How Obamacare Is Making Insurance Worse
Consumer Power Report #374
One talking point about Obamacare that has received little pushback is that whatever you can say about what the law will do to premium costs, or taking away a plan and a doctor you like, it’s going to put you on a better – meaning more comprehensive – insurance plan at the end of the day.
Jonathan Cohn probably uses this line more than anyone. And for many people, he could be right. I usually point out in debate that this mandates a lot more coverage for young and healthy people than they actually require, forcing them to subsidize the older and sicker by purchasing more coverage than they need. But there’s another argument to be made: that because of the law’s broken structure, it’s actually going to lead to less coverage, and worse plans, for those who are currently covered.
Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage. Benefits advisers and insurance brokers--bucking a commonly held expectation that the law would broadly enrich benefits--are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit. Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.
The fact is that while robust, heavily mandated plans will be mandatory for those purchasing through the exchanges, large employers with 50+ workers will be required only to offer preventive services, without a lifetime or annual dollar-value limit, in order to avoid the employer mandate penalty. Ultimately, this will lead to coverage that won’t even cover basic things any sick person would want in a plan, creating further disruptions. And of course, the administration didn’t anticipate any of this:
Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach. “We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” said Robert Kocher, a former White House health adviser who helped shepherd the law. “Our expectation was that employers would offer high quality insurance.” Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.
To the extent ObamaCare’s employer mandate pushes firms to offer bare-bones plans, premiums for plans offered through Exchanges will rise. The healthiest workers will enroll in their employers’ bare-bones plans, but workers who have expensive illnesses (or with dependents who have expensive illnesses) will seek more-comprehensive coverage through the Exchanges. The influx of sick consumers will increase the premiums for Exchange-based plans. Many of these sick workers won’t receive any premium-assistance tax credits or cost-sharing subsidies because their employer’s bare-bones plan will likely satisfy ObamaCare’s definition of adequate – and because the statute forbids those entitlements in the 33 states that have declined to establish an Exchange.
Employers are also renewing their health-benefits contracts early (i.e., before January 1, 2014), which allows them to avoid many of ObamaCare’s regulatory costs for several months. That move could also increase premiums for Exchange-based plans by encouraging workers with high-cost illnesses to seek coverage through Exchanges while healthy workers stick with their employer’s plans.
Many employers are also considering self-insuring their health benefits, an arrangement in which the employer bears the risk that is usually borne by the insurance carrier and just hires someone (often an insurer) to administer the coverage. This strategy also allows employers to avoid many of ObamaCare’s regulatory costs and could also increase premiums in the Exchanges and small-group market.
But remember: If you like your plan, you can keep it.
-- Benjamin Domenech
IN THIS ISSUE:
Small businesses looking for a break from President Obama’s healthcare law aren’t getting any help from Congress.
The law’s critics spend a lot of time talking about its potential effects on employers, and small businesses in particular. But there hasn’t been a real effort on the Hill to address the provisions that will have the most immediate impact on small businesses.
In part, the lack of action stems from Republican divisions over whether it’s OK to “fix” parts of the healthcare law. Some conservatives say the party should focus solely on repealing the law and shouldn’t help Democrats solve potential problems.
“There are members of leadership that told me, ‘Hey, we’re willing just to let it collapse, and somebody else will get blamed, and it’ll be a great political issue,’” Rep. Tim Huelskamp (R-Kan.) said.
Huelskamp is a hard-line conservative, and he opposed a recent bill that was described as fixing a part of the healthcare law. But he said Republicans should consider small, targeted changes to the law’s employer mandate.
SOURCE: The Hill
Obamacare backers stymied by conservative legislatures in red states may have a new approach: letting the voters break logjams with state ballot initiatives in 2014.
Frustrated by conservative opposition to extending Medicaid even in states where Republican governors have embraced it, the president’s allies are strategizing about asking voters to do what their elected leaders have not: accept billions of federal dollars to cover millions of poor people under Obamacare.
Putting anything as volatile as President Barack Obama’s health law on the 2014 ballot is risky – more so if the rollout of the law is rocky next year, less so if people start seeing tangible benefits. The health law, after all, was a big reason the Republicans captured the House and made gains in the Senate in the last midterms, in 2010. And ballot initiatives could stoke emotions and affect turnout in unpredictable ways in the 2014 midterms, when the health law is still likely to be a raw political issue.
