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Thursday, November 3, 2016

"OBAMACARE" -- October Surprise or Trump's Bamboozle?

Well, wouldn’t you know… Donald Trump is trying desperately to make “Obamacare” the “October Surprise.”  But then, along comes the real October Surprise:  FBI Director, James Comey, brings forth a letter to Congress in which he indicates that some more e-mails have been discovered while agents were investigating former Rep. Anthony Weiner.  And, on top of all that, there are on-going surprises generated by the innumerable polls out there that claim to predict the electoral preference of voters.

It might be important, and even ‘fun,’ to present some facts and inevitable opinions on each of these matters, but time is short.  As a first step toward that goal, I shall concentrate today on health care plan cost hikes, and more broadly on the ACA (Obamacare), since Donald Trump seems somewhat possessed by the subject!

The Rate Hikes:
The AP reported over a week ago:
“Premiums will go up sharply next year under President Barack Obama’s health care law, and many consumers will be down to just one insurer, the administration confirmed Monday.
Before taxpayer-provided subsidies, premiums for a midlevel benchmark plan will increase an average of 25 percent across the 39 states served by the federally run online market, according to a report from the Department of Health and Human Services. Some states will see much bigger jumps, others less.
Moreover, about 1 in 5 consumers will only have plans from a single insurer to pick from, after major national carriers such as UnitedHealth Group, Humana and Aetna scaled back their roles.
Administration officials are stressing that subsidies provided under the law, which are designed to rise along with premiums, will insulate most customers from sticker shock. They add that consumers who are willing to switch to cheaper plans will still be able to find bargains.
‘Headline rates are generally rising faster than in previous years,’ acknowledged HHS spokesman Kevin Griffis. But he added that for most consumers, ‘headline rates are not what they pay’.”
Now, let’s take a moment to consider some of the basic aspects of Obamacare that the article does not make clear and which many politicians use to distort the picture of rising rates.
  1. Obamacare does not affect all health insurance rates and plans.  The ACA is, after all, limited in its applicability.  It does not affect rates charged to those not on Obamacare, which is the clear majority of insured citizens. The private insurance that you purchase directly, or the company policy that you have from work, or any policy that is not offered on the state and federal health exchanges, their rates are not directly influenced or controlled by the ACA (Obamacare).  Rising rates seen in them come not from Obamacare but from your insurance provider trying to keep up with the generally rising costs associated with healthcare, pure and simple.  Paul Krugman reminds us: “The spike in premiums…only applies to one piece of the health care system — the “exchanges,” the insurance markets Obamacare established for people who aren’t covered either by their employers or by government programs, mainly Medicare and Medicaid.”  So, the first paragraph of the AP story tends to distort the true picture, as do many Republicans, including Donald Trump, who want you to believe that Obamacare rates determine the rates of all health insurance plans. They do not.
  2.  The ACA has two basic goals that are essentially being met.
Paul Krugman again:
“Health reform had two big goals: to cover the uninsured and to rein in the overall growth of health care costs — to “bend the curve,” in the jargon of health policy wonks. Sure enough, the fraction of Americans without health insurance has declined to its lowest level in history, while health cost growth has plunged: since Obamacare passed Congress, private insurance costs have risen less than half as fast as they did in the previous decade, and Medicare costs have risen less than a fifth as fast.” 
“The law has more-or-less hit its target for covering Americans. Almost 20 million people had coverage in 2015 close to what the nonpartisan Congressional Budget Office had forecast in early 2013.” (Politico)
The reining in of health care costs is much trickier than enrolling consumers.  There has been an overall success in reducing the percentage of health cost growth, but in some states, like North Carolina and Texas, insurers have had to increase premiums substantially to prevent losses of revenue.
  1. The larger premium increases are not a surprise.
Despite Republican rhetoric to the contrary, there are several cogent reasons why the rise in rates is not surprising.  Why?
a.       The insurers initially guessed wrong as to how much their new customers’ health care was going to cost in the long run.  After two and one-half years of operation and data-collection, it is now quite clear that the ratio of premiums charged to costs paid out is in dire need of adjustment, especially in states where initial estimates were far off the mark, like Texas and North Carolina, and at least 10 others.  A POLITICO review of 2015 filings from nearly 100 health plans across a dozen geographically and politically diverse states found that less than a quarter of them hit the standard break-even point for insurers at which payouts are kept to about 85% of premiums taken in.  Many of those insurers lost “tens of millions of dollars on their Obamacare policies last year.”
b.       The “risk pool” is unbalanced.  As with most insurance, profit for the provider depends on having “shared risk.”  The one question influencing provider participation in Obamacare from the start has been the question of just who will sign up for Obamacare and how sick will they be?  In the language used by insurance companies, the “risk pool” of Obamacare customers has turned out to be “riskier” than they anticipated.  It is now clear that in several states, fewer people signed up than expected and many turned out to be sicker and thus more costly than anticipated. 
