The Premium Spikes Begin

The Premium Spikes Begin
June 25, 2014

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Consumer Power Report #425

The shoe is beginning to drop for consumers who purchased insurance under Obamacare: The premium hikes the president said would be mitigated by the law show no signs of abating. The choices consumers face this fall: Stick with their existing coverage and pay more, or go somewhere else for less.

Hundreds of thousands of consumers nationwide who bought insurance plans under the Affordable Care Act will face a choice this fall: swallow higher premiums to stay in their plan, or save money by switching.

That is the picture emerging from proposed 2015 insurance rates in the 10 states that have completed their filings, which stretch from Rhode Island to Washington state. In all but one of them, the largest health insurer in the state is proposing to increase premiums between 8.5% and 22.8% for next year, according to a Wall Street Journal review of the filings. That percentage represents the average rate increases for all individual health plans offered by that carrier.

Of course, that’s good for the insurers:

Health insurers in 10 states that reported rate filings have the support of Moody’s Investors Services to go forward with double-digit rate hikes in 2015. Moody’s analysts said the rate increases reflect an increasing medical cost trend, the Affordable Care Act industry fee and regulatory changes that allow people to keep noncompliant plans for another year, according to a report released Monday, emailed to FierceHealthPayer.

“The premium increases show that insurers have chosen to protect earnings margins rather than push membership growth,” the report states.

However, the credit-rating agency noted that next year’s rates are not definitive. State regulators must review and approve the proposed changes. The rate filings also are non-binding, so insurers can choose to opt out of the online marketplaces before the next open enrollment period begins in November. Insurers’ final approved rates and how they compare to competitors will largely influence exchange participation decisions.

But it’s less good for the taxpayers:

Over the past twelve months, there has been an energetic debate among health policy researchers about the extent to which Obamacare will increase the underlying cost of individually-purchased health insurance: what observers have come to call “rate shock.” Yesterday, the Manhattan Institute published the most comprehensive study yet on the topic, analyzing premium data from 3,137 U.S. counties, and finding an average rate hike of 49 percent. In response, left-wing bloggers are trying out a new talking point: that rate shock doesn’t matter, because taxpayer-funded subsidies will bear the higher costs.

There are a number of reasons why the underlying cost of health insurance matters. First: not everyone is eligible for subsidies. If your income is above 400 percent of the Federal Poverty Level, you don’t qualify. Second: subsidies don’t always make up for rate shock. If your underlying premiums go up by $200, and Obamacare gives you a subsidy for $120, your net cost has still gone up by $80. Our interactive map explains the interaction of these factors for every U.S. state--just click on the “Who Qualifies?” and “Your Decision” tabs and see for yourself.

Third: subsidies aren’t free. They’re financed by taxes: not just taxes on “the rich,” whoever they are, but on average Americans. So if Obamacare increases the underlying cost of insurance, taxpayers are hit with a double whammy: higher insurance costs for themselves, and higher taxes to subsidize those costs for other people.

Indeed, the nearly nine out of ten citizens who purchased coverage through the exchanges were subsidized by other taxpayers, to the tune of billions of dollars.

It suggests that the federal government is on track to spend at least $11 billion on subsidies for consumers who bought healthcare plans on marketplaces run by the federal government, even accounting for the fact that many consumers signed up for coverage in late March and will only receive subsidies for part of the year.

That total does not count the additional cost of providing coverage to millions of additional consumers who bought coverage in states that ran their own marketplaces, including California, Connecticut, Maryland and New York. About a third of the 8 million people who signed up for coverage this year used a state-run marketplace. Federal officials said subsidy data for these consumers were not available.

If these state consumers received roughly comparable government assistance for their insurance premiums, the total cost of subsidies could top $16.5 billion this year. Making precise estimates is difficult because of expected fluctuations in enrollment over the year.

It’s a real question whether consumers will actually see what they’re really paying for this coverage. Chris Jacobs thinks more could be exposed than Washington expects:

Because federal premium subsidies are tied to the second-lowest-priced “silver” plan on each exchange, shifting rates could surprise some consumers. For example: Say Insurer X gained a large market share in 2014 by submitting the second-lowest silver plan premium, at $250 per month. In 2015, then, other insurers might lower their bids to attract market share, keeping the state’s second-lowest silver plan at $250 per month. But say Insurer X proposed a 10% rate increase, to $275 monthly.

