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.

But it is hard to figure out just where the Obama administration is going with all of this.

For employers with more than 50 workers this is a delay not a fix. Employers will only now up the pressure to change the law completely, knowing they have the administration on the political run over these issues. And, small employers will still have to comply with the very costly minimum benefit mandates––really the biggest complaint they have had. Just exactly what is the Obama administration accomplishing with a delay?

What will the administration back off on next? Given the very small exchange enrollment so far coming from the ranks of the uninsured, will they next postpone or eliminate the individual mandate?

No one has been more critical of the various requirements in Obamacare that I have.

But to make an insurance system work you have to have a set of consistent and consistently applied rules. You can't have some people choosing to be out today and in tomorrow. You can't have a system where insurers price products based upon one set of conditions and then you keep backing off on the conditions consumers and employers have to follow.

The administration really has three options:

1. Full speed ahead––enforce all of the original rules. Just take the political heat believing you have crafted a system that will work. This is what they have been telling us for almost four years now!
2. Do a comprehensive and rational fix that provides for a modified system for everyone learning from the mistakes that were made.
3. Let it unravel one step at a time caving in to every constituency that threatens a vulnerable Democratic Senator and end up with a worse mess.

Looks to me like they are on track for number three. Ironically, I don't think these delays will do the Democrats one bit of good for their vulnerable Senators. These aren't permanent fixes and these concessions will just reinvigorate the people complaining that their cause is justified.

Either make it work or fix it!

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.

As a person whose policy is scheduled to be cancelled at year-end, I am happy to be able to keep my policy with a better network, lower deductibles, and at a rate 66% less than the best Obamacare compliant policy I could get––presuming my insurance company and state allow it.

But for the sake of Obamacare's long-term sustainability, this is not a good decision.

The mendasar duduk perkara here is that the administration is just not signing up enough people to make anyone confident this jadwal is sustainable.

Yes, the law's $20 billion "3Rs" health insurance company reinsurance jadwal will prop up the jadwal through 2016––and even be enhanced because of these changes. But then the "training wheels" come off and the jadwal has to stand on its own. As I have said on this blog before, I don't expect the insurance industry to be patient past 2015 before it has to begin charging the real cost of the jadwal to consumers.

The administration now claims that it signed up 4 million people as of late February. Of course, that number is inflated. It has been widely reported; including here at the New York Times, that about 20% of the people who enrolled in January never paid their premium and were cancelled. Carriers are telling me that another 2% to 5% of those January enrollments never paid their second month's premium.

So, that 4 million Obamacare enrollment number is likely more like 3 million.

The Kaiser Family Foundation has said that 17.2 million people are eligible both for the new health insurance exchanges and eligible for a subsidy. Because the direct enrollment function hasn't been working, the only place a person can get a subsidized policy is on the exchanges.

In reporting their enrollments in February, the administration said that 82% of the exchange enrollments were getting a subsidy.

That means only about 2.5 million subsidy eligible people (82% of 3 million) have so far signed up and paid for their coverage out of a total of 17.2 million eligible––or about 15% of the total the Kaiser Family Foundation estimates are eligible.

And many of these already had coverage––they aren't coming from the ranks of the uninsured that are the people this jadwal was really designed to get to.

Even if the administration gets 20%, or 25%, or 30% of the eligible group signed-up by March 31, that is nowhere near enough to create a sustainable pool. The long-time underwriting rule calls for at least 70% of an eligible group to participate in order to get enough healthy people to pay for the sick who will always show up first for coverage.

Supporters will cite the Congressional Budget Office (CBO) projections saying a third of the eventual participants will sign up each of the first three years. Why would they? If Obamacare, with all of the attention and promotion it is getting, is not attractive the first year, particularly because of its steep deductibles compared to the after-subsidy premium people must pay, then why would it be attractive in the third year?

The response might be that the fines for not buying coverage will eventually more than double and force these people to finally buy coverage. Think about that. People don't want to buy this and the solution is to fine a family making $60,000 a year $1,500? If the cancelled policies are creating an election-year nightmare for the Democrats, think about how politically problematic big fines for not buying an Obamacare policy that consumers don't want would be in the 2016 presidential election year.

The health insurance plans participating in Obamacare are a very worried group right now.

The employer mandate has been pushed back twice. Enrollment deadlines have been ignored and delayed. Now, the requirement to cancel non-compliant policies has been deferred twice.

The carriers need the average 35% baseline premium increase they were going to get by converting the old individual health insurance policies, that generally reflect a much healthier group, to Obamacare in order to offset the generally much sicker group that was always going to make up the new Obamacare risk pool.

Why should the insurers believe these policies would ever be cancelled and converted to Obamacare by the end of 2016? Will the Democrats have less of a political duduk perkara in 2016?

Will the administration next suspend the individual mandate and its fines for not buying a compliant policy? How can you let me off the hook with my old policy and force my neighbor to buy the more expensive policy?

If the administration is willing to let employers off the hook, and now these people who had individual coverage before, why won't it let the people who don't want to buy an Obamacare policy off the individual mandate hook rather than have them be angry in an election-year––2014 and 2016?

All of these delays are just tinkering around the edges of a law that is deeply flawed.

The biggest flaw is that the product the Obama administration is trying to sell to consumers is not the product people want to buy.

Rejiggering deadlines until this thing is contorted like a pretzel is exactly the wrong thing to do.

Obamacare needs a mendasar fix.

I have to believe that even its most ardent supporters are coming to that realization.

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.

So, the President gathered his senior team in the boardroom and asked each department head, "Why isn't our dog food selling?" The Boston consultants said, "Don't worry the customers just don't understand yet how good this is for them and they will." The scientists were mystified, marketing was completely stumped, the state sales offices said, "It isn't our fault." No one had a clue about what was wrong.

Finally, after a long pause, a new college intern (not from Boston) sitting in the back of the room finally got up enough courage to tell the President, "The dogs don't like it!"

The Washington Post is reporting, "The new health insurance marketplaces appear to be making little headway so far in signing up Americans who lack health insurance, the Affordable Care Act's central goal."

The article cites a February McKinsey & Company survey that found only 27% of people who had bought coverage by early February had been previously uninsured. That is better than McKinsey's last survey which indicated only 11% of of those who enrolled a month earlier were uninsured––likely because the later enrollments don't include so many previously insured people who had their coverage cancelled on January 1.