Before ACA, the insurers had several ways to balance their ‘risk pool.’  They used filters like ‘pre-existing conditions,’ monthly or lifetime caps,’ and “benefit reductions” to avoid covering the people who would most likely have higher medical costs and thus be a drain on their profit margin.  But Obamacare, thank goodness, made those tactics illegal. 
Other factors have played into this imbalance of the risk pool.
·         Fewer people got shut out of employer plans than anticipated and didn’t end up on Obamacare. 
·         One of the most popular provisions in the law allows young people (mostly healthy and representing small costs for health care) to remain on parent policies until age 26. Unfortunately, that one provision keeps many younger healthy potential customers for other plans out of the risk pool.
·         The decision by the administration to extend to 2017 the time when old plans that didn’t comply with the ACA would have to be cancelled may also have cut off a flow of new sign-ups of less costly consumers. 
·         Instead of sticking to one enrollment period for all, special enrollment periods have tended, in some cases, to produce sign-ons who are looking for immediate care and thus run up larger medical bills quite quickly.
·         The tax penalty for not having health insurance may be too low and thus a viable means for younger people to avoid signing up because they believe paying the penalty is cheaper than paying premiums on health care they don’t need.
·         Republican recalcitrance and attempts to restrict if not repeal ACA.  Another interesting aspect that the AP article didn’t discuss at all is a fact that POLITICO reports in its study:  those states that supported ACA and set up their own exchanges were roughly twice as high in enrollment as those states that refused to promote enrollment, and that relied on the federal exchange.
For insurance markets to be sustainable under Obamacare, “experts estimate that 35 percent of customers should be between the ages of 18 and 34.  In reality, right now, just 28% of customers fall into that group” under Obamacare. (POLITICO)
  1. A big part of this story is the importance of mandated subsidies to keep costs low for those who enroll under Obamacare.
What the AP story tells you is that in most cases, where there are substantial rate hikes, there are also similar raises in the subsidies granted.  Thus, the net cost to the consumer of the rising premiums may end up being, at most, between 4- 8%, not 25%.  Subsidies are available only to those below 400 percent of the poverty level, which in 2016 was less than $97,000 for a family of four.  Subsidy amounts vary based on state, income, and number in family, of course.
According to an analysis done by the U.S. Department of Health & Human Services (HHS) even if all premium rates were to rise by double digits next year, the vast majority of Americans who buy coverage through the Obamacare exchanges will still have affordable options.  If all rates increased 25 percent, nearly three-quarters of people who use the exchanges would still be able to purchase coverage for less than $75 a month. Under Obamacare, low-income consumers are shielded from the impact of rate increases by tax credits that rise along with the premiums, along with their ability to shop for the best plan.
  1. Republicans in Congress must share the blame for higher rates and loss of insurers.
What the AP bulletin doesn’t tell you is that provisions in ACA known as the “three R’s” were placed in the ACA to protect insurance providers, designed to alleviate expected losses in the first two years of Obamacare operation.  Two of those provisions will expire by the end of this year, but while in existence, paid out substantial amounts to help cover the losses to initial providers.  The first “R” was a “reinsurance” provision that paid out federal funds of over $15 billion dollars in the first two years of exchange operations to insurers who attracted individual consumers who racked up particularly high medical bills.  The second “R” – “risk adjustment” – was intended to help small insurers by requiring insurers with low-cost patients to make payments to plans that insured higher cost customers. Small companies complained that bigger companies were favored in this, and that this second “R” was too unpredictable.
But it is the third provision – “Risk Corridors”-that ended up on the trash heap of a Republican Congress’s dedication to the dismemberment of Obamacare.  This action by Republican saboteur-legislators has surely contributed to the current situation of higher premiums and loss of providers in some exchanges.  They won’t admit it, and Donald Trump will never speak truth to you about it if he even knows!
“Risk Corridors” was a provision intended to subsidize health plan providers whose total medical expenses for all their ACA customers exceeded a certain set amount.  With this “insurance for insurers,” many companies were willing to risk trying low premiums at first.  Providers could then submit claims seeking federal payments for expenses that overshot the allowed target.  Insurers submitted claims for $2.9 billion under this provision of the Law, but ended up getting only 12.6 cents for each dollar they had counted on because once Congress passed a spending restriction, there was just $400 million available to make good on some of those payments.  What happened?
