Thursday, August 28, 2014

August, 2014 The Unfolding Disaster That is Obama Care, Part 1: Attrition Sets In and Dental Work is Not Covered

Every month since last August we have had to do multiple posts every month in order to keep up with the unfolding disaster that is Obama Care. It is easily the worst piece of legislation ever passed by the Federal government under any previous Presidential administration. Runaway costs, dysfunctional or non functioning websites, high potential for identity theft, less coverage for more cost, cancelled insurance policies, etc., it was a failure in every way imaginable.

And those failures have continued to unfold every month, which is why we are going to take a few days now to cover what has happened just since last month’s disaster updates. Before we do that, let’s do a quick reminder of where the program is from a numbers perspective:
  • The Obama administration claimed that about 8 million Americans signed up for an Obama Care health care insurance plan during the initial sign up period.
  • However, recent research from reputable sources found that it is likely that only between 80 and 90% of those who signed up actually followed through and paid for and bought a policy.
  • If we take the midpoint of that range and assume only 85% followed through with payment, that 8 million sign up number is really only 6.8 million real policy holders.
  • But other reputable research found that only about 57% of those who signed up for an Obama Care policy were previously uninsured, the other sign ups already had health insurance coverage and just churned out to an Obama Care policy.
  • Thus, the actual number of INCREMENTAL Americans with health insurance via Obama Care is 57% of 6.8 million or around 3.9 million people.
  • That means that 2.9 million Americans were not incremental insurance policy holders, they just churned from an existing policy into an Obama Care policy.
  • Somewhere between 5 and 6 million people had their current health insurance policies cancelled as a result of Obama Care, policies that often were perfectly fine and acceptable to those carrying those policies.
  • If we assume a best case view from the Obama Care perspective and assume all of the 2.9 million people who were not incremental to the Obama Care numbers came from this pool of 5-6 million people, than the net number of Americans who lost health insurance coverage as a result of Obama Care is between 2.1 and 3.1 million people (5 or 6 million less 2.9 million people).
  • Thus, we have to take the 3.9 million people that were truly incremental because of Obama Care and subtract out either 2.1 or 3.1 million, ending up with a net gain in insured Americans of between 800 thousand and 1.8 million.
  • Thus, after years of trying, billions and billions of dollars spent, we may have gotten incremental, expensive, and narrow insurance coverage to less than two million Americans.
Only in Washington can the nation spend billions and billions of dollars of taxpayer wealth and end up with a problem that is hardly any better than when before the program started. Insane.

That is where we stand today. Let’s take a look at what disasters have come to the surface since we last talked about Obama Care:

1) In early August, 2014, the Centers for Medicare and Medicaid Services (CMS), the Federal entity responsible for administrating Obama Care, announced that letters had been sent 310,000 Obama Care customers notifying them that they have to fix errors within their Obama Care applications by September 30, 2014 or their Obama Care health insurance coverage will be cancelled. 

These 310,000 customers are part of almost 1 million Obama Care customers who submitted applications but whose applications had citizenship and immigration information that did not match up with Federal records. CMS has admitted that 450,000 cases out of the 1 million have already been resolved, but it’s not clear how many of those “closed” cases resulted in more canceled policies.

Thus, of those 3.8 million incremental Obama Care policies we calculated above, that number will likely go down even further as CMS likely cancels out hundreds of thousands of more policies for not having proper information on the applications. Which raises an interesting question: it is not how high Obama Care enrollments can go but how low will they sink.

2) But it is not only faulty applications data and information that are reducing the number of incremental Obama Care sign ups. Aetna, the country's third-largest health insurer and an Obama Care participant, reportedly had 720,000 people signed up for Obama Care coverage as of May 20. However, by the end of June, Aetna had fewer than 600,000 paying Obama Care customers, a decrease of about 16% in a month and a half.

Even worse for Obama Care supporters, Aetna says it expects even more people to cancel out of Obama Care policies by the end of the year, expecting to be left with "just over 500,000." If their prediction comes true, than they would have seen more than a 30% drop off in Obama Care policy enrollments in less than eight months after hitting their high water mark of 720,000: "I think we will see some attrition ... We're already seeing it. And we expect that to continue through the end of the year," CEO Mark Bertolini said in a July 29 conference call.

Cigna, another major Obama Care insurer it is also seeing some attrition but not as much as what Aetna is owning up to. Cigna has publicly stated that it expects is Obama Care policy enrollment to shrink from 300,000 down to 280,000, about a 7% decrease.

Now some of those cancelled polices may have occurred because people got a job that provided health care insurance, causing them to cancel their now unnecessary Obama Care coverage. However, given that the economy is still pretty sluggish and the unemployment rate has been basically unchanged for a long time, the possibility that a large majority of those cancelled policies were caused by job finders is small.

Far more likely scenarios, scenarios that we have already extensively discussed, is that Obama Care policy holders found out that:
  • They were paying more and getting less than what they expected relative to premiums.
  • They were shocked when they found out how high Obama Care policy deductibles were.
  • They were disappointed that Obama care policies had very restrictive lists of approved doctors, hospitals, and drugs, opting to not pay for coverage that restricted their choices.
Those are likely the real reasons why people are dropping out of Obama Care policies and the reasons why even that calculated 3.9 million number we estimated above is far more likely to continue to shrink in the coming months.

3) One of the major selling points of Obama Care was that insurance companies could no longer deny insurance coverage to anyone who had a pre-existing condition. However, the law was possibly deficient in laying out what type of coverage would be provided. 

It seems that one way insurance companies are minimizing their financial exposure to this new law that requires them to take on all customers, regardless of the likely cost to the insurer, is that the insurance companies simply jack up the cost that customers have to pay for expensive treatment and drugs for their pre-existing conditions. In other words, “we are happy to insure you but the premiums and deductibles for your condition are going to be really expensive to you.” 

The situation has gotten so bad that the Associated Press recently reported that more than 300 patient advocacy groups have signed a letter addressed to Health and Human Services Secretary Sylvia Mathews Burwell to complain about some insurer tactics that "are highly discriminatory against patients with chronic health conditions and may ... violate the (law's) nondiscrimination provisions."

The good news is that you now have an Obama Care policy that covers your pre-existing condition. The bad news is that you cannot afford the costs within the parameters of that policy. Insurance companies are not stupid. Forcing them to take on expensive customers with chronic pre-existing conditions is not good for the company’s financial bottom line so that they will take whatever steps necessary to stay within the letter of the law and still remain financially viable. The writers of the Obama Care legislation were too stupid to recognize this reality.

4) What would an update be without some personal news on how Obama Care is messing with the lives and health of Americans. An Indiana man, who purchased health insurance through Obama Care’s Federal exchange, says he was assured he had dental coverage without any waiting period. 

To be sure, he actually recorded several conversations he had with Federal call center employees, all of whom guaranteed him that he had immediate Obama Care insurance coverage to take care of any dental problems. However, when it became apparent that he needed some serious dental work, the Obama Care insurer who provided the policy and who was collecting a monthly premium denied the claim, stating that there was a one year waiting period on his Obama care policy. This denial was made despite him being assured by the Obama Care call center employees that he was covered.

As a public service, he is now others about getting misleading information form the Obama Care processes and to be sure what they are actually buying from the Obama Care health insurance exchanges: “You might be very surprised you’re not covered when you were told that you were.” 

The news report covering his problem can be viewed at:

Another day, another screw up of an American’s life, brought to you by Obama Care, the continuing unfolding disaster. More disasters tomorrow.

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