The article also reports that about half of uninsured adults have looked for information on the online health insurance exchanges.

Last month, the Obama administration reported the following activity both online and through the health insurance exchange call centers:

By their own count, there were 64 million visits to the state and federal health insurance exchanges through January. There were also almost 16 million calls to the state and federal call centers.

While I expect these are not all unique visitors, it is hard to argue that the "dogs have not tried the dog food."

But by February 1, only 3.3 million people hit the "enroll in a plan" button.

As I have reported on this blog before, about 20% of these 3.3 million people never paid their bill and were cancelled so the enrollment is even smaller than this.

The administration now says 4 million people have hit the "enroll in a plan" button.

As I reported on this blog yesterday, starting with the administration's more recent enrollment total of 4 million, less than 15% of the 17.2 million people the Kaiser Family Foundation has estimated are eligible for subsidies have signed-up and paid for coverage––and many of these people who were eligible for subsidies were also previously insured.

The uninsured just aren't buying Obamacare.

I believe they are not buying it because the premium––even net of the subsidies––is too much for plans that have deductibles that are too high. Consulting firm Avalere has put the average Silver Plan deductible at $2,567 and the average Bronze Plan deductible at $4,545. People are often being asked to pay hundreds of dollars per month in premium, net of subsidies, and they don't see the value.

There are three weeks left in the open enrollment that has already afforded people the months of December, January, February, and soon to be all of March, to take a good look at Obamacare and decide whether it is a good buy for them or not.

Starting in April, when the selesai numbers are in, I hope we can have a meaningful conversation over how to fix the new health insurance reform law that is clearly not working.

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.

So the number of those uninsured dropped by 2.5 million to 4 million?

Avalere Health is estimating that the number of new Medicaid enrollments through January alone is in the range of 2.4 million to 3.5 million.

On this blog last week, I noted the low take-up rate for people eligible for a subsidy, previously insured and uninsured, at only about 15%. Within that low 15% take-up rate there are likely a million uninsured people who bought coverage and would total far less than 10% of the number of those who were uninsured at the end of 2013.

When Obamacare started there were at least 40 million people uninsured and eligible. That number has hardly been dented.

Celebrating a drop in the rate of the uninsured by about a percentage point doesn't make a lot of sense in the context of the surprisingly low take-up rate in both Medicaid and in the insurance exchanges so far. In fact, the Gallup poll confirms, like the McKinsey survey last week, just how little an impact Obamacare is having so far on getting people covered.

Context, context, context.

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.

Selling Insurance Across State Lines
Presumably, Republicans are targeting the many state benefit mandates that drive health insurance policy prices up. The idea is to allow the sale of policies from states with the fewest benefit mandates to be able to be sold in a high mandate state––thereby encouraging the state with more mandates to curtail them.

There are a number of problems with this idea:

1. IF it did attract new carriers to a market, it would be a great way to blow up an existing health insurance market––for example, the high market share legacy Blue Cross plan whose business is in compliance with all of the existing state benefit mandates. A new carrier could conceivably come into the market with much lower rates––because it is offering fewer benefits––attracting the healthy people out of the old more regulated pool leaving the legacy carrier with a sicker pool. Stripping down a health plan is a great time tested way for a predatory insurance company to attract the healthiest consumers at the expense of the legacy carrier who is left with the sickest.
2. It's a 1990s idea that fails to recognize the business a health plan is in in 2014. Health plans don't just cross a state line and set up their business like they did decades ago when the insurance license and an ability to play claims was a all a carrier needed to do business. This idea was first suggested by the last of the insurance industry cherry pickers back in the 1990s and it has long outlasted its relevance. Building a new health plan in a market can easily cost hundreds of millions of dollars over a plan's first few years of operation. The most important thing a health plan now offers is not an insurance contract but rather a comprehensively managed provider network. Just look at the capital costs for the new co-ops under Obamacare that are often receiving something approaching $100 million each to set up a new plan. Georgia, for example, passed such a law in 2011 and not a single new carrier entered the state because going into business in Georgia would be about a lot more than simply having a licensed contract to offer and there just aren't a lot of cherry pickers left to want to exploit this opportunity.
3. It doesn't solve the masalah it identifies. The masalah this solution targets is that there are arguably too many benefit mandates unnecessarily driving costs up. So, solve that problem. Why do we even need to enact this convoluted and market obsolete idea? Why even encourage the return of predatory health insurance cherry pickers? Why create a two-tiered market? Why not fix the real masalah and create a level playing field for everyone at the same time? I suggest the supporters of this idea first ask the leaders of the insurance industry if they would even do this under the best of circumstances.

Association Health Plans
Small group health insurance costs a lot more than big group health insurance. This idea is based upon the commonsense notion that if you pool lots of small buyers together you can get them lower costs.

Commonsense unless you know how the insurance markets work.

I may be one of the only people you will ever know that has actually run blocks of association health plan business over the years.

Pooling lots of smaller groups together in order to get them the benefits of the economy of scale?

What the hell do you think a Blue Cross plan is?

If I take 10,000 dry cleaners and put them into the Dry Cleaners Association Health Plan will I get their costs down?

No.

Marketing and renewal costs? The same. I will still have to market to each and every one of those dry cleaners––broker/agent costs, telemarketing, web sales––whatever technique it will be the same as the Blue Cross plan will have to spend because you don't just sign-up the association to get to each and every one of those dry cleaners and convince them to join the association plan and then convince them to renew with you each year.

Policy and enrollment costs? The same. Every dry cleaner needs a copy of the policy, enrollment cards, and booklets for each employee, etc.

Claim processing costs? The same. An insurance company needs so many claim processors per thousand covered people whether they are serving a big business or a small business.

Billing and eligibility costs? The same. Every one of those dry cleaners has to be billed every month and keeping their enrollment straight requires the same tasks.

Provider discounts? Maybe worse. That Blue Cross plan, for example, gets the provider discounts it does because it often insures millions of people in its state. Putting ten thousand dry cleaners together is not going to get a better deal than that.

So, the Dry Cleaners Association ends up with the same costs as any small group book of business? Well, actually no. The association costs end up being a little bigger. I never met an association executive that didn't want to get paid. That is one expense I did not have in my regular small group block. And, it is likely that the only way the Dry Cleaners Association can get the optimum levels of expense in any of these categories is to work with the most cost efficient plans in the market––like that Blue Cross plan.

