s being done manually. That’s a big problem.
The other challenge now is getting people to pay for coverage. I was surprised today calling around to people to find only about 50 percent have paid. That’s not a reason to panic yet. The due dates for payment have been sliding all around, so people can be confused. But it can be a mess. Some insurers are doing autocalls like politicians do the night before the election asking people to pay.
EK: I recognize that we won’t really know what the mix of healthy and sick people is until at least April, once we see the surge from the individual mandate. But what are insurers seeing in the mix so far?
RL: It’s not positive. I don’t want to say people have given up on the notion they’ll get a good mix. They know the administration will make a big push. The insurance companies will spend big on advertising and outreach. So no one has given up. But it doesn’t look good right now.
There’s a big misconception that this is about young people. That’s baloney. It’s about healthy people. A healthy 20-year-old might only pay a $100 premium. You want healthy 40 and 50-year-olds. The big problem right now is really total enrollment. We only have about 10 percent of the uninsured in here. Insurers think you need more like 70 percent of a pool of people to sign up.
EK: When you say “a pool,” what do you mean by that here?
RL: The people who are uninsured and eligible for the exchanges and the people coming over from the individual market. That’s the new pool. It’s hard to estimate exactly how many of them there are. But I think we’re going to ultimately need about 20 million people for a sustainable pool. It doesn’t need to be this year. That’s what the transitional risk corridors are all about. But it needs to happen in the first few years. So when I hear people talk about the goal being seven million, I think, “time out.” This needs to be 20 million people within three years.
The problem with the enrollments today is that they’re so small, it’s less than 10 percent of the uninsured coming in, it really can’t be anything but sick people. So if it’s going to be sustainable you need loads of people coming in the door. So when I judge where Obamacare is on December 31st or March 31st, I want to have confidence that this thing is ramping up to 20 million. I want to see momentum.
EK: That brings up two issues. The first is the individual mandate, which begins this year but is a much bigger penalty in year two, and then even bigger in year three. So one question here is how well that works.
RL: I have an interesting answer for that. I think the mandate is almost worthless because the word is getting around that they can’t really collect it. And by year three, it’s really a lot of money. I think there’ll be real pressure to just get rid of it. I don’t think you can force people to buy this insurance. If they don’t want it there’ll be a political groundswell to get rid of it. So in my mind the individual mandate is kind of irrelevant to this.
EK: There seems to be a bit of a contradiction there. You’re saying the mandate won't scare people because it can’t be collected, but that the penalty is so large that they’ll hate it enough to get rid of it. It seems to me that if people really think the penalty is huge, then the mandate is likely to do its work and persuade people to buy insurance.
RL: I think it’s all about whether they have confidence in Obamacare or not. The mandate will be effective for free riders. No one has a problem penalizing people who don’t pay their fair share. But if Obamacare hasn’t been sold to the American people as something they should want then the mandate will just be rubbing salt in the wound and there’ll be enormous political pressure to get rid of it. So I think this gets back to whether the American people end up accepting obamacare or not.
EK: The other issue here are premiums in the exchanges in 2015. You’ve argued that you don’t think they’ll go up very much, even if not that many healthy people sign up. Why?
RL: I think the 2015 rates will be the rates you’re looking at today, more or less. Everyone believes this is an absolutely catastrophic launch. But the “three Rs” buy the administration and the insurers another year to try and reboot the thing. Insurers don’t want to just end up with a bad mix.
Having said that I do have a concern that people are looking at these plans and not finding value. Some people are looking at paying 10 percent of their income for plans with huge deductibles, and then you have politics of Obamacare and the bad press of the launch and if you put all those things in a bag and mix them up, I am really concerned that the uninsured who are healthy are not finding Obamacare the value they hoped it will be. That’s the real risk for Obamacare.
EK: Do you think there’s anything the Obama administration can do about that? Or is it just a question of the marketplace at work now?
RL: I don’t think there’s anything they can do for March 31. But as we move to 2015 open enrollment, the Secretary of Health and Human Services has some power to reshape the plans. The mandated benefits are so high they’ve driven costs up and created narrower networks. The statute talks about actuarial levels so the Secretary can’t just do anything she wants. But given a combination of regulatory authority and what the Obama administration has been willing to do already in overriding statute, I think they could do some pretty significant things.
