October, 2014 Part 3, The Unfolding Disaster That is Obama Care: Less Competition, More Insurance Company Sleaze, and Heading For A Massive Court Defeat

Over the past few years, but especially over the past fourteen months, we have had to devote more and more posts each month to the unfolding disaster that is Obama Care. This legislation, without a doubt, is the worst piece of legislation ever passed, likely passed by the most inept and useless set of Washington politicians that this country has ever had to endure. The disasters from this law include at least the following downsides:

• It has and will continue to increase the national debt.
• It will leave tens of millions of Americans still uninsured ten years from now.
• It has restricted overall economic growth.
• It raised taxes on all Americans in dozens of ways.
• It has reduced the job growth rate in this country.
• It has turned many full time workers into part time workers or into unemployed workers.
• It has generally increased the cost of health insurance, both premiums and deductibles, over what was available in the insurance market before it was passed.
• The Constitution was violated any number of times when the Obama administration unilaterally and illegally changed components of the law without the permission of Congress or the American people.
• The American people were lied to over and over, directly by the President and Democrats in Congress, on the negative ramifications of the law.
• It has caused millions of American to lose access to the current insurance policies they had.
• It has caused millions of Americans to lose access to their preferred doctors, preferred hospitals, and in many cases, current medicine treatments.
• It has likely increased the volume of people visiting hospital emergency rooms.
• It has caused thousands of doctors to retire early or change professions in order to not deal with the bureaucracy and idiocy of the law.
• It has exposed the inability of the Federal government and various state governments to develop, launch, and operate any kind of successful program.
• It has exposed millions of Americans’ personal financial information to identity thieves.
• It never addressed, and thus, never resolved, the root causes of our escalating health care costs in this country.

I am sure that I omitted some of the negative ramifications of the legislation but you get the idea. To review past discussions of past disasters from Obama Care, enter ”the unfolding disaster that is Obama Care” in the search box above. To see what disasters have popped up over just the past month or so, read on:

1) Richard Pollock wrote a recent article for the Washington Examiner where he showed that the smaller health insurance companies, those that have a relative small potion of the health insurance market, look to be getting out of or being driven out of the Obama Care exchanges.

The U.S. Government Accountability Office (GAO) recently published some of its research which showed that in 40 states, the largest insurers either maintained or boosted their market share through the health exchanges established by the Affordable Care Act. The GAO analysis is the first government analysis study which examined how competition within the health insurance market has been affected by Obama Care.

The study found that in 2012, consumers in the individual health insurance market on average could choose among 36 small-market company carriers in their state, each holding a market share of five percent of or less. However, by 2014 those same consumers could on average choose from only three insurers in their state exchanges, a decline of more than 90%.

Similarly, in the small-group/small business insurance market, at least 15 small-market carriers were available, on average, to consumers before Obama Care. But within the Obama Care exchanges, now only three insurance companies still competing on average.

Thus, let’s use some logic here. Before Obama Care stormed the market for health insurance across the country, premium and deductible costs were less and the number of competing insurers was more, probably a cause and effect relationship: more competition usually means lower consumer costs. 

Obama Care comes along, and the number of competitors dwindles while the cost of deductibles and premiums generally go up substantially across the country. Less competition usually means higher consumer costs, basic economics, something that is constantly lost on the American political class. And as always, when the political class acts out of ignorance, the American consumer pays more.

2) Charles Ornstein, writing for the ProPublica website on September 17, 2014, analyzed the many ways that insurance companies within the Obama Care tent are finding new and interesting ways to reduce their costs but endangering the financial and medical well being of Obama Care policy holders. My source of the story noted that his story was co-published with The New York Times’ column,  The Upshot.

A little background. Under the Obama Care legislation, health insurance companies are no longer allowed to deny coverage to any consumer with a pre-existing medical condition. Since these customers are likely to have more of a negative cost impact on the company, they are also likely to depress earnings of those insurance companies. Of course, Obama Care also required ALL Americans to have health insurance so those same insurance companies were willing to trade off some high cost customers, i.e. those with pre-existing conditions, to get millions and millions of new customers.