I have been critical of Obamacare because it has looked to me that it was largely created by people who really didn't understand how the insurance markets work.

Looks like Republicans and Democrats have a lot in common.


Recent post regarding a health insurance reform usulan by four Senate Republicans:  The Republican Alternative to Obamacare––Their Aversion to Fixing It May Prove to Be a Political Mistake

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 tawaran to Obamacare.

A high-risk pool tawaran 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.

Presumably, the Republicans are contemplating a market where insurance companies could once again choose just who they wanted to cover––the healthy but not the sick.

Anyone turned down could then go the high-risk pool to be assured of having health insurance. Presumably, Republicans would assure consumers that they would be able to access the same kind of comprehensive health insurance and at the same market rates as those able to buy from insurance companies would be able to get.

Let me be clear at this point that I don't know of anyone in the insurance industry asking to go back to the days when a carrier could exclude people as a result of their health status and make money just covering the healthy.

Whether it's Obamacare or a risk pool concept, policymakers are faced with the same dilemma: How do you insinuate the unhealthy and otherwise uninsurable into a health insurance system in a way that benefits are comprehensive and costs are affordable for everyone?

The Obamacare route did this by mandating that everyone needed to be in the same system––same benefits and same rates. That meant rates had to increase for everyone to offset the cost of the sick now being allowed in the pool and a temporary reinsurance system had to be devised as the transition took place (the three-year $20 billion Obamacare "3Rs").

If we instead went down the Republican high-risk pool route, we would have the same challenges. But instead of putting the solution inside a comprehensive health insurance system everyone was in, a risk pool solution would create two parallel health insurance systems––the traditional mainstream system for the healthy and a second high-risk pool system for those who were rejected by the insurers from the mainstream system.

All other things being equal, each system would have exactly the same cost if everyone had access to the same benefits and premium costs. You pay the extra costs for the otherwise uninsurable people inside Obamacare or you pay those same costs outside the mainstream market system by subsidizing high-risk pools.

This is why Republican claims that the Obamacare reinsurance aktivitas is an insurance company bailout are so disingenuous. If and when we see a Republican high-risk tawaran in detail, you will find much the same financial transition mechanism buried in the high-risk pool structure.

A properly structured high-risk pool system that assured consumers access to the same benefits and prices would accomplish the same thing Obamacare is trying to accomplish. It wouldn't do a worse job and it wouldn't do a better job. It wouldn't cost more and it wouldn't cost less. Everyone would have quality health insurance at market rates.

But it is a politically stupid idea.

For Republicans to sell a high-risk pool scheme in 2014, they would have to convince voters:

1. That we need to go backward to the days when insurance companies could deny anyone access to health insurance on account of their health.
2. That insurers can make their profits covering only the healthy leaving the sick to go to a government supported pool.
3. That the government supported pool will always have coverage and prices as good as a consumer would have otherwise been able to find in the mainstream market––separate but equal coverage.

History is full of examples of states setting up high-risk pools. They all have one thing in common––they were never adequately funded. The number of people who had access ended up being capped, premiums were higher, and coverage was restricted. Could high-risk pools theoretically work as well as putting everyone in the mainstream market? Yes. Have they ever? No.

I can't believe Republicans are even considering this idea in 2014.

Do Republcians really want to go into the November elections suggesting we should go back to the days insurance companies make money unilaterally deciding who they would cover and those shut out would be eligible for separate but equal coverage in a government-run pool for the sickest?

Who would want to be in this health insurance equivalent of a ghetto?

I really think Republicans are risking ceding the health insurance issue back to the Democrats.

The polls say people don't like Obamacare but they think it should be fixed––people don't want to go back.

I see Democrats slowly coming to the realization that they need to admit Obamacare is broken and that they want to fix it. (Although, I am not always sure they are really willing to fix it or know how to fix it.)

If the best Republicans can do is to end up pushing silly ideas like selling health insurance across state lines, association health plans, and separate but equal high-risk pool ghettos for the uninsurable, they risk taking all of the voter anger over Obamacare for granted and blowing yet another election.

For a good historical perspective on state risk pools, you can access a 2010 Kaiser Family Foundation white paper here.


Recent post on other Republican health insurance reform ideas: Silly Republican Insurance Reform Ideas––Selling Insurance Across State Lines and Association Health Plans

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.

A Treasury Department spokesperson (the IRS is charged with enforcing the mandate) said, "the rules are clear and taxpayers should be able to determine whether they had coverage for 2014, or if not, whether they owe a fee." But the spokesperson then pointed out the fee will be imposed only on those who don't have a valid exemption.

What's a valid exemption?

The administration just published a list of 14 valid exemptions with the first 13 including such things as having suffered from a flood or other disasters, the death of a close family member, and not finding an affordable alternative for a cancelled policy.

Then there is the 14th exemption: "Another hardship in obtaining health insurance." That is all number 14 says.

That's pretty broad. But, am I reading too much into this 14th exemption?

Here is what President Obama said last week when he was asked about the individual mandate in an interview with WebMD.com, "What I think is important for people to understand is that if, in fact, they still can't afford it, there is a hardship exemption in the law. That means they may not be subject to a penalty. The penalty really applies to folks who clearly can afford health insurance but are choosing not to get it."

Under Obamacare, a family of four making $59,000 a year is expected to pay almost $5,000 a year net of the federal premium subsidy (more than 10% of their take-home income) for the Silver Plan that has an average deductible of almost $2,600 a year, or pay a fine of about $400. How many families like this have an extra $5,000 in their family budget to buy a policy with a deductible this high? Would this be a hardship for them?

A family of four making $71,000 a year would be expected to pay $6,700 a year net of the subsidy for a plan with the same average $2,600 deductible, or pay a fine of about $600. Would this be a hardship for them?

An individual making $29,000 a year would have to pay as much as $193 per month for a plan with that average $2,600 deductible––more than 10% of his or her take-home income, or pay a fine of about $200. Would that be a hardship for them?

The fines would double in 2015.

It looks to me like the Obama administration is on the way to enrolling about 6 million people by the March 31 deadline. But adjusting that number for those not paying (15% to 20%), the real net enrollment number will be closer to 5 million.