Under this scenario, consumers who stick with Insurer X would pay the full cost of the 10% rate increase ($25 per month). Federal premium subsidies would not offset any of the higher premiums. So it’s possible that individuals with a subsidized premium of $50 per month in 2014 could face a 50% increase in net premium costs (from $50 per month to $75) by remaining with their current insurer.

That’s a not-insignificant amount. It bears watching to see how Obamacare re-enrollment looks given the number of factors involved here. But for the majority of Americans, premiums are only going to be moving in one direction: up.

-- Benjamin Domenech


IN THIS ISSUE:


OBAMACARE EXCHANGES DISAPPOINT IN NUMBER OF NEWLY COVERED

In April, President Obama told the nation that “marketplace” or “exchange” enrollment, at 8 million customers as of March 31, had exceeded expectations and costs were lower than expected.

Many in the news media accepted the selectively released statistics, despite the Obama administration’s record of sometimes providing inaccurate or incomplete information on HealthCare.gov. Even today, the government continues to withhold relevant public information on costs and enrollment requested by Congress and the press under the Freedom of Information Act.

Why did the media accept inaccurate or incomplete information on Obamacare enrollment?

In fact, the measure of the Affordable Care Act’s success rests neither with individual anecdotes nor in the Obama administration’s self-assessments. It’s a long-term process that many analysts say will take years to unfold.

Many who were considered uninsurable now have affordable policies. But the Affordable Care Act has shifted the cost burden for those who already had insurance. More policies now have bigger deductibles and cost more.

“In general, healthy people are paying more and unhealthy people are paying less,” says a source who supports and helped implement Obamacare but is disappointed with the results to date, “with those above-average [income] tending to pay more and those below-average [income] tending to pay less.”

“Is the new law effective in reducing the number of uninsured? Yes, but so far not very,” he says.

SOURCE: The Daily Signal


ONLY 53 PERCENT OF NEWLY INSURED APPROVE OF OBAMACARE

The Kaiser Family Foundation has released a survey of a statistically significant sample of people who buy their own insurance. The headline reported by the media was that 57 percent of enrollees in ObamaCare exchange plans were previously uninsured. To me, that seems underwhelming. But more on that later. We all know that ObamaCare is unpopular. However, it is also unpopular amongst its beneficiaries -- the previously uninsured who have bought (highly subsidized) health insurance in ObamaCare exchanges. Only 53 percent of these people have a favorable opinion of ObamaCare (p. 22). If that doesn’t make the law politically vulnerable, I don’t know what does.

As to the number of uninsured post-ObamaCare: This estimate is getting more mysterious. When looked at from another angle, the survey suggests that ObamaCare has had no real effect on the number of uninsured getting non-group (individual) private insurance. Elsewhere, the Kaiser Family Foundation informs us that the number of people with private, non-employer-based, health insurance in 2012 was 15.8 million. We also understand that the most optimistic estimate of the number of people in ObamaCare exchange plans is 8.1 million. Kaiser Family Foundation’s new survey tells us that between 48 percent and 51 percent of the people in the non-group market are in ObamaCare exchanges. That is, the total market is estimated to be between 15.9 million and 16.9 million. So, maybe one million people, net, have received non-group coverage due to ObamaCare.

SOURCE: NCPA


OLDER WOMEN BEAR BRUNT OF OBAMACARE’S COSTS

What Mark Pauly, Scott Harrington, and Adam Leive of the Wharton School have done is to figure out how much non-elderly individuals spent on insurance before the ACA and then compared these figures with what they’ll spend after the ACA. They did this by using survey data for 2010 through 2012 from the Census Bureau’s Current Population Survey that show how much people spent on health care, including premiums and out of pocket payments. By looking at the total spent rather than just on premiums, the data reflect the fact that someone who buys a policy with a low premium can expect to have higher out of pocket costs, and vice versa. They report their findings in a paper from the National Bureau of Economic Research.

For post-ACA prices, they looked at the premiums for the various levels of coverage (these levels are classified according to various metals: bronze, silver, gold and platinum) and estimated out of pocket payments according to data from the Medical Expenditure Panel Survey. The data were tabulated by age and gender for the bronze and the two lowest price silver plans.

After crunching the numbers, they found that people who buy the bronze or silver plans on the federal exchanges will spend a moderate amount more -- from $694 to $1,165 a year, or 14 to 24 percent -- on premiums and out of pocket expenses than they did before the health reform took effect.

However, that average figure masks a huge redistribution of the costs to older women from nearly everyone else.

