Sunday, September 7, 2014

The Next Chapter of Obamacare

Welcome back from the summer.

It's been pretty quiet lately on the Obamcare front.

So quiet, that there has been a flurry of articles recently over how Obamacare has dropped to a second or even third tier issue and will hardly matter come election-time.

Wishful thinking.

Obamacare has largely been out of the news cycle for a couple of months but that is about to change.

A few thoughts.

The 2015 rate increases have been largely modest. Does that prove Obamacare is sustainable? No. You might recall that on this blog months ago my 2015 rate increase prediction was for increases of 9.9%.

You might also recall my reason for predicting such a modest increase. With almost no valid claims data yet and the "3Rs" Obamacare reinsurance program, insurers have little if any useful information yet on which to base 2015 rates and the reinsurance program virtually protects the carrier from losing any money through 2016. I've actually had reports of actuarial consultants going around to the plans that failed to gain substantial market share suggesting they lower their rates in order to grab market share because they have nothing to lose with the now unlimited (the administration took the lid on payments off this summer) Obamacare reinsurance program covering their losses.

We won't know what the real Obamacare rates will be until we see the 2017 rates––when there will be plenty of valid claim data and the Obamacare reinsurance program, now propping the rates up, will have ended.

To say this fall's 2015 Obamacare open-enrollment has the potential to be problematic is an understatement.

The HealthCare.gov backroom is not built yet––a year and counting after it should have been.

How many people are enrolled in Obamacare? Without a government to insurance company accounting system yet built, no one knows.

The administration says they are going to auto-renew existing Obamacare policyholders. But they don't have a valid baseline census from which to start.

While the administration tells Obamacare policyholders their automatic renewal will go smoothly, the fact is every one of these subsidy-eligible people needs to go to the exchange website and re-enroll. The biggest reason is that in most cases the baseline second lowest cost Silver plan, upon which their personal subsidy is based, has changed and with it the subsidy they are eligible for. The only way a participant will know the impact of price changes in their community's baseline plan on their own net of subsidy premium is to re-enroll. If they do not, they could be surprised by a big jump in their 2015 out-of-pocket premium come January, or a big tax bill a year later. And, if their income data is not up-to-date, they could be getting a much smaller or bigger subsidy than they are entitled to.

Actuarial firm Milliman put the impact of Silver baseline plan changes this way in a recent issue brief: "Even modest premium increases by market leaders of 5% could lead to materially higher net premium contribution increases of 30% to near 100% for low income [subsidy eligible] enrollees during 2015." Milliman also pointed out, "If consumers choose to auto-enroll because of the simple process versus evaluating their options by going to the federal exchange, individuals who auto-enroll may have unexpected materially higher net premium contributions relative to payments in 2014 for the same plan."

Last week the Kaiser Family Foundation was out with a report that said average premiums will decline slightly for the Silver baseline plans in 16 markets. That conclusion could be incredibly misleading for current enrollees––or as an indicator about the success of the new health law.

The new 2015 Silver baseline plan may have a lower premium than the 2014 Silver baseline plan. But that is almost always because the insurance company that held that slot in 2014, and almost always got the largest share of business, significantly increased their rates for 2015.

Then another insurance company, who didn't write much business and likely now eager to increase market share, decreased their rates and has become the 2015 baseline plan. The second company was able to decrease their rates without much fear because the Obamacare "3Rs" reinsurance scheme virtually protects them from any material losses.

So, this headline about the baseline plans decreasing their rates in so many markets is more about the carriers who sold the most in the first year increasing their rates while the plans that sold very little business, and able to fall back on the Obamacare reinsurance scheme, cut their rates in a no lose attempt to gain business.

If you don't think this "auto-renewal" promise isn't going to lead to a real mess, you need to read the complete Milliman brief here.

Since the administration can't automatically update a participant's subsidy based upon 2015 changes in their local baseline Silver plan, the Obama administration's assurances that the renewal will go smoothly, without existing participants having to re-enroll, is just plain bad information that is going to cause people lots of problems.

The upshot is however many million people (pick any number other than 8 million) are still enrolled, everyone really needs to visit their state exchange or HealthCare.gov in the month between November 15 and December 15 in order to have their January 2015 enrollment validated, to be sure their income information is up-to-date, and to be sure they are enrolled in the optimal plan for the best subsidy.

Five to ten million people all trying to get through exchange websites between November 15 and December 15? Add however many people are going to sign-up for the first time this November to all of those existing participants re-enrolling for January 1, who will all be hitting the still fragile Healthcare.gov and state exchanges during that four week period, and it is not hard to see how Obamacare could be back in the news.