The Kaiser Family Foundation has estimated that 17.2 million people are eligible to buy subsidized insurance in the exchanges. The most recent administration enrollment report says 83% of those who have enrolled in the exchanges got a subsidy. If the administration enrolls 5 million people who pay for their insurance and 83% of these have a subsidy, that means only about 4.2 million subsidy eligible people will have signed up and paid.

This would mean that less than 25% of the people who were eligible for a subsidy signed up for coverage and paid for it. That is far less than what will ultimately be needed for a sustainable pool.

But only 25% of the subsidy eligible signing up also means that 75% of the subsidy eligible did not sign-up.

There will be an election in November. Does this administration intend to go into that election getting ready to fine 75% of those who were eligible for a subsidy––about 13 million people––and didn't sign-up?

I will suggest that would create a political hardship for the Obama administration.

Will the Obama administration delay the individual mandate? I don't think they will.

Have they found a way not to enforce it? Looks that way to me.

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.

The health insurance companies have to submit their new health insurance plans and rates between May 27 and June 27 for the 2015 Obamacare open-enrollment period beginning on November 15th. Any major modifications to the current Obamacare regulations need to be issued in the next month to give the carriers time to adjust and develop new products.

If the administration goes into the next open enrollment with the same unattractive plan offerings costing a lot more than they do today, they will not be able to reboot Obamacare.

Simply, health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won't buy them any more enthusiastically next fall than they already have. See: Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It

Doubling the fines for not buying in 2015 will only give the Democrats more political problems––and it doesn't look to me like they are going to enforce the fines anyway.

Health insurance plan executives are now faced with a daunting decision. How do they price the 2015 Obamacare exchange plans?

Even if the administration announces they have signed-up about 6 million people by March 31, the number of people enrolling would be well below expectations––only about 25% of those subsidy eligible will have signed up by the deadline. An enrollment that small guarantees the risk pool is sicker and more expensive than it needs to be in order to be sustainable.

But dramatically increasing the rates will only assure even fewer healthy people will sign up for 2015 and some of those who signed up for 2014 will back out over the higher rates. This is what a "death spiral" looks like.

The health plans will be helped considerably by the "3Rs" Obamacare reinsurance scheme that makes $20 billion available for 2014 - 2016 to cushion the costs of bringing the previously uninsurable into the new health insurance system.

But the reinsurance scheme only limits most of the carriers' annual underwriting losses––it doesn't eliminate them.

By the end of 2016, just one year past the next plan year, the insurance companies need to get their Obamacare health plans on a profitable footing.

So, how do the insurance companies set their prices for 2015?

Do the carriers go easy on their renewals continuing to price their offerings below profitable levels, relying on the temporary reinsurance scheme to cover most of their losses, fearing that a big rate increase would finish off Obamacare and hoping the administration can reboot Obamacare in 2015 by getting the enrollment to acceptable levels?

Or, do they presume Obamacare cannot be rebooted given the currently unattractive plan offerings and it's hopeless to continue to take losses on something that has little or no chance of ever succeeding?

For insurers to have faith Obamacare is worth the continued investment and the risk the administration needs to quickly demonstrate they understand this aktivitas is in big trouble and they are willing to make big changes to save it.

And, whatever insurance executives think, do Democrats want to go into the November elections offering the same unattractive health plan offerings at even higher prices? Open enrollment doesn't begin until November 15 but the plans will be out and will be well publicized before Election Day.

The administration can go a long way toward fixing this and do it within the scope of the statute and their regulatory authority.

Here's what I would suggest.

Give carriers the ability to offer plans outside the Bronze, Silver, Gold, and Platinum structure.

Let them offer people plans they will find attractive––premium, deductibles, and benefits.

But, require any new plans to:

1. Satisfy the 60% actuarial minimum in the statute––no "junk" plans.
2. Give consumers the detail to compare the standard Silver Plan to any new offerings––full transparency.

Give carriers the ability to swap current benefit mandates (that were set by regulation not statute) for lower premiums and deductibles and be completely transparent in what those trade-offs are while still complying with the underlying statutory requirement that the plans must be worth at least 60% of total health care costs. The administration has the power to do this within the scope of the law.

Would such a range of choices lead to anti-selection within Obamacare?

Yes. But it would be manageable just as broad choices are manageable within the Medicare Part D aktivitas and the Medicare Advantage aktivitas where consumers are very happy with the choices they are offered and the plans have succeeded in getting an excellent spread of risk.

Without the sense Obamacare is salvageable the Obama administration risks having carriers giving up hope that Obamacare will ever work. The administration needs the insurance companies to believe this is fixable for them to remain committed.

Ardent Obamacare supporters won't want to do this.

Want to save Obamacare? Want to have at least a chance of avoiding an Election Day debacle in November?

I believe the administration has about a month to give health plans the confidence this can be saved.

If the carriers do what the Wellpoint executive has told Wall Street analysts they are about to do, Obamacare is finished. The "death spiral" will have begun.

But there is a way for the Obama administration to get the new health law back on track.

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.

Forget the Obama administration's spin over hitting 6 million. Forget all of the opposition spin over Obamacare's failings.

The country's judgment should and will come down to a simple answer to this simple question.

Of course, the more than 6 million enrollment the administration recently announced overstates Obamacare's success because this includes enrollments that were never completed since the person never paid the premium. There are lots of reasons why a consumer might not complete the enrollment. The person may have hit the enroll button a number of times and ended up paying only once. It may have been one of the infamous "834" transactions that never made sense and the consumer ended up having to enroll again later. Or, the person might have had second thoughts about the cost/benefit of Obamacare and decided not to move forward.

Then there were a measurable number of people who paid their first month's premium but never paid the second month's premium. I am told that 2% to 5% of January's enrollments never paid in February, for example.

Whatever the reason, the real enrollment number will likely be about 20% lower than what the administration finally reports. That means the real enrollment will be closer to 5 million than 6 million.

But 6 million sounds better than 5 million.

There are two important pieces of information we need to have before the country can really answer this mendasar question about the way Obamacare accomplished health insurance reform:

1. How many people have actually paid and completed their enrollment?
2. To what extent have we reduced the ranks of the uninsured––how many of these people who enrolled were previously insured and how many of them were previously uninsured?

Reporters often ask these questions and the Obama administration says they don't know. And, that's the end of it.

But these questions are easily answered.

Every insurance company knows exactly how many people it has enrolled and who paid their premium at the end of every billing period. How else would they be able to process the claims for these people?