“If Obamacare is on the ballot, people will line up to vote against it again,” said Bowen Greenwood, executive director of the Montana Republican Party. “Historically, it’s always a major turnout driver for us.”
Nevertheless, local groups in Montana and Ohio that back the law say they’ve begun mobilizing for 2014. Florida stakeholders say a ballot initiative is “on the table” if a bitter standoff continues there. And there’s some early-ballot talk among stakeholders and lawmakers in Arizona, too.
“I’m for it however we can get it,” Ohio Gov. John Kasich told reporters after a pro-Medicaid expansion rally this month when asked whether he’d support a ballot initiative measure if his Legislature continued to balk.
Advocates in many stalemated states – from Michigan to Missouri – say they’re not quite ready to commit to a ballot push, hoping lawmakers and governors can still strike an expansion deal in the next few months, even if that requires governors to convene special sessions. But they aren’t ruling out the direct-to-the-voter option.
After all, the other side did it first. The health law’s critics used voter initiatives effectively to mobilize and motivate voters since the law was enacted in 2010. Some of those state ballot wins were symbolic, like saying a state didn’t have to recognize the individual mandate or declaring that state officials couldn’t cooperate with the feds. Others, like a Missouri measure that blocked the Democratic governor from creating an insurance exchange unilaterally, crushed key elements of state implementation.
The advocates say Obamacare, as a whole, may still be unpopular, but many of its components – including the Medicaid piece – poll extremely well. Plus, the federal government is paying the Medicaid bill for the first three years, and even in the out years it will pay 90 percent. That’s a good deal, Medicaid champions say, and if the legislatures won’t take it, the voters should overrule them.
“If you’re an opponent of Obamacare, opposing free money is not a place to make your stand,” said Ethan Rome, executive director of Health Care for America Now.
In addition, proponents of expansion would have a natural and powerful alliance. Every state already features a ready-made, deep-pocketed coalition of hospitals, labor unions, insurers, public health advocates and even local chambers of commerce that support expansion.
Backing away slowly:
The Obama administration’s efforts to raise private money to carry out the president’s health care law have provoked such a strong partisan uproar that potential donors have become skittish about contributing, according to several people involved in the fund-raising program.
White House officials said they did not sign off on the fund-raising calls made by Kathleen Sebelius, the secretary of health and human services, but were generally aware that she would be seeking support from outside groups.
Two House committees have begun investigating the solicitations. Five senior Republicans from the Senate and the House have asked the comptroller general of the United States, Gene L. Dodaro, to investigate the actions of Ms. Sebelius to determine if she was improperly circumventing spending limits imposed by Congress.
One of the House panels, the Energy and Commerce Committee, has also asked health insurance companies to provide records of any contacts with administration officials seeking money or other assistance for President Obama’s campaign to enroll people eligible for subsidized insurance.
Reports emerged this month that Ms. Sebelius had urged business executives and nonprofit groups to assist Enroll America, a private nonprofit organization that will encourage millions of Americans to sign up for insurance this fall. Enroll America is led by veterans of the Obama White House and Mr. Obama’s presidential campaigns and will use campaign-style techniques to locate the uninsured.
A federal health official said potential donors had become “gun-shy” because of the onslaught of Republican criticism of the administration’s fund-raising practices. A person involved in raising money for Enroll America said that many corporations and philanthropies “are risk-averse and do not want to be involved in anything controversial.”
The government is reviewing bids from insurers eager to sell their products to the public through marketplaces scheduled to open for business on Oct. 1. It is also weighing applications from community groups that want federal grants to serve as insurance counselors, or “navigators,” who help people understand their coverage options.
Senator John Barrasso of Wyoming and Representative Jack Kingston of Georgia, both Republicans, said Ms. Sebelius appeared to be “shaking down” businesses and other potential donors. The House Democratic leader, Representative Nancy Pelosi of California, however, said Ms. Sebelius’s efforts were entirely appropriate because “we have a responsibility to do outreach” to make sure people sign up for benefits to which they are entitled.
SOURCE: New York Times
Gov. Mary Fallin proposed a last-minute legislative change Friday to the state’s Insure Oklahoma program that would direct $50 million in state tobacco taxes to pay for more than 9,000 people who are expected to lose their health insurance under the program.
Insure Oklahoma currently uses federal Medicaid funding, state tobacco tax revenue and payments from workers and employers to provide health insurance to about 30,000 low-income Oklahomans, but the federal government notified Oklahoma last week that the program must change in order to qualify for federal funding. The program is expected to lose its federal funding Dec. 31.
