Sunday, November 29, 2015

November, 2015, Part 5, The Unfolding Disaster That Is Obama Care: The Insurance Companies Balk, Baillout Time?

Every month for years now we have had to discuss how bad Obama Care is turning out to be under the continuing theme, “the unfolding disaster that is Obama Care.” This month is no different. As the legislation continues to march through America, driving up health care and health insurance prices as it serves as dead weight on economic growth, it cements it rightful place as the worst piece of legislation Washington has ever produced.

It never had a chance to be successful since it really never addressed the underlying root causes of our ever increasing health costs in the country:
  • Americans eat too much of the wrong kind of food, resulting in obscenely high obesity rates for the country.
  • Our food chain is infested with overdoses of high fructose corn syrup, salt, and other unhealthy additives.
  • Americans smoke too much.
  • Americans do not exercise enough.
  • The country is in serious need of health care tort reform.
  • Barriers to insurance company competition across state lines need to come down.
  • Obama Care never “followed the money” to find out who is actually profiting from the ever escalating health care costs in this country and how to get those factors under control.
  • Obama Care never got the immense amount of fraud and abuse in current government health care programs, Medicare and Medicaid, under control in order to save money to efficiently fund other government health care initiatives.
  • Obama Care never put serious research money towards curing the major diseases that drive high health care costs such as high frequency cancers and dementia type diseases.
You cannot resolve any problem unless you understand and address the underlying root causes. No difference here but with a big exception: Obama Care legislation never addressed these listed root causes and thus, has no chance of ever being successful.

But it is not just missing the root causes of our health care costs that makes Obama Care so horrible. It resulted in millions of Americans losing access to their favored doctors, hospitals, and insurance policies. It has caused deductibles and co-pays to escalate substantially. It will likely add trillions of dollars to the national debt. It has exposed millions of Americans to higher than necessary identity theft chances. It has created government bureaucracies that are wastefully spending taxpayer wealth and being exploited by criminal elements. It has stifled economic growth and job creation.

These are just a sample of the types of idiocy that we have been reviewing for the past several years in this blog relative to Obama Care., To read those past posts, just enter the phrase, “the unfolding disaster,” in the search box above.

This will be the final review for this month of the latest unfolding disasters from the worst piece of legislation ever written by Washington:

1) Earlier in this series we extensively reported on how the Obama Care co-ops were going out of business on an almost daily basis. These organizations were established to provide Obama Care insurance policies in areas of the country where there was not a lot of regular insurance company competition to hold down insurance costs. 

Unfortunately, most of the co-ops ended enrolling far fewer customers than needed or expected and the customers that did enroll were older and sicker than what was needed to make the co-ops financially viable. As a result, the co-ops are shutting down, over a billion dollars (so far) that they received as Federal loans will likely never be repaid, and tens of thousands of Americans need to hustle to find other sources of health insurance. 

But while the closing of a dozen or so co-ops is a disaster for Obama Care, a much larger disaster is looming, as laid out in a Washington Examiner article by Philip Klein on November 19, 2015:
  • UnitedHealthcare Group, which is the largest insurance company in the country, recently announced lower than expected earnings due to policies related to Obama Care.
  • And what could be an earth shattering move, the company announced that it may exit out of Obama Care exchanges and not write any more Obama Care policies.
  • Stephen J. Hemsley, the CEO of the company stated: "In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated."
  • In addition, a company press release stated: "UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. The company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017."
  • The company said its “earning pressure” is "driven by projected losses on individual exchange-compliant products [i.e. Obama Care policies] related to the 2015 and 2016 policy years."
  • In a conference call with investors, Hemsley said that customers' claims for medical care against their Obama Care policies were getting worse over time and that there was no sign that this trend would reverse any time soon, if ever.
  • When asked about whether the UnitedHealthcare could sustain these Obama Care losses past 2016, Hemsley was very clear: "No. We cannot sustain these losses. We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."
  • This is critical since in 2017 the Obama Care programs that were put in place for the first years of the legislation to mitigate insurance company losses on Obama Care policies are scheduled to go away, making any financial cushion that does exist today for insurance company losses a thing of the past in 2017 and beyond.
  • This could push other insurance companies to also reconsider their decision to offer Obama Care policies as their financial results possibly deteriorate even faster.
And thus the death spiral picks up speed. As companies like UnitedHealthcare dropout of the Obama Care exchanges, their high risk, high cost customers will migrate over to the remaining Obama Care insurance carriers which will see an increase in their costs from these sicker and costlier customers which will cause them to raise their insurance rates which will cause more people to drop their insurance which will decrease Obama Care insurance company revenues which will cause them to raise rates more……

2) Let’s stay with this mess that is bad financials and Federal subsidies. Another recent article by Philip Klein of the Washington Examiner shows the first hint that the American taxpayer may be on the losing end of another corporate bailout scenario. Klein reported on November 20, 2015 that “The Department of Health and Human Services attempted to reassure private insurers on Thursday that they'll be able to recover losses from participating in Obamacare by claiming it was an "obligation" of the U.S. government to bail them out.”