How many people were enrolled and paid for?

All HHS Secretary Sebelius has to do is write each of the 400 insurance companies selling in the exchanges and ask them for the total number of people enrolled and paid for on the insurance exchanges as of a certain date. She could email each of them on April 1 and ask for their hard enrollment numbers, for example, as of the end of the month of March. Either the feds or the state exchanges communicate with the carriers daily. The carriers would be able to respond in a matter of hours with the data.

Then, get a pad of paper, a pencil, and a dime store calculator and add up the numbers. By April 5th, we would know the precise answer.

Then there is the second question: Just how much have we reduced the ranks of the uninsured since Obamacare went into effect? It's just as easy to answer this question.

We only need ask the carriers for two numbers:

1. The number of people they insured (and were paid for) in both the individual and small group markets as of December 31, 2013––the day before Obamacare started covering people.
2. The number of people that were insured (and paid for) in both the individual and small group markets on a specific date––March 31, 2014, for example.

I will suggest that asking for both the small group and individual market numbers is important as people have a tendency to move between the markets, particularly as employers drop coverage and their people go, or don't go, into the exchanges.

Then subtract one total from the other. We would have an excellent idea of just how many more people, net of any gains and losses, secured private insurance since Obamacare's launch.

Then people could make their judgments about how well Obamacare accomplished health insurance reform free from all of the spin.

My conversations with carriers suggest that about half of the enrollments come from the ranks of the previously insured. But that is just anecdotal information. I don't have a hard number. And, why should anyone believe me particularly when the real answer so easy to get?

Yes, there might be some movement between the large employer market and these other markets and there are a very few carriers not participating in the exchanges. But, I will suggest, to the 90th percentile, we'd have our answer. It would sure be a lot more accurate answer than someone doing a poll involving a few hundred or even a few thousand people.

Why should the administration make the effort to get this information? They know the answer wouldn't spin as well as saying they have enrolled 6 million people and arguing that millions of previously uninsured people have coverage.

But the mendasar question is: Did we sign-up enough people to really reduce the ranks of the uninsured and therefore make this new health law worth it?

The information the country needs to answer that question, and to really judge Obamacare for themselves, is remarkably easy to produce.

And, the press needs to do its job making sure the people get it.

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?

Yesterday, the Los Angeles Times reported that the non-profit Rand Corporation estimated that two-thirds of the first six million people to enroll in Obamacare were previously insured––only two million were previously uninsured.

If all of the one million people who signed up in the last week were previously uninsured, that would mean that only three million previously uninsured people have purchased coverage in the government-run exchanges.

Rand also estimated that about nine million people have enrolled directly with the insurance companies, bypassing the government-run exchanges. But Rand also reported that the vast majority of those were previously insured.

If 20% do not pay, as has been the case since Obamacare launched, then the real Obamacare exchange enrollment number is about 5.7 million.

According to the March report from the Obama administration, 83% of those signing up were subsidy eligible. If 83% of those 5.7 million were subsidy eligible, then about 4.7 subsidy eligible have signed-up in the first open enrollment. The Kaiser Family Foundation has estimated that 17.2 million people were subsidy eligible when the new health law launched. That would mean that only 27% of subsidy eligible people have enrolled––and 73% of those who were subsidy eligible have not.

By celebrating seven million enrollments, the administration has set some pretty high expectations: That Obamacare is making a huge dent in the number of those who were uninsured.

But it would appear that is not the case and they will have to manage a steady flow of hard data that will undermine today's celebration––in an election-year.

Of course, these are all estimates. The Obama administration could very quickly report the hard numbers on just how many people enrolled and paid. They could also very easily and quickly give us hard numbers on just how effective Obamacare has been in reducing the number of those uninsured.


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

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 anjuran 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.

This is a good place to recognize outgoing HHS Secretary Sebelius for her leadership by being willing to work with state Republicans in order to get millions of people covered who wouldn't be getting coverage otherwise.

Good faith Republican Medicaid proposals have led to good faith responses from Sebelius' Department of Health and Human Services (HHS) and a few done deals and other deals still in the works.

Many Republicans have said that Medicaid is not sustainable and that the feds could well cut the new Obamacare funding in future years. Sebelius responded by giving these governors an out if funding were to be cut.

Of course Medicaid is unsustainable, that's why the states should be given the autonomy to run their own plans and deal with these challenges in any number of different ways the country can learn from.

Arkansas, a conservative state led by a Democratic governor and a very conservative Republican legislature, was one of the first states to secure a Medicaid waiver from the Obama administration. The Republican legislature just renewed that program.

But in a recent is in the middle of a big battle with his conservative Republican legislature. He's basically telling his legislature he wants to go to Washington and get a deal to expand Medicaid on Virginia's terms.

But the Republicans are saying, "No."

I know that being anti-Obamacare is a potent election-year issue for Republicans. But every time they get a block grant concession from the Obama administration Republicans could argue they know how to fix America's broken health care system with practical "common sense" and state-based Republican ideas. Why shouldn't this be a winning political strategy for them?

What are they afraid of; the blue states will end up covering more people for less money than red states doing it their way?

So much for 50 state laboratories.

This from the same party that thinks selling insurance across state lines, association health plans, and high risk pools are good common sense ideas.


Recent Posts:

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

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

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?

The bigger concern continues to be the relatively small number of previously uninsured people who have signed up compared to the size of the eligible group.

The recent report released by Express Scripts reporting on very costly pharmacy claim experience from January and February enrollees is far more concerning than the average age.

About 15% to 20% of new enrollees are not completing their first month's enrollment by not paying their premium, according to my marketplace discussions.

I note that the California exchange just As I wrote on this blog recently, the carriers all have this data and can make it available to the administration in a matter of a few days––or even hours.

The back-end of  HealthCare.gov, that reconciles enrollment between the feds and the health plans, is still not fully built and won't be for months to come. The feds and the carriers are still talking about how parts of the reconciliation system will work.

While the Obama administration could easily poll all of the carriers to be able to report a more accurate enrollment, I don't expect them to report the real enrollment numbers until after these last systems are built––and that could easily be months away.

When the back-end is finally built and tested, we will have the mother of all accounting reconciliations trying to clean up months of workarounds and patches. It may well be that the back-end of HealthCare.gov won't be fully built until close to the first anniversary of the launch of Obamacare.

