Monthly Archives: October 2013

How the Administration Knew Americans Would Lose Their Current Health Plans

There has been much chatter about an NBC News report last night highlighting one clear fact: The Obama Administration knew millions of Americans would lose their current health plans due to Obamacare. That the Administration knew about the impact of Obamacare on Americans’ health plans is clear, not least because internal Administration documents suggest an effort to downplay the law’s impact to the public.

At issue are regulations issued in June 2010 implementing the “grandfathering” provisions of Obamacare. In theory, this section of the law was intended to allow individuals to keep their existing health plans if they liked them. However, as a leaked draft of the “grandfathering” regulations reveals, the Administration knew that would not be the case. This paragraph, on page 56 of the leaked draft, admits that “most plans will relinquish their grandfathered status” over time—in other words, many Americans will lose their existing health coverage (emphasis added):

After careful consideration, the Departments opted against rules that would require a plan or sponsor to relinquish its grandfathered status if only relatively small changes are made to the plan. The importance of gradual change outweighs the risk of market segmentation. Similarly, the Departments concluded that sponsors and issuers of grandfathered plans should be permitted to take steps within the boundaries of the grandfather definition to control costs, including limited increases in cost-sharing and other plan changes not prohibited by these interim final regulations. As noted earlier, deciding to relinquish grandfather status is a one-way sorting process: after some period of time, most plans will relinquish their grandfathered status since plans rarely stay exactly the same. These interim final regulation will likely influence the time frame over which plan sponsors decide to relinquish grandfathered status.

Compare that paragraph to a very similar paragraph on page 11 of the official, publicly released regulation. The final version struck a sentence emphasizing “the importance of gradual change” in transitioning health coverage to the new, post-Obamacare regime—and said that “more plans,” not “most plans,” will relinquish their grandfathered status over time. In other words, the Obama Administration tried to massage and downplay the regulation’s impact on Americans’ ability to keep their health coverage, even though the substantive contents of the rule changed very little from the leaked draft to the official document.

For millions of Americans—as many as 16 million who buy their own health insurance, according to one estimate—Obamacare will prove anything but a “gradual change.” They are losing their existing health plans and have no good options. Some will migrate to Obamacare’s new (non-functioning) exchanges, where the law’s new requirements mean their premiums could increase substantially. This is change—a change that Heritage predicted—but it’s not the change President Obama sold to the American people.

This post was originally published at the Daily Signal.

Will Insurers Be the Next Obamacare Drop-Outs?

The ongoing malfunction of HealthCare.gov has led some to wonder whether Obamacare’s exchanges are headed for a “death spiral”—one in which only highly motivated sick people enroll, resulting in higher premiums, which further drive out healthy individuals. But there’s another “death spiral” to be worried about—one in which insurers drop out of the insurance marketplaces altogether.

Insurers may still be able to withdraw from the federally run exchange through this Thursday. The contract between qualified health plan issuers (QHPIs) and the Centers for Medicare and Medicaid Services (CMS) includes this provision:

Termination with Notice by QHPI. At any time prior to midnight on October 31, 2013, QHPI may terminate this Agreement upon sixty (60) Days’ written notice to CMS if CMS materially breaches any term of this Agreement, unless CMS commences curing such breach(es) within such 60-Day period to the reasonable satisfaction of QHPI in the manner hereafter described in this subsection, and thereafter diligently prosecutes such cure to completion.

Other language in the contract could give insurers grounds to declare a “material breach.” Part II of the contract states that “CMS will undertake all reasonable efforts to implement systems and processes that will support QHPI functions.” Getting flawed and incomplete data reports from the CMS database—such that insurance companies are having to hire temporary workers to repair flawed reports by hand—may well qualify as a “material breach.”

The contract does state that, if insurer(s) attempt to terminate their contracts due to a material breach, CMS has “fifteen days from the date of the notice in which to propose a plan and a time frame to cure the material breaches, which…shall be accepted by QHPI unless the same is substantially unreasonable on its face.”

Granted, CMS claims it can get the website fully functioning by November 30. But with independent experts claiming the web infrastructure could require months or years to repair and rebuild—if it even can be fixed—why should CMS’ assertions now be taken with any more credibility than the Administration’s assertions that it was ready to launch the exchanges on October 1? After all, one day after the Administration claimed the exchange “data hub” was working well, the “hub” stopped functioning at all—the latest embarrassment in Obamacare’s comedy of IT errors.

Lurking behind all this is another issue raised last week—the impact of sequestration on Obamacare, and on insurance companies in particular. The Congressional Research Service believes that insurance companies will personally end up footing the bill for the sequester’s cuts to Obamacare cost-sharing subsidies. Those cuts will total $286 million in the first nine months of 2014 alone. Multiplying Congressional Budget Office projections of spending on cost-sharing subsidies by the required sequester reduction percentages yields a total sequester cut of nearly $6.8 billion through 2021.

