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Wednesday, September 25, 2013

Obamacare – An Unintended Consequence?

 

Obamacare officially kicks off in nine days. What the heck is going to happen? I don’t believe that anyone really knows.

I’m concerned that there will be many ‘unintended’ consequences. Information has being coming out in recent days about how much Obamacare is going to cost individuals. As near as I can determine, the cost of Obamacare is going to be substantially lower than what it was thought to be. The liberal press has been having a field day over these cost estimates. Yesterday  Obama and Clinton were on TV touting how cheap the new insurance will be. Obama made the point that the cost of health insurance for younger people will be less than a cell phone bill.

 

obamaclinton

 

The Department of Health and Human Services (HHS) released its Obamacare cost estimates this week. (Link) If these numbers are what we end up getting across the country, then there is proof that the cost of health care insurance is going down. The HHS report has numbers for different ages and family size, and by city and state. The following are the state by state averages:

 

hhs#1

 

 

hhs#2

Okay, this all sounds good, but what about the unintended consequences?? Consider this report from the CBO that estimated the consequences of Obamacare. Look at the line ‘Employer’ and note that the CBO has forecast zero change in 2014 for the number of individuals who now have private insurance who will be forced onto the exchanges.That line decreases by 2m in 2015. The working assumption is that Obamacare will have a negligible consequence on those individuals who now have private insurance.

 

cbomigration

 

But we know for a fact that the CBO estimates are dead wrong. Obamacare has not even started, and these four companies have announced that they will be forcing some of their workers to get Obamacare:

 

 

ibm

walgreens

home depot

ups

 

I think the number of workers that will be forced into Obamacare is going to soar over the next few years. The economics will force this to happen. Look again at the pricing structure from HHS. Then check to see how much you are paying for health insurance, and how much your employer is kicking in. If the total of the contributions (self and employer) is greater than the Obamacare cost, then you are in trouble.

Many employers are going to follow the lead set by IBM, Walgreen, UPS and Home Depot. They will compensate employees for the cost of Obamacare, and pocket the difference. An additional incentive is that for employers (large and small), it reduces/eliminates the overhead and problems of company sponsored insurance plans.

What if Obamacare results in substantial forced ‘outsourcing’ of health insurance? The CBO estimates are way off the mark, but by how much? What happens if the forced migration over the first few years of Obamacare is 20 million, versus the forecast of only 2m? If this is to be the result, then some will call it a great success. This outcome would move the country much closer to the ‘single payer’ system that many liberals believe should happen.

But what about those who are forced into Obamacare? What about the promise by Obama that in his ‘plan’ anyone who now has private insurance, could keep it?

 

Screen Shot 2013-09-25 at 10.19.44 AM

I do not have answers to how this will play out. I’m comfortable saying (1) the migration from private insurance to Obamacare is going to be much larger than has been estimated, and (2) large groups of folks will get burnt in the process.

 

A question for readers: 

Are there any muni workers reading? A cop/fireman, town clerk or teacher? Can you share some of the info on what you and your employer’s monthly Ins. cost is? Compare that cost to the estimates for Obamacare in your area HHS report Link.

Would your muni save money if it moved you to an exchange? If the answer is “yes” then muni workers are going to be in for a rude awakening. There is not a muni in the country that is not desperate to cut the health care costs it provides for its workers.

Anyone who now has private insurance that is forced onto the insurance exchanges is going to be unhappy. Based on what has happened so far, it appears that the negative consequences of the forced migration is being felt largely by the Democratic base. This unintended consequence of Obamacare may prove to be the ‘wild card’ that swings the Bi and Presidential elections. It’s possible that the liberal’s ultimate objective of achieving a single payer system, might well prove to be their undoing. That would be a very interesting unintended consequence.

 

wild_card

Comments

  1. I’m assuming those rates are for single people. Post the family rates and tell me it is cheap.

    The problem with Obamacare is it doesn’t fix the problem. We don’t have high health care plan costs, we have high MEDICAL costs due to EMTALA and Medicaid cost shifting. We also don’t have INSURANCE, we have HEALTH PLANS.

    Farting around with the insurance industry won’t change much. Reining in malpractice LOTTO lawsuits would do more. There is no way forcing a bunch of added “benefits” will result in a cheaper situation. So you are telling me someone with cancer (pre-existing condition) can now sign up for $200/mo, and run up $150,000 in bills, and premiums go down. I’m not buying it.

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  3. Thanks for your article. I agree with your perspective very much. I work in healthcare and can tell you that many have seen health care delivery and insurance going this direction since Hillary’s efforts in the early 90’s. We are all blind men feeling this elephant. Anyone that tells you they know how this will evolve is delusional. Politicians, providers, insurers, and certainly patients don’t know what to expect even on the eve of the introduction of the plan. As money is drying up “Quality of care” has changed already. I am very familiar with the V.A. system from my student days and this is the best example to describe where we are headed. I can give real examples of rationing, drug shortages, and diminishing patient access already. Federal subsidies will fade between 2016-2020 so be careful about describing the new rates as “cheaper” as this is transient to win over consumers. Traditional insurance makes up a small amount of our market (less than 30%) and it is the pillar that maintains the health care system for Medicare (pays at cost) and Medicaid/Tricare (pays below cost). Insurance is fading fast as is our ability to maintain the current system. I am no fan of ObamaInsurance, but our current system is unraveling. We fail if we go forward and we cant afford the system we have grown up with. ObamaInsurance is Obamacare as the funding for the system defines the system we get. I fear when we have to live within our means as a culture. Healthcare is only a small part of that.