The administration would be doing themselves a favor to report the actual enrollment sooner rather than later. Every month, an individual health insurance block loses 2% to 3% of its members. Generally, the "change of life" adds about offset the deletes. But in this case, while people can buy coverage if they have a qualifying event, the general market cannot buy coverage until the next open enrollment period. The upshot is that this first Obamacare block is likely to lose lots of people on a net basis as the people who simply let their coverage lapse can't be offset by those who later simply become interested in being insured before the next enrollment. The longer the administration waits to give us a solid enrollment number the farther they are going to be from eight million.

There is a lot of dissatisfaction being communicated from consumers to insurance company call centers and their agents about the new health insurance plans, particularly compared to the plans people are used to. Many people likely signed up because having insurance is the right and responsible thing to do––especially if their plan was canceled. Many who had insurance before could now get a subsidy and sometimes a better plan for their out-of-pocket premium. Many also feared the fine. Some have health problems and they can finally get insurance. But it would appear we shouldn't confuse someone wanting to buy an Obamacare policy with an average Silver Plan deductible of $2,600, and the likelihood of a narrow network, with the person necessarily being pleased with the product.

There is a concern that the administration sees the recent flurry in enrollment as evidence Obamacare is working and therefore the plan offerings do not have to be improved. Without more attractive offerings there is concern that the currently poor penetration into the eligible market will not improve.

What will the 2015 rate increases be? 9.9% There will be some variation in rate actions because the Obamacare enrollment outcome varies considerably among states. Also, some carriers' rates turned out to be too high and others too low when compared to their competitors which will likely lead to some compression in the local markets as these outliers get closer to typical rates. This could produce a few significant increases or decreases for 2015.

But generally, I really do expect a lot of rate increases just below 10%. The carriers do not have, and will not have, claim data worth much by the time the 2015 rates are due between May 27 and June 27. All of the people who signed up in the last half of March, for example, have an effective date for coverage of May 1––we won't know anything about their claims costs.

Health plans will have very little claim data on the new enrollees when they must complete their pricing analysis. Any rate increase of more than 10% is subject to regulatory review under federal guidelines. Ironically, if regulators challenge a carrier's rate increase, no matter how concerned the health plan is with the enrollment demographics, the carrier will have very little hard claim data with which to defend the action.

Health insurers are also protected from most underwriting losses in 2015 because of the $20 billion reinsurance scheme. Simply, the carriers are worried about the Obamacare risk pool, they have no hard data to credibly project or defend a challenge from a regulator, and 9.9% is the most they can generally get unchallenged.

Will any health plans exit the Obamacare exchange markets in 2015? No. The aktivitas is so immature at this point that no one's original strategic calculus over Obamacare has changed. Health plans do not expect Obamacare to be repealed. They expect it to evolve. The current or future Obamacare represents all of the individual and small group health insurance market in the U.S. You can't be in this substantial market without going along for this ride.

That their losses are minimized through 2016 by the $20 billion Obamacare reinsurance scheme is no small issue in their calculations.

Many health plans are a lot more concerned about their Medicare Advantage payment rates than their Obamacare results right now.

When will we finally have a good handle on Obamacare's claims experience? Years. In a year we will have some pretty good data on the 2014 enrollments. But, then we will have just had the 2015 open-enrollment and there will be questions about the impact these new people will have on the overall program. In addition, the 2015 open-enrollment will again have millions of relatively healthier cancelled policyholders signing up for Obamacare because their one year extensions will be running out (don't count on a lot of carriers extending these policies further).

Really, we won't have a good handle on Obamacare's costs until the program's enrollment stabilizes so that the group's simpulan composition can be accurately measured, and we then get at least a year of claim data from that point.

Also, at the end of 2016 "the pembinaan wheels will come off" as the $20 billion reinsurance scheme ends.

It seems that every time there is a snippet of news––an insurance company is entering the market for 2015 so that means it's working, or an insurance commissioner reports lots of people aren't paying their premium so it's not working––people try to make something of it.

This is going to take years to play out.

The politics of Obamacare will likely be more volatile than the health plans' near term rate actions.

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?

Because if they want to be in the individual and small group markets, Obamacare is the only game in town––it has a monopoly over these markets. The same rules that apply to the individual market also apply to the even larger small group health insurance market.

Unless Obamacare is repealed this is the business reality insurance companies have to deal with. So, you make the best of it.

Republicans are right to think Obamacare is unpopular. The latest Real Clear Politics average of all major polls taken since open-enrollment closed still has 41% of those surveyed favorable to the law and 52% opposed to the law––about as bad it is always been.

But Obamacare is not going to be repealed. The sooner Republicans come to understand that the better for them.

I really think Democrats have the potential to take back, or at least neutralize, the health care issue by the November elections if Republicans aren't careful.

Most voters are still very unhappy about Obamacare. They hate the individual mandate and they find the health plans––with their after subsidy premiums still too high, the deductibles and co-pays way too big, and the narrow networks too confining––unattractive.

But most don't want it repealed, they want it fixed. In the latest Kaiser poll 58% want the law improved and only 35% want it replaced.

But, the Republicans' challenge is that they have painted themselves into a political corner by convincing their base Obamacare has to be repealed––Republicans want the law repealed and replaced by a margin of 62% to 31%. That means any Republican running in a contested primary has to continue the repeal and replace line.

But once in the general election, the tables turn on this argument.

Independents want the law improved by a margin of 56% to 39%. Repeal and replace is a loser issue in the general election.

Looking at what the independents have to say, the Republican repeal and replace strategy could well run into trouble come November IF Democrats are able to convince voters they are the party that understands Obamacare needs fixing and they are the ones to do it.

Obamacare will certainly have to be fixed.

Amid all of the Democratic euphoria over "eight million enrollments" (which are really about 6.5 million enrollments once all of the premiums are finally paid) is the fact that only about a third of those eligible to purchase subsidized health insurance on the exchanges did so.

That means two-thirds did not.

In an earlier post, I recounted the old marketing story about the dog food company that pulled out all of the stops to create the best dog food ever. But the product didn't sell––because the dogs didn't like it.

Obamacare is a product that is a monopoly––you can't buy individual health insurance anywhere else. It is a product that about everyone would agree you are much better off to have than not have. It is a product that the government will pay a big part of most people's cost. And, if you don't buy it the government will fine you.