According to the article, in order to protect profitability, some health policy experts say health insurers may be pulling some subtle shenanigans to protect their profits by forcing customers with certain illnesses such as Parkinson’s disease, diabetes and epilepsy to pay more for their drugs. If potential customers with pre-existing conditions find out that a certain health insurance provider makes them pay a lot for their medicines, they might be more inclined to look elsewhere for their insurance coverage.

In this way the insurance company wins from a profitability perspective: they avoid high cost patients with high cost medical needs while still fulfilling their legal requirement to accept any and all potential consumers as customers. Very subtle, very profitable, very sleazy.

Wayne Turner, a staff lawyer for the National Health Law Program described the process: “It seems that the plans are trying to find this wiggle room to design their benefits to prevent people who have high health needs from enrolling.” In the article, Turner stated he feared a “race to the bottom,” in which plans don’t want to be seen as the most attractive for sick patients. “Plans do not want that reputation.”

The article also points to research showing that as medicine gets more expensive, customers are more likely not to take the medicine or to take the prescribed amount do to the high costs. Thus, the consumer gets screwed again by this legislation. Sick Americans who thought their prayers would be answered by the legislation are finding that the legislation gives them little protection from health insurance companies who still do not want them as customers. 

And as a result, this discourages these people from even applying for insurance, placing them right back where they were prior to the legislation being approved. Much ado about nothing.

3) In the midst of all these disasters, there is a much bigger issue that is working its way through the courts and whose fate could crash the entire Obama Care legislation. Some background:

• The legislation was written so that individual states could set up their own online Obama Care health insurance exchanges where each state’s citizens could obtain Obama Care insurance policies.
• But the states did not have to set up their own exchange process, they had the option of defaulting to the Federal government’s exchange.
• However, in order to entice the states to operate their own state level Obama Care exchange, the law made it crystal clear that only insurance policies obtained from a state exchange would come with the possibility of receiving Federal subsidies to pay for the premiums.
• Customers who got their Obama Care policy from the Federal exchange website would NOT be eligible for subsidies.

But Obama and his supporters outsmarted themselves since about three dozen states did not take the bait and allowed their citizens to go through the subsidy free Federal website. Without subsidies, Obama Care insurance policy costs become even less financially attractive.

The Obama administration decided just ignore that part of the law, basically breaking the law, and allow everyone who got an Obama Care policy, regardless of where they got it, to be eligible for subsidies. They realized that if two thirds or so of the Obama Care customers did not receive a subsidy, the entire operation crashes from high costs.

But this is breaking the law, as decided by a Federal judge’s recent ruling. Despite an IRS ruling that approved them, subsidies to residents in states without a state insurance exchange violate the language of Obama Care, according to a Federal judge in Oklahoma: “The court holds that the IRS rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law,” wrote Judge Ronald A. White in his decision, according to Politico.

White’s ruling accords with a similar decision by the D.C. Court of Appeals that was later vacated when the entire court decided to hear the case, as opposed to the three-judge panel that issued the ruling. The 4th Circuit Court of Appeals in Richmond, Virginia, however, sided with the Obama administration, meaning that the issue is likely to go to the Supreme Court eventually.

“Today’s ruling is a consequential victory for the rule of law,” said Oklahoma Attorney General Scott Pruitt, who filed the lawsuit. “The administration and its bureaucrats in the IRS handed out billions in illegal tax credits and subsidies and vastly expanded the reach of the health care law because they didn’t like the way Congress wrote the Affordable Care Act.”

Most legal experts expect the issue to eventually get decided by the Supreme Court. But given that the law’s language explicitly excludes customers coming through the Federal exchange from receiving a subsidy, odds are good that the entire house of cards will coming crashing down all because the writers and supporters of the law got too cute with the language. 

More disasters due in tomorrow on top of the three we discussed today: less competition, sleazy accounting, and trying to deny they wrote what they wrote. Every day a new disaster in a different form, the legislation that keep on giving.

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