Tuesday, May 24, 2016

May, 2016, Part 1, The Unfolding Disaster That Is Obama Care: Death Spiral In The Market and Defeat In The Court

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.

For the next few days we will be reviewing the latest unfolding disasters from the worst piece of legislation ever written by Washington:

1) We have often talked about the Obama Care “death spiral” scenario. As fewer than expected younger and healthier people sign up for Obama Care policies and the insurance companies pay out more than expected for their older and less healthy Obama Care customers, their financial results start to sink and they are forced to raise the premium rates on Obama Care policies. The higher rates further discourage younger and healthier people from signing up which increases insurance company costs which means they have to raise their rates more, etc.

And that is exactly what appears to be happening, at least in New York state. According to a Washington Free Beacon report on May 20, 2016 by Ali Meyer, New York insurance companies are expected to ask for average rate increases of 17.3% for individual Obama Care policies beginning in 2017. 

According to the New York Daily News: “The proposed increases, which must still be approved by the state’s Department of Financial Services, range from 6.1% sought by MVP Health Plan Inc. and HealthNow New York Inc., to a whopping 89% requested by Crystal Run Health Plan LLC.” 

The article also cites Bloomberg reporting which states that: “Oscar Insurance Corp., is planning to increase individual rates by 18.4 percent, CareConnect Insurance is asking for an increase of 29.2 percent and UnitedHealth Group Inc. is looking to boost premiums in New York by 45.6 percent.”

Oscar Insurance explained what is going on, which looks like suspiciously like the death spiral we have been talking about: “Medical costs have gone up, government programs that helped cover our costs are ending, and our members needed more care than we expected.” So much for the Obama promise that his approach would “bend the cost curve” downward and that Americans families would save up to $2,500 a year on the health insurance costs. Tough to save $2,500 a year when the premiums are going up as high as 89% in a single year.

2) An alternative to insurance companies raising their rates is for them to get out of the Obama Care insurance policy business altogether. Unitedhealthcare is already going down the road since they have already decided not to offer Obama Care policies in at least 26 of the 34 states that they were active in in 2016. And that withdrawal strategy could be repeated by other companies going forward, as identified in a paper and analysis by Heritage Foundation senior research fellow Ed Haislmaier, Mercatus Center senior research fellow Brian Blase, and Galen Institute senior fellow Doug Badger.

They analyzed enrollment and financial data and results of 289 Obama Care insurance companies’ Obama Care plans and found that:
  • In total, they found that insurance companies have suffered substantial losses on their Obama Care policies so far.
  • These large losses were incurred even though they were receiving subsidies (reinsurance) for the first couple of years as laid out in the Obama Care legislation. Otherwise, their losses would have been much worse.
  • The companies lost an aggregate $2.2 billion, which would have really been $8.9 billion since their losses were offset by payments of $6.7 billion from the reinsurance process.
  • The Obama Care policies of the insurance companies would have had to be 26% higher from the start just to break even financially. But that would have started the death spiral, according to the authors: “If premiums had been 26 percent higher, on average, enrollment would have been lower and adverse selection would have increased. Relatively healthy people and higher income enrollees, who qualify for smaller subsidies if they qualify for any subsidies, would have been deterred to a greater degree than people who expected to use more health care services. As a result of this dynamic effect, the premium increase would likely have needed to be substantially greater than 26 percent for insurers to break even on their Qualified Health Plans in 2014.”
  • But the reinsurance programs go away in 2017, likely meaning that the companies will have to jack up their rates to cover the lack of subsidies, much like we just saw what is going on in the New York state.
Looks like New York may be a foreshadowing of the Obama Care death spiral to come starting in 2017.

3) Staying with this death spiral theme, Ali Meyer, again writing for the Washington Free Beacon, on May 4, 2016 discussed the news that Humana, one of the largest health insurers in the nation, is considering existing some of the Obama Care markets in 2017.

Besides exiting some states, the company recently announced that it is in the process at looking at what other changes it needs to make to make a profit in the Obama Care world: “Humana is in the process of finalizing plans for its ACA-compliant individual commercial medical market offerings in 2017.Humana anticipates proposing a number of changes to retain a viable product for individual consumers, where feasible, and address persistent risk selection challenges. Such changes may include certain statewide market and product exits both on and off exchange, service area reductions and pricing commensurate with anticipated levels of risk by state.” 

This is particularly important for Humana since they also reported that their commercial insurance enrollment figures dropped by 233,200 putting additional financial pressure on the company. The company anticipates this business will finish in negative financial results in 2016. The same Meyer article reminds readers that the Unitedhealthcare’s CEO recently reported that his company may lose more than $1 billion in 2016 serving Obama Care customers.

Death spiral anyone?

4) As if the market setbacks were not enough, Obama Care recently lost a vital decision in the courtroom. According to a Heritage Foundation article by Hans von Spakovsky and Elizabeth Slattery on May 12, 2016:
  • A Federal district court in Washington, D.C. recently ruled in favor of a U.S. House of Representatives’ challenge to the Obama administration’s implementation of part of Obama Care.
  • Specifically, the suit brought by the House wanted the court to force the Obama administration to stop using general Treasury funds to subsidize insurance companies that were offering Obama Care insurance policies since the Congress, in passing the original legislation, forbid that kind of subsidies to exist.
  • The court found the Obama administration in violation of the Constitution’s Article I, Section 9,Clause 7, which states that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”
  • Since Congress passed no law approving the use of taxpayer funds in this manner, the court and judge had no choice but to stop the process.
  • The judge was quite sarcastic in her ruling finding this misuse of funds was “a most curious and convoluted argument whose mother was undoubtedly necessity.” In other words, the insurance companies are getting killed financially by Obama Care policies and Obama, out of necessity to save his landmark legislation, had to get very convoluted to get around the law and Constitution.
  • She also got funny in her comment that the Obama administration was trying to “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401(d)(1).”
The article goes on to show the many other ways the administration was trying to call black white and up down to find a way, any way, to save the insurance companies money and help them decide to stay in the Obama Care market, even if it meant massive, illegal taxpayer bailouts. The decision is sure to be appealed but at least one judge got it right from a common sense, straightforward reading of the law. 

That’s a good start for this month’s discussion of the unfolding disaster that is Obama Care. It showed again how Obama missed the root causes of the high healthcare costs in this country, how he put forth a (bad) insurance remedy for an ailment that needed a public health remedy. The underlying causes of our high health care costs are still the same, or possibly worse, than when this legislation was passed in 2010: bad American eating habits, bad American smoking habits, bad American exercising habits, an aging population, etc. Coming up with a Rube Goldberg insurance process that is falling apart at the seams (e.g. higher than expected medical costs to insurance companies, rising premiums, rising deductibles, etc.) was totally expected and are now coming true in a classic death spiral way. 

More disasters this week.

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