Total expected premiums and out of pocket expenses rose by 50 percent for women age 55 to 64 -- a much larger increase than for any other group -- for policies on the federal exchanges relative to prices that individuals who bought individual insurance before health care reform went into effect.

Women age 55 to 64 will pay from $2,185 to $2,738 more in premiums and out of pocket expenses under the new health insurance environment than they did pre-ACA.

Premiums for the second-lowest silver policy are 67 percent higher for a 55 to 64-year-old woman than they were pre-ACA.

In fact, the redistribution to older women is so great that almost everyone else is “below average” in the change in their total health care expenses for these two plans. For example, men age 45 to 54 will see their premiums fall by about $1,000 a year relative to the average if they buy the bronze plan, while total costs for women in this age group are $300 below average. For older women, they’re $1,500 above average.

SOURCE: Washington Post


VA REPORT DETAILS FRAUD, DECEIT

In another damning report on the Department of Veterans Affairs, the Office of Special Counsel on Monday assailed the VA for failing to acknowledge the “severity of systemic problems” that have put patients at risk.

Special Counsel Carolyn Lerner said in a letter to President Obama that her office found a “troubling pattern of deficient patient care” and expressed concern about what she termed the department’s unwillingness to acknowledge the impact of its problems on the health and safety of veterans. Her office is investigating more than 50 cases brought by whistle-blowers.

“The VA, and particularly the VA’s Office of the Medical Inspector has consistently used a ‘harmless error’ defense, where the department acknowledges problems but claims patient care is unaffected,” she wrote. “This approach has prevented the VA from acknowledging the severity of systemic problems and from taking the necessary steps to provide quality care to veterans.

“As a result, veterans’ health and safety has been unnecessarily put at risk,” she said.

In her report, Lerner said her office had found the use of a “bad boy” list at the VA facility in Fort Collins, Colo., for staff who scheduled appointments for longer than 14 days from a veteran’s desired date for an appointment. Staff members had been instructed to alter wait times to make the waiting periods look shorter, she said.

Her office, which looks into whistle-blower complaints, also is investigating allegations that two schedulers were reassigned from Fort Collins to Cheyenne, Wyo., for not complying with instructions to “zero out” wait times, she said. After the employees were transferred, officially recorded wait times dramatically improved, “even though the wait times were actually much longer.”

SOURCE: Los Angeles Times. The Coburn report on the VA is here.


MEDICAID EXPANSION BLOCKED IN VIRGINIA

The Virginia General Assembly completed work late Monday on a two-year, $96 billion state budget, averting a government shutdown and at least temporarily thwarting Gov. Terry McAuliffe’s key priority of expanding health coverage under the Affordable Care Act.

The setback for McAuliffe (D) -- and the long-delayed finalization of the budget -- came months into a bitter political standoff between the governor and legislative Republicans over whether to expand government-funded health coverage to 400,000 low-income Virginians under the controversial federal law. The issue has come to define McAuliffe’s young term as governor.

“It has been a very long session, and the good news is we have a budget,” said Del. S. Chris Jones (R-Suffolk), who has been a leader in the fight against Medicaid expansion as chairman of the House Appropriations Committee.

A key moment came Monday night when Virginia House Speaker William J. Howell (R-Stafford) tossed out a critical veto that the governor had hoped would make it easier to expand Medicaid without legislative approval. Three days after McAuliffe had declared that he would defy the legislature by seeking a way to expand the health-care program on his own, Howell outmaneuvered the governor with a procedural move that killed his line-item veto without a vote.

SOURCE: Washington Post


CALIFORNIA’S MEDICAID SYSTEM STRUGGLES

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act. Expanding Medi-Cal is one of the important ways the ACA increases access to health insurance, but providing insurance does not ensure health care will be available. It’s important to understand the facts related to access to health care in our state.

Thankfully, California is one of the states that committed to expanding government coverage for the poor and uninsured. At this time, the number of Californians served by Medi-Cal is increasing and approaching one-third of our population, or 10 million. Unfortunately, reimbursement rates for providers who serve the poor are declining drastically.

For this and other reasons, the number of primary care and family practice physicians who accept Medi-Cal is decreasing. Private and community hospitals are also consolidating or closing, reducing the supply of Medi-Cal beds. Emergency rooms in the remaining facilities are filled, frequently with nonemergencies. All of this underscores the fact that providing insurance does not guarantee access to health care.

We have the perfect economic storm of increased demand and reduced supply. In normal environments, this would lead to higher prices. However, that option clearly does not exist as the primary payer, the government, is not prepared to pay more.

SOURCE: Mercury News

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)