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:
“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.
- 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.
- 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.”
“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.
- 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)
- 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.
- 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.
- Despite all the exaggerated bad news from the Trump camp and
from the Congressional Republican saboteurs, there is hope for future
stabilization and success.
- 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.
- 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.
