California’s experience with ObamaCare portends a dubious future for the nation. “The rate increase from 2013 to 2014, on average, was significantly higher than rate increases in the past,” said Insurance Commissioner Dave Jones at a news conference Tuesday. Jones admitted that Californians endured premium rate increases ranging from 22 percent to 88 percent from last year to this year. “The rate increase from 2013 to 2014, on average, was significantly higher than rate increases in the past,” Jones added.
Unsurprisingly, younger Californians bore the brunt. Jones cites one region of Los Angeles County, where people age 25 paid 52 percent more for a silver plan than they had for something similar in 2013. Yet Jones was also forced to note someone age 55 saw a 38 percent increase in their premiums.
Jones, a partisan Democrat, isn’t sounding the alarm because of altruistic concerns for the residents of his state. Instead he’s pushing voters to embrace Proposition 45, a ballot measure that would give him considerable control over the the pricing of insurance in the Golden State, allowing him and other government officials to reject price increases deemed “excessive.” “Unless Proposition 45 is passed or some other law is enacted to provide health-insurance rate regulation and the requirement that health insurers and HMOs justify their rates, we are going to continue to see dramatic year-over-year increases,” he warned.
Californians Against Higher Health Care Costs, a collation of businesses, healthcare groups, unions and civil rights organizations, adamantly oppose Prop 45. “The insurance commissioner is using this misleading report to promote a ballot measure that would give him vast new powers over health care decisions,” said Robin Swanson, a spokeswoman for the group. “Our coalition of doctors, nurses, labor unions and health care providers opposing the measure thinks that giving one politician the power to override decisions made by the state’s successful health exchange is the wrong approach to controlling costs.”
One wonders if they feel the same way about a politician named Obama, who unilaterally over-rode healthcare decisions enacted by Congress.
Charles Bacchi, the group’s executive vice president, echoed Swanson’s sentiment. “Health plans are focused on working with Covered California to provide affordable premiums during the upcoming open enrollment period, while Commissioner Jones is looking backward,” he said. “His analysis doesn’t take into account subsidies, enrollees who are benefiting from the ACA, or acknowledge how the ACA has substantially expanded coverage and benefits while also changing the way premiums are priced.”
Jones believes otherwise. “We’re going to continue to see rates go up simply because … no one has the ability to stop excessive rates,” he said, further insisting the 2015 rate increases proposed by insurers will be lower than they might ordinarily be because the providers won’t want to offend the voting public prior to the 2014 election. “There would be a huge public outcry, and the public would respond at the ballot box,” Jones warned. “I have no question that what we’re going to see … will be much lower than would otherwise occur.”
Unfortunately California, much like other states, can’t postpone reality indefinitely, even if they attempt to do so by fiat. As the Wall Street Journal explains, those enrolled in new healthcare plans “are showing higher rates of serious health conditions than other insurance customers, according to an early analysis of medical claims, putting pressure on insurers around the country as they prepare to propose rates for next year.”
The numbers are daunting, as 27 percent of enrollees who have seen doctors or other healthcare providers in the first quarter of this year are dealing with serious health issues including diabetes, psychiatric conditions, asthma, heart problems or cancer. That percentage represents an 11 percent increase over last year’s individual consumer market covering the same time frame—and more than double the 12 percent rate of those who were able to keep their former policies.
“The findings provide the clearest picture so far of the health status of those who bought plans under the Affordable Care Act, and show a sharply bifurcated consumer insurance market—with sicker, and costlier, people in health-law plans and healthier people sticking with previous coverage,” the Journal adds.
Hoover Institution research fellow Lanhee Chen states the obvious reasons why. “The law’s one-size-fits-all regulatory regime, which requires insurers to offer coverage to all comers and prohibits pricing of coverage based on an applicant’s health status, was bound to increase the number of relatively sicker people purchasing insurance through the exchanges,” he writes, adding that healthcare exchanges “remain a haven for those who may consume more medical services than others.” Thus as Chet Burrell, chief executive officer of CareFirst BlueCross BlueShield, concludes, “Over a period of time, the rates have to go up to catch up with the reality of who enrolled.”