While the open-enrollment is now scheduled to begin until 11 days after the November election there will be plenty of renewal and cancellation letters going out in October––not the least will be more pre-Obamacare policies being cancelled this year now that their one-year extension is up––carriers aren't necessarily allowing policies to be extended further.

Does this all sound confusing? Just wait until we approach the next open-enrollment with millions of people hearing about all of this complexity and having just four weeks to get their enrollment validated for January 1. The Obamacare anxiety index is going to be off the charts well before November 15th.

Add to all of this bigger deductibles for 2015 (those go up with cost trend as well as the rates) and more narrow networks as well as generally larger rate increases for the plans that got the most enrollment and there will be lots to talk about.

Then there is the still unanswered question: How many people are enrolled in Obamacare?

Any bets on how many more months it will be before the Obama administration has the administrative wherewithal to answer that simple question and give us the real number? Any predictions prior to November 4th won't count.

The last couple of months have been very quiet for Obamacare.

That is about to end.

Tuesday, July 22, 2014

Halbig Decision Puts Obamacare Back on the Front Burner and Will Give Republicans a Huge Political Headache

Today's 2-1 decision by the DC Court of Appeals striking down federal premium subsidies, in at least the 27 states that opted for the feds to run their Obamacare insurance exchanges, has the potential to strike a devastating blow to the new health law.

The law says that individuals can get subsidies to buy health insurance in the states that set up insurance exchanges. That appears to exclude the states that do not set up exchanges––at least the 27 states that completely opted out of Obamacare. Another nine states set up partnership exchanges with the feds and the impact on those states is not clear.

The response by supporters of the law, and the IRS regulation that has enabled subsidies to be paid in the states not setting up exchanges, hinges on the argument that the language is at worst ambiguous and the Congress never intended to withhold the subsidies in the federal exchange states.

But in the DC Court ruling one of the majority judges said, "The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states."

My own observation, having closely watched the original Obamacare Congressional debate, is that this issue never came up because about everybody believed about all of the states would establish their own exchange. I think it is fair to say about everyone also believed a few states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn't have the scale needed to make the program work. I don't recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies.

Thursday, July 17, 2014

"Biggest Insurer Drops Caution, Embraces Obamacare"

Kaiser Health News is out with that headline today reporting that UnitedHealthcare is expanding its Obamacare exchange presence planning to sell polices "in nearly half the exchanges next year." The story goes on to report that United's leadership is saying the new public marketplaces look sustainable.

There may be more to it than that.

Friday, June 20, 2014

Kaiser Family Foundation Survey Finds Most People Who Bought Health Insurance on the Exchanges Are Happy With It and That 57% Were Previously Insured––No One Should Be Surprised On Either Count

Let's take a look at both of these headlines:

Most People Are Happy
But Kaiser only asked the people who bought health insurance on the exchanges if they were happy with what Obamacare offered them.

As I have said before on this blog, two out of three subsidy eligible people did not buy a health insurance plan in the first open-enrollment.

Wednesday, June 18, 2014

Obamacare: What About the Working Class and the Middle Class?

The administration issued a report yesterday that says individuals who selected plans in the federal health insurance exchanges have a post-credit premium that is on average 76% less than the full premium for the plans they selected. And, 69% are paying less than $100 after the subsidies––46% are paying $50 or less.

The administration also pointed out that 65% of individuals selecting the Silver Plan in the federal exchange chose the lowest or second-lowest cost Silver Plan.

As I have said before, only about one-in-three subsidy eligible people bought and paid for coverage during Obamacare's first open-enrollment.

It would appear from this data that it is the lowest income people who are most often signing up for coverage. They are the ones who get the biggest premium subsidies as well as the reductions in their deductibles and co-pays.

Tuesday, May 13, 2014

With the November Election Six Months Away Obamacare is Up For Grabs

House Energy and Commerce Committee Republicans seemed surprised last week when representatives of the insurance industry reported that they didn't have enough data yet to forecast prices for next year's health insurance exchanges, the market was not about to blow up, and that so far at least 80% of consumers have paid for the health insurance policies they purchased on the exchanges. The executives also reported there are still serious back-end problems with HealthCare.gov––particularly in being able to reconcile the people the carriers think are covered and the people the government thinks are covered. These are all things that you have read about a number of times on this blog.

The insurance companies are doing their best to make Obamacare work.

Why?