And only a third of the subsidy eligible signed up?

I will suggest that lost in the celebration over "eight million enrollments" is the fact that two-thirds of the consumers who were eligible for a subsidy didn't buy it. And, according to my travels in the market, about half that did buy it in the insurance exchanges already had insurance.

A just released McKinsey survey done during April estimates that 74% of those who bought coverage inside and outside the insurance exchanges had been previously insured––which would be consistent with my finding.

 Obamacare's two biggest problems come down to this: Not enough people are signing up for it to be sustainable in the long-term because the products it offers are unattractive.

The polls and the market's response to Obamacare are all consistent: The jadwal is not attractive and needs some serious fixing but it isn't going to be repealed.

Republicans can continue to exploit this issue only if they understand this.

And, Democrats can win the issue back, or at least neutralize it, if they can get beyond their current euphoria over "eight million" and get real about how unhappy people are with the jadwal and the plans it offers––and come up with a plan to fix Obamacare.

I feel like I'm watching a football game here. The ball (Obamacare) has been fumbled. It's bouncing down the field up for grabs. The Republicans are saying they don't have to chase the fumble because, "We're are so far ahead we're going to win the game anyway." The Democrats are saying, "What fumble?" They've got "eight million reasons why the ball hasn't been fumbled."

Going into November, Obamacare as a major political issue, is up for grabs.

It's going to be interesting to see which side, if any, gets past its overconfidence by figuring that out and jumps on the ball first.

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.

The Obama administration has been touting the report. The new HHS secretary said, "We're finding that the marketplace is working. Consumers have more choices, and they are paying less for their premiums. Nearly 7 in 10 consumers who signed up in the marketplace are paying $100 or less for that coverage."

That is one way to look at it.

Here is another. The lowest income people––who pay the lowest premiums and out-of-pocket costs––are the ones who are obviously signing up. That explains why the average consumer subsidy is so high and the average net cost is so low.

As I have said on this blog before, the biggest consumer kasus Obamacare has is that the plans––with their still high premiums even after the subsidy, big deductibles, and narrow networks––are not attractive to working class and middleclass families and individuals who don't qualify for the biggest subsidies.

Simply, the Obamacare plans are unattractive to all but the poorest who get the biggest subsidies and the lowest deductibles.

Last week, the CBO said that 87% of the 30 million who they project will still be uninsured in 2016 will not pay an individual mandate fine because of all of the Obamacare hardship exemptions. Obamacare looks to be on its way to creating a chronically uninsured class.

I understand the administration's desire to spin the enrollment results. But if they want to see Obamacare's approval ratings rise above their longstanding abysmal results I suggest they take a hard look at why two out of three subsidy eligible people aren't buying it and work to make these plans more attractive for them.

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

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

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.

This week the administration also reported that 76% of those who received a subsidy paid 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.

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.

So, the Kaiser Family Foundation has found that these people who are having their premiums and deductibles disproportionately subsidized are happy with their coverage. Hardly a surprise. If you paid for most of my insurance and cut my deductibles from the standard levels I'd be pretty happy too.

But how happy are the people who found the Obamacare health plans so unattractive they did not buy? 

A recent McKinsey survey found that of the people who shopped for an Obamacare policy, 56% didn't buy. Think about that. Obamacare is a monopoly––you can only buy individual health insurance through Obamacare. The government will pay a big part of many people's premiums. Most people would more likely want to be insured than be uninsured. To top it all off, if you don't buy they will fine you!

After all of that, 56% of the people who went shopping didn't buy. Overall, two thirds of subsidy eligible people did not buy.

Perhaps Kaiser could poll the people who did not buy on how happy they are with Obamacare. After all, they make up by far the biggest group.

57% Were Previously Uninsured
The Kaiser survey also found that 57% of those who bought health insurance on the exchanges were previously uninsured. A number of press reports said that the Kaiser finding was much better than the recent McKinsey survey that found only 24% of those who signed up were previously insured.

Actually, the McKinsey finding and the Kaiser finding are completely consistent.

McKinsey found that 26% of those who bought on and off the exchange were previously uninsured––Kaiser found 57% of those who bought on the exchange were previously uninsured. It is no secret that most of those who bought their coverage directly from insurers were their prior customers making the two surveys pretty consistent in their outcome.

I reported on this Blog on April 22 that about half of those who bought on the exchanges were previously uninsured and half were not.

Here is what I said on this blog on May 13th:

[A]ccording to my travels in the market, about half that did buy it in the insurance exchanges already had insurance.

A just released McKinsey survey done during April estimates that 74% of those who bought coverage inside and outside the insurance exchanges had been previously insured––which would be consistent with my finding.

So, there is really no news here––about half of those buying on the exchange were previously insured.

I guess I am in danger of sounding like a broken record on this blog, but what I think the Democrats, as well as the Kaiser Family Foundation, are missing is that by far the majority of people took a look at Obamacare and passed on it.

According to the administration's latest enrollment report, 98 million people visited the state and federal websites while 33 million spoke to the call centers (these are not unique visitors). But only about 6.5 million completed their enrollments––and only one out of three subsidy eligible people bought health insurance.

If the supporters of this law really want it to be sustainable and find acceptance among voters and those eligible for it, they really need to begin to address the reasons why people are not buying it.

But the Kaiser Family Foundation survey does sound good.

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.

Consider:

• A carrier laying back the first year will have the advantage of coming into the market after the first year carriers, particularly the big Blue Cross plans, have harvested most of the initial market share and with it all of those first year people who were pretty sick and wanting to take advantage of the new Obamacare underwriting reforms to finally get themselves covered. Yes, these people can change carriers the second year but they likely won't––particularly if they are sick and worried about their provider relationships.
• United currently has a lot of non-compliant individual business in these states. While carriers can continue the pre-Obamacare cancelled policies for another two years I don't know of any insurers that are. If United wants to hang on to the remainder of its non-compliant individual legacy business in the insurance exchanges––as well as pick-up other carrier's cancelled business––this is their opportunity to do so. The legacy policies are a relatively better health risk than those first year Obamacare enrollees, having already passed the pre-Obamacare underwriting requirements. And by being able to reissue these policies in the exchanges, United will be able to charge these existing customers the higher Obamacare rates.