Proposition 45 apparently ignores that reality, along with a far simpler one: if a state makes it too onerous for an insurance provider, it will simply stop providing insurance for the people of that state.
Back in June, Anthem Blue Cross President Mark Morgan predicted the 2015 increase in premium rates for Californians would be less than 10 percent on average. “We will not have double-digit increases in our Covered California operations,” Morgan said in a speech. “That’s a good indication of how we feel about the success of our early work, because there are other parts of the country where we are hearing 20% and higher.”
The tradeoff? The narrowing of networks that limit enrollees’ choices of doctors and other healthcare providers that cannot be avoided. “These narrow networks are making a huge difference on affordability,” Morgan contended. “People value price above all else…. These narrow networks are really here to stay.”
A Kaiser Health Tracking Poll taken in February belies the notion that people prefer cheaper insurance and narrower networks. Once again bifurcation is the order of the day: at 51 percent, the public in general prefers broader networks to cheaper insurance. On the other hand, people who have been either uninsured or purchasing their own coverage and are most attracted to ObamaCare, prefer narrower networks and cheaper premiums.
What is being lost in the overall argument is the fact that, no matter which side the public is on with regard Prop 45, California premiums are still going up. Jones added a little scaremongering to the equation in support of the measure, noting that after 2015, the “sky’s the limit” with regard to premium increases.
Yet what neither side is apparently willing to tell the public is that controlling the cost of insurance in any meaningful way may only last until the end of 2016. That’s when ObamaCare’s “risk corridor” provision, limiting losses incurred by insurance providers, expires. The risk corridor provision is the mechanism whereby insurance companies that made a profit would compensate those who didn’t. The premise behind the system was that an equivalent number of both would make the program revenue neutral and self-sustaining.
Unfortunately, if there are more “losers” than “winners,” the same Obama administration that has already played it fast and loose with the law claims they can appropriate billions of dollars of funds from other sources (read taxpayers) to maintain the program, despite the nonpartisan Congressional Research Service making it clear such a “diversion” of funds is impermissible. Earlier this year Congressional Republicans proposed repealing the risk corridor provision they characterized as an insurance company “bailout,” and the issue may still become an integral part of the 2014 mid-term campaign.
For example, Sen. Mary Landrieu (D-LA) who is already vulnerable, is going to have to explain why 45,000 policy-holders in her state are facing premium increases between 10 and 20 percent next year, courtesy of Blue Cross and Blue Shield of Louisiana, the state’s largest insurer. That would be the same Mary Landrieu who cast the deciding vote for ObamaCare and claimed that predictions of higher costs were a “pathetic lie” in a 2009 speech on the Senate floor prior to the bill’s passage.
Again it must be emphasized that such increases are occurring in California, Louisiana and elsewhere while the government backstop of risk corridors remains in place. Furthermore Americans should be clear on what they, as well as Prop 45, really represent: a government effort to control prices, irrespective of costs. Costs that were also imposed by government fiat, as any man in possession of an ObamaCare policy that requires coverage for maternity care can attest. Costs that have been transferred to the public in general, as the more than one million Californians who qualified for subsidized insurance can attest. A full 88 percent of Californians enrolled in Covered California are eligible for such taxpayer-underwritten subsidies.
One suspects fans of ObamaCare should cheer while they can. In addition to the expiration of the risk corridors, the imposition of the twice-delayed business mandate that forces companies to pay for their employees insurance or face fines for failing to do so, remains on its revised schedule. Businesses with 100 or more employees will have to cover those employees beginning in 2015, while businesses with 50-99 employees have until 2016 before they must comply with the law.
Assuming the lawsuit initiated by the House challenging Obama’s unilateral re-scheduling goes nowhere. Assuming the more potentially disruptive ObamaCare lawsuits challenging the IRS’s right to provide subsidies on federally-run exchanges, in direct contradiction to the law’s wording that subsidies can only be provided on exchanges “Established by the state,” also go nowhere. And assuming the necessary demographic of younger healthier Americans offsetting the costs of older, sicker Americans isn’t as out of whack as is currently reported.
That’s a lot of assumptions.
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