Yes, America, after bailing out the car companies, the banks, Fannie Mae, AIG, Freddie Mac and who know what other corporations a few years ago, the Obama administration is looking to put together a corporate bailout for the insurance companies that were foolish enough to sell Obama Care policies. The issue revolves around the Obama Care ”risk corridors” program. 

This program was supposed to run from 2014 through 2016. It called for the Federal government to confiscate money from health insurance companies that did better than expected with Obama Care policies and give that money to Obama Care insurance companies that were doing worse than expected. In theory, this was supposed to ease the transition into the Obama Care world and encourage all insurance companies to participate since their losses, if any, would be mitigated by the risk corridor money.

By law, this pool of money can only be replenished by insurance company funds, no taxpayer funds are allowed to be used to help out the insurance companies. Which is where the problem gets tough: as we discussed above, the Obama Care policies are turning out to be from disproportionately sicker and costlier people which is causing more bad financial results than good financial results.

For example, in 2014, Obama Care insurers who lost more than expected ended up asking for $2.87 billion in risk corridor payments. But the Federal government collected only $362 million from insurers performing better than expected from Obama Care policies. Thus, the Feds had only about 13% of the funds needed to fulfill the risk corridor requirements of the law ($363 million in excess earnings divided by $2.87 billion in excess losses).

This is a situation that has ticked off the insurance companies since they are getting back less than what they claim was promised by the Obama administration when they signed up for the Obama Care exchanges. The industry’s lobbying group, America’s Health Insurance Plans, is demanding that its members be kept whole: "We've been very clear with the administration about the serious challenges facing consumers and health plans in this Exchange market. Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program. When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result. The administration must act to ensure this program works as intended and consumers are protected."

In response to this demand and threat, the Obama administration announced that it would use money collected in 2015 and 2016 to make up for the 2014 $2.5 billion shortfall. Which is a ridiculous statement and promise to make because how are the risk corridors going to pay for the 2015 and 2016 insurance company claims if the excess profits in 2015 and 2016 were used to pay for the excess losses in 2014? It is a zero sum game and unless the people in Obama Care policies get a lot healthier in 2015 and 2016, reducing insurance company costs, there will continue to be a shortfall. 

Thus, one of two things have to happen. The first option involves the Obama administration breaking existing law and giving the insurance companies taxpayer money to keep them happy, i.e. another taxpayer bailout of large corporations. 

The second option involves the insurance companies being stuck with less than what they expected which will eventually lead them to go down the same route as UnitedHealthcare and get out of the Obama Care business. This would then cause the whole Obama Care house of cards to implode onto itself and collapse.

But long ago we and others predicted that this would happen. Obama Care never looked at the underlying root causes of our high healthcare costs in this country. The law mistakes a public health problem for an insurance problem and thus, invokes a bad solution for a misdiagnosed problem. The underlying drivers of high costs still exist, as listed above, and risk corridors and such do nothing to fix those problems. 

And now, the Obama administration is faced with two bad options: try to find a way for taxpayers to bailout multi-billion dollar insurance companies or watch the whole house of cards collapse as more and more companies refuse to offer Obama Care policies.

3) One last piece of disgust from Obama Care this month. We mentioned above that the industry lobbying group is demanding that the Federal government, i.e. taxpayers, keep the insurance companies whole relative to the risk corridors. This lobbying group is headed up by a Marilyn Tavenner. 

Ms. Tavenner just happens to be a former Federal government employee who coincidently was in charge of the government implementation of Obama Care when she was the overall boss at the Centers For Medicare and Medicaid. Thus, she set up the risk corridors and certainly knew the risks involved with them but is now probably a very highly paid consultant trying to tear down those risk corridors at the beckoning of her new employer. 

While probably nothing illegal is going on here, this potential conflict of interest just adds another layer of stench to the whole Obama Care process. A former high government official now using her government knowledge and insights to rip off the American taxpayer and laughing all the way to the bank in the process. Disgusting. 

More Obama Care disasters tomorrow, the legislation that never stops giving….bad news.

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