Tuesday, April 22, 2014

Obamacare Observations From the Marketplace

A few observations from my travels and conversations in the marketplace:

About half of the enrollments are coming from people who were previously insured and half are not. When I try to gauge this, I go to carriers who had high market share before Obamacare and have maintained that through the first open enrollment. Some carriers have said only a small percentage of their enrollments had coverage before but health plans only would know who they insured before.  By sticking to the high market share carriers who have maintained a stable market share and knowing how many of their customers are repeat buyers, it's possible to get a better sense for the overall market. Other conventional polls have suggested the repeat buyers are closer to two-thirds of the exchange enrollees.

The number of those in the key 18-34 demographic group improved only slightly during the last month of open enrollment so the average age is still high. The actuaries I talk to think this issue of average age is made to be far more important than it should be. It is better to have a young group than an old group. But remember, the youngest people pay one-third of the premium that older people pay. The real issue is are we getting a large enough group to get the proper cross section of healthy and sick?

Monday, April 14, 2014

Virginia Should Take the Obamacare Medicaid Expansion Money and So Should All Republican States

In a September 2012 post on this blog, I said that Republican governors should be expanding their Medicaid programs under Obamacare. I argued that Republicans have long called for state block grants and the flexibility to run their own Medicaid programs in what are the state "laboratories of democracy."

I made the point that, given the then recent Supreme Court decision enabling states to opt out of the expansion, the Obama administration would be hard pressed to deny any reasonable proposal from Republican governors. If Republicans really believed in state responsibility and flexibility for how they run their Medicaid programs, this was the opportunity to prove it. (See: The Medicaid Controversy––The Republican Governors Should Put Up or Shut Up)

Since then, a few Republican governors have taken that tack and the Obama administration has been very cooperative and flexible.

Tuesday, April 1, 2014

Mission Accomplished?––7.1 Million––Will the Obama Administration Come To Regret Today's Obamacare Enrollment Announcement?

Politics is about expectations.

The Obama administration blew the doors off Obamacare's enrollment expectations this week and scored big political points.

But in doing so, they may have set Obamacare's expectations going forward at a level that can only undermine their credibility and that of the new health law.

What happens when the real number––the number of people who actually completed their enrollment––comes in far below the seven million?

What happens when the hard data shows that most of these seven million were people who had coverage before?

What happens when it becomes clear that the Obamacare insurance exchanges are making hardly a dent in the number of those uninsured?

Sunday, March 30, 2014

Was Obamacare Worth It? How Many of the Previously Uninsured Have Really Signed Up?

Health insurance reform was long overdue. But did it need to be done the way the architects of the Affordable Care Act did it?

Obamacare was enacted, and the private health insurance market fundamentally changed, so that we could cover millions of people who previously couldn't get coverage.

Are enough people getting coverage who didn't have it before to justify the sacrifices the people who were already covered––in the individual, small group, and large employer market––are making or will make?

I will suggest the country will never really be able to judge how good or how bad Obamacare is until that question is answered.

Tuesday, March 25, 2014

The One Thing That Could Save Obamacare––And The Obama Administration Needs To Do It In the Next Month

To properly price the exchange health insurance business going forward the carriers have to sharply increase the rates. A senior executive for Wellpoint, which sells plans in 14 Obamacare exchanges, is quoted in a Reuters article telling Wall Street analysts there will be big rate increases in 2015, "Looking at the rate increases on a year-over-year basis on our exchanges, and it will vary by carrier, but all of them will probably be double digits."

If the health plans do issue double digit rate increases for 2015, Obamacare is finished.

There are a ton of things that need to be fixed in Obamacare. But, I will suggest there is one thing that could save it.

Monday, March 24, 2014

What Individual Mandate? It is Looking More and More Like the Obama Administration Will Not Enforce the Individual Mandate

It looks to me the Obama administration will claim at least 6 million enrollments by the end of March. But that will mean 75% of subsidy eligible people will not have bought a plan.

Will the 2014 mandate to buy health insurance be enforced come tax time?

It sure doesn't look like it.

To be sure, the administration is not making any major announcements prior to the close of open enrollment on March 31 the better to get as many people to sign-up as possible.

When asked about waiving the individual mandate at a recent Congressional hearing, HHS Secretary Sebelius said, "That's what the law says and that is what will happen."

Well sort of.

Wednesday, March 19, 2014

Republicans Considering Proposing High-Risk Pools––Health Insurance Ghettos

We are hearing that Republicans are considering proposing high-risk pools as part of an alternative health insurance reform proposal to Obamacare.

A high-risk pool proposal would likely mean the Congress giving states the flexibility, and perhaps funding, to set up these risk pools. Risk pools by definition are a place where people can go when they are not able to buy health insurance in the regular market because they have a health problem.