Despite promising to issue guidance prior to the start of open enrollment, CMS has yet to reveal how the sequester reductions will be applied—and whether individuals, or insurance companies, will be asked to foot the bill. Doubtless it will decline to do so before the October 31 deadline for carriers to terminate participation in the federal exchange. And every passing day makes it more and more likely that insurance companies, and not consumers, will end up footing the bill for the sequestration cuts. After all, will the Administration really force individuals who have endured the HealthCare.gov gauntlet to pay more in cost-sharing than advertised, because CMS failed to publicize the impact of the sequester’s cuts?

Earlier this year, many insurers declined to participate in the exchanges—one reason why, in a majority of U.S. counties, consumers face limited choices of plans. But some insurance companies decided to participate in the new marketplaces, either because they saw a business opportunity or feared the consequences if they did not.

But the HealthCare.gov rollout debacle should have those insurers—particularly those publicly accountable to shareholders—thinking again, this time with a focus on the consequences of continuing to participate in Obamacare. If (more likely when) the sequester’s spending reductions are placed on their head, insurers will have to overcome $6.8 billion in guaranteed losses over the next eight years—this while managing a balky website giving them logistical headaches and a enrollee risk profile that could prove catastrophically unsustainable.

The systemic failure augured by HealthCare.com’s performance to date, coupled with the billions of dollars at risk from sequester, present health insurance actuaries with a dramatically different data set from those considered a year ago. Insurers still have a few days to crunch these new numbers and determine if prudence dictates they should back out of the federal exchange and escape from Obamacare’s web.

This post was originally published at The Federalist.

Obamacare Website Calculator Doesn’t Show Real Cost of Many Plans

CBS News reports this morning on another problem with the flawed Obamacare exchanges: In many cases, the new online calculator available at healthcare.gov underestimates premium costs for health insurance:

Industry analysts, such as Jonathan Wu, point to how the website lumps people only into two broad categories: “49 or under” and “50 or older.” Wu said it’s “incredibly misleading for people that are trying to get a sense of what they’re paying.”

Prices for everyone in the 49-or-under group are based on what a 27-year-old would pay. In the 50-or-older group, prices are based on what a 50-year-old would pay.

CBS News ran the numbers for a 48-year-old in Charlotte, N.C., ineligible for subsidies. According to HealthCare.gov, she would pay $231 a month, but the actual plan on Blue Cross and Blue Shield of North Carolina’s website costs $360, more than 50 percent higher….

The numbers for older Americans are even more striking. A 62-year-old in Charlotte looking for the same basic plan would get a price estimate on the government website of $394. The actual price is $634.

We noted nearly two weeks ago that one major bottleneck in the federal exchange occurs because the Administration does not want to reveal how much Obamacare is raising premiums. The Department of Health and Human Services (HHS) forced individuals to go through a time-consuming login process, because they did not want individuals to see premium costs without also seeing the taxpayer-funded subsidies offsetting those premiums for some. As we wrote:

One obvious reason why the Administration wants to highlight the cost of health insurance after the application of premium subsidies is because the law’s new mandates and requirements dramatically raise the cost of insurance before those subsidies are applied.

In response to myriad complaints about the website, HHS introduced the online calculator function to produce “estimated” premiums—supposedly providing more information to interested shoppers unable to complete the online login process. But, as the CBS News report notes, even that “calculator” can vastly understate the costs of Obamacare coverage for many Americans.

Even when the Obama Administration says it’s being transparent, it’s not being transparent. But ultimately, nothing can hide the fact that premiums are going up due to Obamacare.

This post was originally published at the Daily Signal.

Obama’s Defense of Obamacare and its Failed Website

Here’s what the president did—and didn’t—say about Obamacare in his talk today.

What the President actually said doesn’t stand up to scrutiny. He claimed that “the product [i.e., Obamacare] is good,” and that the law was “a good deal.” But the law is NOT a good deal for the millions of Americans in the process of losing their current health insurance—who don’t have a website to go to where they can browse alternative options. And even if they did, it still wouldn’t be a good deal for them; many will have to pay more in premiums due to the law’s new benefit requirements.

Just as important is what the President didn’t say. He provided no explanation for the myriad failures that practically shut down healthcare.gov for weeks, nor did he say when those failures would be fixed. He also didn’t explain why a federal government that had three and a half years to build exchanges couldn’t get the job done right the first time. For the self-proclaimed “most transparent and accountable Administration,” it’s a stunning lack of candor with the American people—the equivalent of “whistling past the graveyard.”

The website failures, the higher premiums, and the millions losing their current plan demonstrate that it’s not just the exchanges that are unworkable—it’s the entire law. The American people deserve better.

This post was originally published at the Daily Signal.

Could Obamacare Cause More People to LOSE Coverage than Gain It?

Obamacare’s supporters have always claimed that the law will help increase the number of Americans with health insurance. But an analysis released yesterday provided persuasive data showing that the number of people losing coverage under Obamacare could exceed the number of people who gain it.