  4. Just posed this to the WSJ and linked to this post (my embedded links in the email did not go through in copy below):

    Hello, Ms. Radnofsky. I just read your WSJ article (http://online.wsj.com/article/SB10001424052702303983904579095731139251304.html).

    “Washington is scrambling to fix a host of technical hurdles on the federally run exchanges, including ensuring the government’s software can reliably determine the exact amount of subsidies for eligible people.”

    I poked around today on the fed-run state exchanges and California’s exchange (CA appears to be the only state-run exchange spitting out estimated premiums, at this point). I see no scrambling to determine initial eligibility.

    As you know, the threshold question for eligibility for a premium subsidy is: does the applicant’s spouse have “ACA-affordable” employer-sponsored health insurance?

    The fed-run state exchanges completely leave out this question, as does the CA exchange. Remember, if your spouse has “affordable” employer-sponsored insurance, you are disqualified from subsidies no matter how poor you are. USA Today refers to this as the “family glitch.”

    So . . . the exchanges simply don’t ask the disqualifying question. Curiously, neither does Kaiser’s handy subsidy calculator. Go try it. Say yes when it asks if employer insurance is “available” — you’ll still get the subsidy. Go to CA’s exchange and answer yes — you’ll still get the subsidy.

    Gee, it’s no wonder premiums are looking so cheap for people at or under 400% of the FPL. They’re net of subsidies that many people are not even qualified to receive.

    The big question now is: will the federally-run state exchanges fix this “fix” to the “glitch”? Will California fix it’s unlawful “glitch”?

    Delaying the employer mandate (so the exchanges can’t determine if an applicant’s spouse is covered), and announcing there will be no income verification, seems like an awfully deliberate “fix” to the so-called family glitch.

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  6. Bruce, anyone can look at the rate filings of the health insurance companies. The state insurance departments review them and make them available to the public through websites.

    In looking at rates filed by the state Blue Cross, there are what appear to be significant assumptions that actuaries were instructed to use. The actuary opinions were qualified subject to the realization of these assumptions. Simple examples of assumptions would include the age and health profiles of participants actually requesting coverage, the adequacy of the reinsurance mechanism to allocate funds to insurers with participant health profiles more costly than average, etc. Basically rates can look good today and the actual results may necessitate adjustments down the road.

    In my state (and probably elsewhere) young adults will see the highest increase, while older will not vary much and people with serious health conditions should receive reductions.

    • Large employers shifting from self-insured plans to fuly insured plans in the private exchanges is a huge shift.
      I wonder why these employers believe the costs will be less by going fully insured?
      Don Levit

  7. Bruce

    1) Why should employers be responsible for provision of health insurance to employees? Its a global world, and we both know companies in other countries aren’t required to do this. Call it leveling the playing field, or whatever, but this is a benefit in the long run

    2) Last time I checked, the USA provides socialised fire protection, law enforcement and defence (military). Don’t be afraid of socialised medicine (‘single payer’). In fact, I commend you to explore the systems in place in Canada and Australia-you’ll be impressed!

  8. Bruce,

    I think the picture is more complicated than you present it.

    First on the premiums, you are looking at them as a New Yorker which has some of the highest premiums in the country. If you are in a lot of other states and you are young and healthy, the premiums aren’t going to look so good. In addition, this is one of those “you tell me the price, I’ll tell you the terms” situations. Most of these plans have significant deductibles, additional out of pocket coinsurance and very narrow provider networks. Compared to plans that you might get from an employer they are generally inferior. Check out KidDynamite’s posts on this topic for one man’s experience. I think the short answer is, it depends. If you are young and healthy, you are getting hosed, if you are old and sick, you won the lottery. For everyone else, your mileage may vary.

    Second, a bunch of the examples you cite on the corporate side are not actual evidence of shifting to Obamacare as I see it. The IBM and Walgreen shifts are to a private exchange, not the Obamacare exchange. I believe the UPS cutoff was for spouses that have coverage from another employer. I agree some employees will be dumped on the exchanges, but I don’t think there is evidence of a big move yet. My guess is the first wholesale dumping will come from distressed muni cases like Detroit. Non distressed muni coverage may not be so easy to move as the benefits are usually enshrined in state constitutions and can’t be cut without an amendment. I guess we’ll have to see whether Obamacare is interpreted as a cut or not. May put some unions that campaigned for it in a difficult position.

  9. Bruce,
    My wife and I received the expected “you’re screwed” letter from Blue Cross Blue Shield. We can’t keep our current plan as is and must select one of the new plans. We have a $5k high deductible plan and are in our mid 50’s. Our premium for a similar plan will increase by $420 per month effective Jan 1. We don’t make a ton of money and don’t qualify for subsidies. Can you imagine the train wreck in progress? What will the economy look like with so many consumers having their life improved upon like us?

    Thanks for the work you do. Keep it up.