Thursday, April 21, 2016

April, 2016, Part 1,The Unfolding Disaster That Is Obama Crae: INsurance Company Jitters and Massive Co-op Failures

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 its 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 healthcare 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 healthcare 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 healthcare 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: 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 healthcare 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 insurance premiums, 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.

Today we will start reviewing the latest unfolding disasters from the worst piece of legislation ever written by Washington:

1) Peter Sullivan, writing for The Hill on April 15, 2016, reviewed how some of the major insurers of Obama Care policies are warning that they may pull out of the program, given how unprofitable the policies are for them. Details of his article include the following realities:

  • Larry Levitt, a health law expert at the Kaiser Family Foundation is quoted as saying: “Something has to give. Either insurers will drop out or insurers will raise premiums.”
  • Unless more healthy and younger people sign up for Obama Care, there is likely to be a need for the insurance companies involved to push for big rates hikes which will make it more unattractive for young people to sign up which leads to a death spiral of increasing costs and dwindling enrollment.
  • Mark Bertolini, Aetna CEO, has already publicly stated that the Obama Care policyholders his company are getting are sicker and more costly than expected or forecasted.
  • Levitt of Kaiser is on record predicting there will big Obama Care policy cost increases in 2017.
  • Some insurance companies may opt to just get out of the Obama Care market rather than fight the continuous battle of annual rate increases.
  • The biggest health insurer in the country, UnitedHealthCare, has already withdrawn from two state markets, Arkansas, and Georgia.
  • CEO Brad Wilson of Blue Cross of North Carolina, recently stated that his company had lost $400 million due to its Obama Care business: “We're not alone, and I think that that also is evidence to suggest that there are systemic and fundamental challenges that we all need to have a civilized conversation about.”
  • He implied that unless his company get the rate hikes they say they need in 2017 that his company might drop out also.
  • The Centers For Medicare and Medicaid, which administers the Obama Care law, tried to downplay the North Carolina exit talk but that seems to be a denial of reality, based on the CEO’s public statements, lamely trying to blame the $400 million loss on the company’s computer problems.
Not good news for Obama Care, not when huge companies like Blue Cross and UnitedHealthCare are threatening to get out of the market after sustaining such huge losses. Given that nothing will likely happen to change the status quo of the Obama Care landscape, expect either big costs increases in 2017 for Obama Care policy holders, exits of companies from the Obama Care umbrella because of huge financial losses, or both. This is what a death spiral looks like, and it is very hard to stop a death spiral once it starts.

2) Guy Benson, writing for Townhall on April 15, 2016, also reviewed the death spiral scenario regarding insurer financial losses vs. the need to exit or increase insurance rates:

  • The Blue Cross Blue Shield Association released a report in March, 2016 that showed that new enrollees of Obama Care policies had 22% higher medical costs than people that got their insurance coverage from employees, which obviously places financial pressure on the insurance companies offering Obama Care policies.
  • According to a report from McKinsey, at the state level Obama Care marketplaces, insurance companies lost money in 41 states and were profitable in only 9 states.
Not a long term sign of hope when sicker people have been using Obama Care policies, resulting in bad financial results in over 80% of the states. Mr. Benson gives a good description of what the Obama Care death spiral will look like: “The "death spiral" begins churning downward when young, healthy people decline to sign up for expensive plans, leaving older, sicker consumers as a disproportionate percentage of health market risk pools. When insurers incur additional losses as a result, they try to compensate by raising rates further (or withdraw from the marketplaces altogether), driving even more of the "desired" consumers away. The problem compounds itself until the risk pools collapse. Given Obamacare's the worse than expected enrollment figures and much-discussed warnings from major insurers, a slow death spiral is by no means out of the question.” 

Probably going to get much worse before it gets a smidgen better, if ever.

3) Richard Pollard, writing for the Daily Caller on April 10, 2016, summarized the current very shaky financial situation of the remaining 11 Obama Care co-ops. Recall from previous posts that Obama Care co-ops were established by the legislation to provide a competitive balance of insurance options in areas of the country that did not have a lot of private insurance competition. The idea was to provide a government funded counterbalance to the scarcity of other insurance competitors.

But readers of this blog know that of the original 23 co-ops established with taxpayer money, 12 of them have already gone bankrupt and out of business. Some of them are under law enforcement investigation for breaking laws. They have been a disaster from day one. As each one has closed, it has created a situation where thousands and thousands of co-op Obama Care insurance policy holders have had to scramble to find replacement insurance and they have wasted hundreds of millions of taxpayer dollars.

And the situation is not much better now for the remaining Obama Care co-ops. Mr. Pollard’s article takes an educated guess at which of the remaining 11 co-ops are viable long term, concluding that upwards of 8 of them are about to collapse themselves due to poor financial results:

  • Mr. Pollard starts off with a quote from Thomas P. Miller, senior fellow of the American Enterprise Institute and former senior health economist for the Congressional Joint Economic Committee: “In general, there’s not a turnaround in sight. The same problems that plagued them before are continuing.” 
  • The New York co-op, that has already failed, will leave hospitals and doctors with hundreds of millions of dollars in unpaid bills.
  • The Daily Caller analyzed the annual financial reports of all remaining 11 co-ops and predict that 8 of them will be out of business by the end of 2016.
  • Their analysis seems right given that the Federal government does admit that 8 unnamed co-ops are being analyzed and watched closely by the Federal government.
  • The remaining co-ops with the most losses in 2015 were in Massachusetts, Oregon, Ohio, Connecticut, Montana, Wisconsin, Illinois and New Mexico. 
  • Each of these 8 used up 50% of their assets already, assets that were supposed to last for 20 years under the Federal government rules for being funded.
  • The Oregon co-op was founded by Sara Horowitz, a long-time New York Democrat political activist and former colleague of President Barack Obama, and in 2015 it somehow had financial operating losses that were greater than all of its assets, not an easy financial failure to accomplish.
  • Despite being in desperate financial or bankrupt shape, many of the co-ops paid their executives very well.
  • In 2015, the Illinois co-op had assets of $107 but had a net operating loss of $91 million despite paying its CEO almost half a million dollars and another executive almost a million dollars.
  • The Connecticut co-op had $112 million in assets but almost half of that worth ($55 million) in net operating losses in 2015, but paid seven executives at least $200,000 each in compensation.
  • The Connecticut co-op was supposed to enroll 25,000 customers but ended up enrolling less than 8,000.
  • The Massachusetts co-op also did horribly on enrollments, enrolling only 14,000 vs. an expected enrollment of 40,000.
  • The Montana co-op in 2014 had $67 million in assets but suffered net income losses of $41 million.
  • The Ohio co-op reported that in 2015, its assets were $108 million but net losses last year topped $79 million.
  • Wisconsin’s co-op had $37 million in losses in 2014, about half of its $74 million in total assets.
  • New Mexico’s co-op had $61 million in assets and a net loss of $23 million.
  • Maryland’s co-op saw its original assets of $65 million shrink to $37 million in 2015 and net cash available was negative $5.5 million.
  • While the Maine co-op was the only one to operate in the black last year, it still lost about 40% of its asset base in doing so. 
What a mess. Poor management, poor enrollment forecasts, corruption, overpaid executives, financial waste, and worst of all, probably over $2 billion in taxpayer wealth that will never be seen again with little to show in return. But that is the story of the Obama Care legislation, a lot of expense with little to show in return except failing co-ops, failing state exchanges, missed enrollment forecasts, rising premiums, rising deductibles, rising co-pays, insurance company negative results, and a whole lot more unfolding disasters.

Unfortunately, there will be more of the same in tomorrow’s post.

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