Friday, August 5, 2016

ObamaCare Revisited: Premiums Go Up

Surprise, Surprise Surprise! The premiums for most 2017 ObamaCare policies will go up even higher than expected. For example some non-profit companies are considering 60% premium increases

Blue Cross Blue Shield of Texas, which has about half the state’s exchange customers, wants to increase premiums almost 60 percent for 2017. Scott and White Health Plan wants to ratchet up premiums over 30 percent, and Cigna, 24 percent. Aetna and Oscar are planning double-digit increases, too. UnitedHealth, the country’s largest insurer, is pulling out of the exchange business in Texas and over a dozen other states. In justifying its rate increase to state regulators, the company said it paid $1.26 in claims for every $1 in premiums collected last year. For the state’s largest insurer, that resulted in a loss of $770 million in the individual marketplace. And Blue Cross is projecting another loss this year for its exchange business.

Every day there is a new story about this or that insurance company raising rates, leaving the exchanges or halting expansion plans.

Insurers want to crank up the cost of health insurance premiums by as much as 45 percent for Illinois residents who buy coverage through the Affordable Care Act's marketplace. Blue Cross Blue Shield of Illinois, the most popular insurer on the state's Obamacare exchange, is proposing increases ranging from 23 percent to 45 percent in premiums for its individual health-care plans, according to proposed 2017 premiums that were made public Monday. The insurer blamed the sought-after hikes mainly on changes in the costs of medical services.

Aetna (AET) said Tuesday it is canceling plans to expand into five more states next year and will reassess its involvement in the 15 states where it currently offers coverage on the individual exchanges. Aetna -- which expects to lose $300 million (pre-tax) on its Obamacare business this year -- must conclude its review by the end of September and notify states where it intends to withdraw.
" light of updated 2016 projections for our individual products and the significant structural challenges facing the public exchanges, we intend to withdraw all of our 2017 public exchange expansion plans, and are undertaking a complete evaluation of future participation in our current 15-state footprint," said CEO Mark Bertolini in a second-quarter earnings statement.

More health care co-ops are failing. We now know that it is not possible to offer gender specific free services to half of the population, prevent insurance companies from charging age or gender based actuarially accurate insurance rates, force insurance companies to cover anyone with preexisting conditions, increase reporting requirements and transaction costs and still make premiums drop by $2500 for a family of four. Who knew?  Who could have guessed this? Wow! If only someone realized that despite good intentions it's not possible to revoke the law of supply and demand. If only someone could have pointed out that insurance packages priced for older people or those with families or chronic conditions will lack allure to younger people, childless people, single people or healthy people. And so, all else equal, those people won't buy overpriced policies. Or they will game the system to get coverage when they're sick and drop it later. So it goes. I just hope that the next time someone demands that the federal government do something right now because we have an "emergency", that we realize that not all of those opposed are inbred mouth breathing bigots who take perverse prideful pleasure in preventing policy progress. Some are obviously. But others really have examined the facts and reached different conclusions. The people who predicted that contrary to the President's claims, that all else equal exchange and individual deductibles and premiums would rise, not fall, were correct. The PPACA supporters were wrong. This bears repeating. One side was right. The other side was wrong. Sometimes even a broken clock is right. This doesn't mean that PPACA detractors were right about all aspects of the law. They weren't. PPACA supporters can still argue that there were several other reasons to endorse the PPACA. I don't say no to that. But cost of coverage for people who are not 100% subsidized wasn't one of them.
It's not simply a question of loving or hating the President, his political party or his rivals. This is an empirical issue now. People on the exchanges who are not completely subsidized will pay more for health insurance. Unless they all happen to come into inheritances, get themselves a Sugar Daddy or obtain job promotions with salary increases outpacing their increased insurance costs, they will need to make cutbacks elsewhere. Presumably, they won't like that. Some may drop the policies. And although those customers who are subsidized won't be paying the full increased cost, the government (which is to say the rest of us) will be. There's no such thing as a free lunch. Note that the President is not talking loudly about the PPACA cost benefits. Instead he's focusing on expanded coverage and the "moral rightness" of the PPACA. I've always said that the honest and fair policy decision would have been to directly raise income taxes to provide health care coverage for the needy. That path would have had fewer market dislocations. But what's done is done. The PPACA is here to stay for the near future, at least until it collapses under its own contradictions. If you are paying more for a policy on the exchange, I hope that you think it's worth it. Perhaps belatedly recognizing that PPACA cost increases are unpopular some PPACA supporters have retreated to their fallback position that things are fine because areas of the health care market that PPACA hasn't reached yet are doing well. This argument is unconvincing. I work in IT. I create and approve changes to critical company processes. If I delay or break my department year end processing I can't defend the resulting chaos by pointing to the other departments which I didn't wreck. Supervisors wouldn't be sympathetic to that line of reasoning. And the American public shouldn't be either. 

The next President will have the opportunity to make changes to the PPACA. He or she (most likely she) will need to take into account that people respond to incentives, good or bad. Just because it would be nice if people behaved in a way opposed to their economic best interest doesn't always mean they will. You can cajole them I guess but good luck with that. It would also be "nice" for PPACA diehards if companies just agreed to continue losing money for the greater good but life doesn't work that way. To paraphrase Bon Scott, even the kind man is going to ask his friends, what's in it for me? For too many people the answer in regards to ObamaCare will be not much. 
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