If an entrepreneur had crafted Obamacare he would’ve gone to a middle class family. A family of four make $54,000 a year has to pay $400 in premiums net of subsidy and for that the standard silver plan has an average deductible around $2,500 and a narrow network. They’re going to pay almost $5,000 for that?
So the entrepreneur would say I’ve got $5,000 in premium and all this deductible, what do they want for that? And they probably would’ve said we want office visits and lab tests because the kids need to go in occasionally and then we want catastrophic care. The problem with Obamacare is it’s product driven and not market driven. They didn’t ask the customer what they wanted. And I think that’s the fundamental problem with Obamacare. It meets the needs of very poor people because you’re giving them health insurance for free. But it doesn’t really meet the needs of healthy people and middle-class people.
AP: Insurers discovering they have no record of some ObamaCare enrollees
POSTED AT 4:41 PM ON JANUARY 9, 2014 BY ALLAHPUNDIT
Is this the first moderately big tremor for O-Care on the news wires this year or did I miss something earlier? It’s been so cold in most of the country, I imagine some significant number of new enrollees decided to put off their first doctor’s appointment, which means few cases so far of people discovering technical snafus that have left them in government/insurer limbo.
But now things are warming up.
Insurance companies are still trying to sort out cases of so-called health insurance orphans, customers for whom the government has a record that they enrolled, but the insurer does not. They are worried the process will grow more cumbersome as they deal with the flood of new customers who signed up in December as enrollment deadlines neared.The government says the problem is real but under control. Officials saythe total number of problem cases they are trying to resolve with insurers currently stands at about 13,000. That includes orphan records. More than 1 million people have signed up through the federal insurance market that serves 36 states. Officials contend the error rate for new signups is close to zero.Insurers, however, are less enthusiastic about the pace of the fixes. The companies also are seeing cases in which the government has assigned the same identification number to more than one person, as well as so-called “ghost” files in which the insurer has an enrollment record but the government does not.But orphaned files — when the insurer has no record of enrollment — are particularly concerning because the companies have no automated way to identify the presumed policyholder. They say they have to manually compare the lists of enrollees the government sends them with their own records because the government never built an automated system that would do the work much faster.
The key word in the boldfaced bit above is “currently.” The fact that the industry’s still “deal[ing] with the flood of new customers who signed up in December” means there’s no way to really know just how many “orphaned files” — or ghost files, or files with the same ID number — there’ll be. That’s what Obama and Sebelius bought for themselves when they started moving deadlines deeper into December to help boost the monthly sign-up numbers for PR purposes. The less time insurers had last month to process new applications, the more uncertainty there’d be this month as they raced to catch up. Now they’ve got thousands of phantom sign-ups to chase down while claims have already begun to trickle in. All of the deadline-shifting was premised on the idea that Healthcare.gov was more or less fixed, which meant the industry would be able to handle applications expeditiously. Not so. In his last blog post of 2013, Bob Laszewski wrote on December 29th that “very serious back-end issues” are still plaguing the site. He’s the guy who warned from the beginning, in fact, that if HHS fixed the front end to make mass enrollment possible without first fixing the back end to make sure that insurers would get accurate enrollment information, we’d end up with a giant clusterfark of insurers trying to correct glitchy applications at the same time they’re busy fielding claims from new enrollees. This AP story is the first rumblings of that problem. (Laszewski himself is quoted in it, predicting that it’ll become a bigger one as the month wears on.)
But that’s not the only issue. Orphaned files might be the most Kafkaesque logistical headache facing the industry but there are surely more new enrollees who haven’t paid their first month’s premium yet than there are “orphans.” I haven’t seen recent data on that but several big names, including Blue Cross Blue Shield in Texas and Illinois, announced today that they’re extending the deadline for payment from January 10th all the way to January 30th. That can only mean, I take it, that the rate of nonpayment in some plans is significant enough that insurers feel they have no choice but to extend the grace period. The alternative is to void coverage, which is something they’re loath to do to a big bunch of new customers who might seek coverage elsewhere if they’re tossed. As it is, some new enrollees this month will end up incurring expensive new treatments and then cut a check on January 30th to have their new insurer cover them retroactively. That gives you an inkling of how chaotic things must be right now within the industry.