“in December of 2014, the Republican Congress voted to prohibit the Obama administration from spending any money on the program, decrying it as a bailout for the insurance companies.  Unlike all those symbolic ‘repeal Obamacare’ votes, Congress succeeded in blocking all those risk corridor payments.  The end result: many of the new Obamacare co-op plans that went out-of-business blamed their collapse in part on the fact that they’d been counting on the full (corridor) payments to keep them solvent.” (Politico)
This is one large causal factor for why premium rates are going up and insurers are withdrawing for 2017.  “Across 36 states analyzed by the Council for Affordable Health Coverage, the average requested increase for 2017 is 19.2 percent.  But in some states like Arizona, Oklahoma and Tennessee, proposed average rate hikes exceed 50%: Texas is asking for a 60% premium hike. 
  1. Despite all the exaggerated bad news from the Trump camp and from the Congressional Republican saboteurs, there is hope for future stabilization and success.
    1. One-time factors. Although somewhat turbulent, this is what new comprehensive programs must go through:  a period of fixing technical problems, ironing out initial errors and stabilization of new and worthwhile provisions. Medicare is an example. Since its inception in 1965, Congress has been amending it, and even now it undergoes needed changes, and remains one of the government programs most approved by the public.  Per the NY Times: “An optimistic view of this year’s price increases is that they represent a one-time market correction, as insurers adjust to the real costs of caring for these customers and to the changes in federal policy.”
 Cynthia Cox, an associate director at the Kaiser Family Foundation, which has analyzed similar rate filings for big cities, said that overall “the factors that are driving premiums to increase in 2017 are one-time factors.” Price trends for future years, she said, will depend on how many people sign up.” 
One of the very important points that is well-taken in the AP article is that there are several types of plans, and not all of them have rates rising at terribly steep figures or percentages.  The point is made that “headline plans and their rates will rise much faster than basic plans. That is true and most people who fall under the law will not be as much affected by rates that rise more gradually. The Affordable Care Act requires every state to offer its citizens different level plans, which also differ in cost and benefit coverage. The bronze plan is considered the lowest regular plan offered under the Affordable Care Act and will generally cover 60% of the costs associated with a claim. 
    1. None of the current problems are insurmountable.
In fact, several solutions or paths to corrections have already been proposed.  Here are some we have already alluded to, and some we haven’t mentioned.
o   Obama administration has already taken steps to improve the stability of the marketplaces by tightening enrollment rules, reaching out to young people to sign-up, contacting people who paid the tax penalty rather than sign-up.  They have also raised an option from the past:
o   A government-run health plan that would compete against other insurers in the exchanges – a second look at the “public option” being proposed by both Hillary Clinton and Barack Obama
o   Increase the tax penalty for non-coverage
o   Make good on the original ‘risk corridor’ payments to cover a portion of insurer losses
o   Most crucial to the health of the ACA is who is elected President.  Hillary has the experience to guide changes and amendments; in fact, she has a plan focused on affordability.
o   The new Congress must stop repeal talk, and get about executing fix-it compromises with the new administration
o   The rest of the states need to accept the Medicaid expansion under ACA and stop leaving uncovered those that are now eligible for Medicaid under the new guidelines
o   Those consumers dissatisfied with the rates of their plan can always switch to another plan.  Last year, (and probably again this year) a substantial number – around 43% - did switch plans to find greater affordability. 
o   There are still numerous states that do not utilize the federal enrollment site, thereby limiting their residents to whatever health insurance providers are on their state list.  
A clear majority of people who are enrolled in the ACA programs are very satisfied with their plans – they finally have something that gives them the possibility to have coverage of their health needs. Those like Donald Trump who seize on a few rate hikes and call Obamacare a “dead issue”, do not have any understanding of what has taken place, of just what ACA requirements consist, nor what the successes are of this program.
 The ACA – “Obamacare” – is not on its last legs by any means.  In fact, it has begun to do what it was supposed to do: cut the number of uninsured and underinsured people by a substantial number.  The total of those covered by insurance has now risen closer to 87% covered and under President Hillary Rodham Clinton’s leadership, it will cover even more people because it will be improved upon where it needs reform or change.  Hillary has more than enough experience with health care reform to get this done, and in a bi-partisan manner with those across the aisle who care more about country than Party. But Trump (and his followers) because of his ineptness and inability to deal with facts and with people’s needs, will continue to be a major problem regarding health care. 
To the 20 million people now covered by Obamacare, he offers nothing but repeal and loss of coverage  because he has no solutions for technical problems, no strategies for preservation of best practices, and no plan for future advancement and sustainability of the ACA.  Others will also suffer the consequences of Trump’s inordinate negativity and lack of solutions, because those who buy their own insurance shall once again be paying much higher premiums to make up for all those who have no coverage and must use emergency rooms, acute care centers and every means possible to find someone to attend to their critical needs.  As usual, “TRUMP” spells disaster.