That means Republicans would be turning the clock back to a time when insurance companies could turn people down for health insurance because of their health status.

Monday, March 17, 2014

Silly Republican Insurance Reform Ideas––Selling Insurance Across State Lines and Association Health Plans

There are news reports indicating Republicans will be proposing such longstanding health insurance reform ideas as selling insurance across state lines and association health plans.

These ideas have been around for some time and have served Republicans as convenient talking points out on the campaign trail positioned as common sense alternatives to Obamacare.

When I discuss these ideas with people in the insurance industry––people who know how their market really works––these ideas generally command plenty of snickers.

Tuesday, March 11, 2014

Gallup: The Number of Those Uninsured Is Falling––Why All of the Amazement?

Reading the many press reports about the new Gallup poll estimating the number of the uninsured I couldn't help be surprised by their surprise.

Under the headline, "Obamacare Working?" CBS reported that Gallup found the uninsured rate had fallen to 15.9% in a survey taken during January and February. That was down from 17.1% at the end of 2013––a reduction of 2.5 million adult Americans.

Other news reports have pegged the reduction in the uninsured to be worth as many as 4 million people.

The Los Angeles Times headline said, "Obamacare Meeting Goal of Reducing Number of Uninsured, Data Indicate."

Well, dah!

The Gallup survey is fully consistent with the reports that Obamacare's enrollment is coming in at a tepid rate at best and there are serious questions about the number of uninsured that are buying Obamacare.

Thursday, March 6, 2014

Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It

Here's my version of a classic corporate marketing story from the 1980s:
A big dog food company decided to come out with the latest and greatest new dog food. They hired the smartest consultants from the big universities in Boston to advise them. They had their scientists, who know far more about nutrition than any consumers or the dogs, come up with the most nutritious formula they were convinced was good for them. The engineers designed a new and cost effective manufacturing process that capped their overhead. The marketing department allocated enormous amounts of money to the various state sales offices and put together a very expensive and colorful national ad campaign led by a charismatic spokesman. The company trained a newly recruited sales force and signed up the biggest supermarkets for the best shelf space.

It did not sell.

Wednesday, March 5, 2014

Extending the Obamacare Cancelled Policy Moratorium––One More Contortion in the Pretzel

The administration has confirmed that the individual policies that were supposed to be cancelled because of Obamacare can now remain in force another two years.

For months I have been saying millions of individual health insurance policies will be cancelled by year-end––most deferred until December because of the carriers' early renewal programs and because of President Obama's request the policies be extended in the states that have allowed it.

The administration, even today, as well as supporters of the new health law, have long downplayed the number of these "junk policy" cancellations as being insignificant.

Apparently, these cancelled policies are good enough and their number large enough to make a difference come the November 2014 elections.

Monday, February 10, 2014

More Obamacare Unravelling

On Friday, I asked if Obamacare was unraveling.

The Obama administration announced today that they are delaying the employer mandate again.

In the announcement, they said that large employers, those with at least 100 workers, will only have to cover 70% of their otherwise eligible workforce in 2015 and 95% in 2016 and beyond.

The administration also said that employers with 50 to 100 workers will have their mandate to provide affordable health insurance to their workers delayed until 2016––one more year's reprieve.

Employers with less than 50 workers, not required to provide coverage by the Affordable Care Act, will be exempt from the original reporting requirements in 2015 and every year thereafter.

Democrats have been under increasing political pressure from employers back home because of the reporting requirements as well as the mandate that employers with more than 50 workers offer coverage. No doubt Congressional Democrats have been pressuring the administration to back off on the requirements with an election approaching in the fall.

Friday, February 7, 2014

Is Obamacare Unraveling?

Rumors have been circulating in the marketplace all week that the administration was thinking of extending the individual health insurance policies that Obamacare was supposed to have cancelled for as much as three more years.

Those rumors have now come out into the open with Tom Murphy's AP story that began running today.

That the administration might extend these polices shouldn't come as a shock. My sense has always been that at least 80% of the pre-Obamacare policies would ultimately have to be canceled because of the administration's stringent grandfathering rules that forced almost all of the old individual market into the new Obamacare risk pool.

But with the literal drop dead date for these old policies hitting by December 31, 2014, that would have meant those final cancellation letters would have had to go out about election day 2014. That would have meant that the administration was going to have to live through the cancelled policy nightmare all over again––but this time on election day.

Avoid having to check back. Subscribe to Health Care Policy and Marketplace Review and receive an email each time we post.

Blog Archive