United is quoted as saying they have far more information than they did a year ago. That is true but mostly for knowing just where the competitors are in the market. But it's only been a very few months since the Obamacare enrollment surge occurred in the last month of open enrollment––many of these people had May 1 effective dates. No one has any credible claim data yet to really be able to assess the first year enrollment.

As I have said on this blog before, any health insurance company in the individual and small group business has to play in the new Obamacare world. Obamacare is a monopoly. For not only the individual, but also the small group market, there is no other way to participate in the marketplace without playing in Obamacare.

But there are different ways to approach the market.

As the United CEO said in their earnings conference call today, "This [public exchange] approach is consistent with our long stated plan to take a prudent first year position and then build and expand in 2015 and 2016 as these markets become more established."

United's strategy of laying back a year letting the other guys pick-up the first year sick people and then making sure in 2015 to be able to keep and compete for the more healthy pre-Obamacare legacy business looks like a very savvy underwriting move to me.

The new health law does contain a risk adjustment system that is supposed to discourage any risk selection strategies by insurers. But if the experience with risk adjustment in Medicare Advantage is any indication, there is plenty of room for improvement.

I am sure UnitedHealth will now get plenty of plaudits from the administration and Obamacare supporters for expanding their public exchange presence arguing this announcement is proof of the new law's sustainability. So, on top of being a savvy underwriting move it will also turn out to be a shrewd political move for UnitedHealthcare––a division of United is also the Obama administration's lead federal health insurance exchange contractor.

Think about it. They implement an old-style underwriting/risk selection strategy and the Obamacare supporters applaud them for it!

Savvy and shrewd.

Sounds like something out of Netflix's House of Cards.

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 kegiatan 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.

At worst, this is clearly a drafting error that in the old days would have been quickly fixed in a technical corrections bill. But these aren't the old days.

This will now work its way through the courts. No one risks losing their subsidies until this issue is finally decided. That will not happen until well after the next open-enrollment on November 15th.

So, for now it is business as usual for Obamacare. But this will send a chill through about 4 million people in these states that are among the 87% who received a subsidy on the federally-run exchanges and are getting an average of 76% of their premium subsidized.

A few observations:

1. It is hard to see how a Roberts' Supreme Court would finally deal Obamacare so serious a blow given that the Court upheld one of the core elements of the law with the Chief Justice going through the legal contortions he did by calling the individual mandate penalty a tax. In fact, just after the DC ruling the 4th Circuit Court of Appeals in Richmond ruled in favor of the administration on this issue in a 3-0 decision.
2. If the DC Court of Appeals ruling is upheld it has the potential to be devastating for Obamacare. With so many people receiving so much in subsidy, the potential is there for the healthiest of these to drop their coverage while the sickest do whatever they need to do to keep their policies creating a major anti-selection duduk kasus for the insurers. Premiums on these federal exchanges would undoubtedly skyrocket.
3. This would put Republicans in the federal exchange states in a heck of a political bind. It seems to me these governors and legislators could opt to immediately contract with the feds to operate their exchanges in order to preserve the subsidies (If a state can contract with Accenture to build and run an exchange, why couldn't it contract with HHS to do the same?). If the states were to do this immediately, no one would have to lose their subsidies.

So what would these Republican governors and legislators do?

In effect, the political consequences for all of these people losing their subsidies and their coverage would immediately shift to the Republicans who control these state governments.

Proponents of Halbig argue that the fault for people losing their coverage would be on the Obama administration because they have operated Obamacare in an illegal manner by paying subsidies that are not allowed under the statute.

The courts could well end up supporting that argument.

And, millions of people would have their insurance yanked out from under them in what people will see as part of the ongoing partisan political wars being waged by people out of touch with life in the rest of the country.

The mendasar duduk kasus the Halbig proponents have here is that common sense, whatever a court rules, tells people that denying subsidies in half the states was never the intent of the Congress––that this is all about political point scoring and stopping a law Republicans hate.

Obamacare has lots of problems. But many would argue those problems should be solved in the Congress, not in the courts. If the proponents of Halbig want to effect real change they need to win some elections.

Poll after poll says a big majority of voters want Obamacare fixed not repealed.

Obamacare's most partisan and ideologically opposed enemies scored a big victory today.

On the surface, Republicans will be attributing this decision to the way the Democrats and the Obama administration wrote this flawed law and the way they have implemented it. But below the surface lots of sensible Republicans must be sweating bullets.

Average California Obamacare Rate Increase Only 4%––Success!!!

The weighted average increase for plans being sold on the Obamacare California public exchange in 2015 will be 4%. So, that means Obamacare is working really well, right?

Well, wait a minute.

Let's consider a few things:

1. This week the California insurance commissioner reported that the average unsubsidized 2014 rate increase carriers charged going into Obamacare was between 22% and 88%. That was a pretty healthy bump (I'll call it a bump because "Rate Shock" didn't happen) to get everyone into Obamacare in the first place. And remember, many of these consumers are now in narrow networks in California to boot.
2. California voters will go to the polls this fall to vote on Proposition 45. That ballot initiative would regulate health insurance rates in California for the first time––something the carriers are dead set against. Big rate increases on part of the carriers would do a lot to get that proposition passed and very low increases would do a lot toward defeating it. The state's largest carriers have so far made $25 million in political contributions to defeat Prop 45.
3. The health plans competing in the Obamacare exchanges are limited to very small losses this year because of the Obamacare reinsurance program that runs through 2016. In effect, anymore underpricing the insurers put into their rates for 2015 is subsidized by the federal government. In fact, the Obama administration recently took the statutory caps off of how much they can pay the carriers to keep their bottom line whole.

So, let's summarize.

The California insurance commissioner has said that consumers saw individual health insurance rate increases of 22% to 88% to get into Obamacare in the first place.

There is a highly contentious November ballot initiative facing the health plans they absolutely do not want to see passed, that would put the government in charge of their rate setting in future years, giving the carriers every incentive to low-ball the 2015 rates so voters don't have any more incentive to vote for it.

And, to the extent the carriers low-ball the rates, taxpayers will pay for every dime of it given that their losses are capped by the federal government.

Does the average 4% rate increase mean Obamacare is a big success in California?

For 2015 it does.

Let's see how this all goes when the pembinaan wheels come off after the federal Obamacare reinsurance kegiatan goes away at the end of 2016 and this November's Prop 45 is behind us.

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 jadwal 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 jadwal 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 ekspresi dominan 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.