Fallin released a statement Friday urging lawmakers to redirect the $50 million so Insure Oklahoma could continue to operate as a “smaller, more targeted program run with state dollars only.”
“I am asking the Legislature to send me a bill that would continue Insure Oklahoma as a state-funded program before they adjourn for the year,” Fallin said. “Unless a bill is passed this year, 9,000 working, low-income Oklahomans will be stripped of their health insurance. That is not an outcome that any of us at the State Capitol should accept.”
Fallin spokesman Alex Weintz said the rest of the 20,000 or so people currently enrolled in the Insure Oklahoma program likely would qualify for federal subsidies to purchase health insurance as part of the Affordable Care Act.
SOURCE: Lawton Constitution
At the heart of Obamacare is the goal of expanded health insurance coverage, and the law as originally passed envisioned coverage for an additional 30 million or so Americans. About one-half of these would purchase their insurance in the so-called “exchanges” – state-based marketplaces where approved coverage will be for sale for individuals and small businesses to purchase. An elaborate system of government subsidies would assist insurance for those making up to $89,000. Of course, as was settled by the Supreme Court decision, those who do not purchase insurance will be subject to a penalty, or extra tax.
Younger Americans are central to this vision of broader insurance coverage. First, they are supposed to participate in insurance coverage, and the mandate and penalty are there to make sure that this comes to fruition. Second, by having the young in the insurance pool with their low health care costs, the insurance offered in the exchanges would be more attractive and affordable to older and sicker Americans. In effect, young Americans are supposed to be both key participants and the piggy bank of the expansion effort.
Unfortunately, health insurance is a product, not a social vision. What we know to be true thanks to ample survey and analytic research is that in 2014, Obamacare will cause insurance premiums to rise sharply for the healthy and young. When it comes to products, Americans aged 18 to 40 act like consumers of all ages everywhere: They have a price point, and when the price gets too high, they get busy making changes.
Evidence of these changes was gathered in late March and early April of this year, when the American Action Forum sponsored the first national poll of this demographic, specifically testing what effects various premium increases would have on consumers’ willingness to purchase coverage. Respondents were those who already purchase insurance and had very specific information regarding their monthly premiums and the penalty they would pay if they failed to continue to buy insurance. They were also provided with the dollars they would have to fork over if premiums rose 10 percent, 20 percent or 30 percent.
The results are illuminating. In this group of current insurance purchasers, only 83 percent will still purchase if premiums rise 10 percent; 65 percent, if premiums rise 20 percent; and only 55 percent, if premiums rise 30 percent. The economic lesson is simple: As premiums rise, eventually, some consumers reach a price point at which they simply stop buying health insurance.
SOURCE: Washington Times
On Oct. 1, millions of Americans are supposed to be able to go online and acquire health insurance on electronic exchanges in the states where they live. But here is a question that is being increasingly asked by people in the insurance industry: What happens if the exchanges aren’t ready on time?
Already, the Department of Health and Human Services has thrown in the towel on small-business exchanges that were supposed to allow employees to choose among competing health plans. The opportunity to make those choices has been put off for at least a year, leaving small-business employees with only their employer’s plans as options. Prospects for the individuals acquiring insurance on their own aren’t much better.
The only states that have functioning exchanges at the moment are Massachusetts and Utah. Both developed their exchanges independently of the Affordable Care Act, and they may not be able to do everything the federal government requires. Fifteen other states are trying to develop their own exchanges with varying degrees of success. The other 33 states have either completely ceded responsibility to the federal government or have entered a partnership that gives the federal government responsibility.
One problem is that too little money was budgeted for creating the exchanges, which are the online markets where people can choose among competing health plans and prices. [The exchanges also are] where those with income below a set ceiling – for example, up to $94,200 for a family of four – will be entitled to buy insurance at subsidized prices.
The Congressional Budget Office originally estimated that setting up the exchanges would cost between $5 billion and $10 billion. California alone is spending more than $900 million, yet the health-reform law allocated only $1 billion for the country as a whole. The Obama administration has been cannibalizing other federal health budgets in a mad rush to find more for the exchanges.
A second problem is complexity. The Obama administration wants something the federal government has never done: a computer system that connects HHS, the Internal Revenue Service, the Social Security Administration, Homeland Security and perhaps other departments. This is a herculean task with unclear benefits.
SOURCE: Wall Street Journal
SOURCE: Wall Street Journal