Health insurance industry expert Robert Laszewski’s updated analysis of Obamacare’s insurance exchanges included the following nuggets:

The U.S. individual health insurance market currently totals about 19 million people. Because the Obama administration’s regulations on grandfathering existing plans were so stringent about 85% of those, 16 million, are not grandfathered and must comply with Obamacare at their next renewal. The rules are very complex. For example, if you had an individual plan in March of 2010 when the law was passed and you only increased the deductible from $1,000 to $1,500 in the years since, your plan has lost its grandfather status and it will no longer be available to you when it would have renewed in 2014.

These 16 million people are now receiving letters from their carriers saying they are losing their current coverage and must re-enroll in order to avoid a break in coverage and comply with the new health law’s benefit mandates––the vast majority by January 1. Most of these will be seeing some pretty big rate increases.

In total, 16 million people who purchase insurance for themselves could lose their current health plans on January 1. And that number doesn’t even count the Americans losing employer-provided health coverage—because their firms are dropping spousal coverage or dropping coverage for part-time workers.

Earlier this year, the Congressional Budget Office (CBO) estimated that in 2014, Obamacare would enroll 7 million people in exchange coverage and 9 million people through Medicaid. (Medicaid’s problems with physician access and patient outcomes are so widespread that some beneficiaries don’t consider the program “real insurance,” but that’s a separate story.) The CBO total of 16 million who will gain coverage is exactly equal to the 16 million Robert Laszewski estimates will lose their existing health plans due to Obamacare’s new mandates.

But based on the opening weeks of Obamacare’s open enrollment period, it’s far from certain that the CBO’s estimate of 7 million exchange enrollees will be reached. Laszewski estimates that only 20,000 people have actually enrolled in health plans in the 34 states using a federally run exchange. Based on internal Administration estimates obtained by the Associated Press and released earlier this week, enrollment is well behind even its meager projections for the first few weeks of open enrollment. Moreover, the ongoing technical difficulties faced by insurance companies and users alike give little prospect for massive new uptake any time soon.

Given the ongoing exchange chaos, it’s entirely likely that Obamacare could result in more people losing their current health insurance next year than obtaining new coverage. Any way you slice it, that’s not reform.

This post was originally published at the Daily Signal.

Washington versus the American People

Various press reports indicate that Congress is preparing to announce a “deal” that would allow Obamacare to move forward virtually uninterrupted. If that is what happens, such as a “grand bargain” may be a political win inside the Beltway but a loss for the American people.

It’s a loss for the Americans who are losing their health insurance due to Obamacare. It’s a loss for the workers who have lost their jobs due to the law. It’s a loss for those who will pay more next year for their health insurance. And it’s a loss for future generations, who will pay the price for Obamacare’s trillions of dollars in spending.

This debate has never been about satisfying one political party or another; it’s been about common-sense solutions that protect the American people from Obamacare. And the materializing “deal” ensures their pleas to Washington for relief from the health law’s burdens will, for the moment at least, fall on deaf ears.

This post was originally published at the Daily Signal.

Survey: Doctors May Not Participate in Exchange Plans

A recent survey covering more than 1,000 physician practices confirms what many experts had feared—many doctors will not participate in Obamacare’s exchanges.

The survey was conducted by the Medical Group Management Association (MGMA), a trade group representing multi-physician medical practices. The results are in, and they’re unambiguous:

  • A majority (55.5 percent) of practices believe the exchanges will have an unfavorable, or very unfavorable, impact on their practice.
  • Fewer than three in 10 practices (29.2 percent) definitely plan to “participate with any new health insurance product(s) sold” on an exchange, with a majority (56.4 percent) still uncertain.
  • Of those not participating in the exchanges, the top concern, listed by 64 percent of practices, was “concerns about the administrative and regulatory burdens related to these products.”
  • More than two in three practices said that reimbursement rates for exchange plans are somewhat lower (36.2 percent) or much lower (33.2 percent) than “average payment rates from all commercial payers in your area”—and these lower reimbursement rates likely explain the lack of robust commitment by physician practices in participating in exchange plans.

The study’s results are even more surprising given the source of the study. MGMA represents many integrated physician practices, including famous practices like the Mayo Clinic. The Obama Administration has held out these types of integrated practices as the prototype for the accountable care organization (ACO) model created in Obamacare. Yet these practices, which the Administration views as part of the future of health care, along with many other doctors and hospitals, may decide not to participate in Obamacare exchange plans.

Giving millions of Americans an insurance card that does not provide access to care represents an empty promise, not health “reform.” It’s one more reason why Congress needs to stop this unworkable law and focus on better reforms that can actually help patients.

This post was originally published at the Daily Signal.

The Broken Promise Underlying Obamacare’s Exchange Debacle

The public recriminations continue surrounding Obamacare’s terrible, horrible, no good, very bad week and the myriad problems plaguing health insurance exchanges. But the concerns about flawed websites and consumer privacy are also symptoms of trying to mask the massive premium increases due to Obamacare.

The Associated Press (AP) explains that many of the flaws on the federally run exchange stem from the fact that consumers cannot “window shop” for health plans without first establishing an account. IT consultants called the exchanges’ lack of anonymous shopping capabilities a “major design flaw,” because it creates potential bottlenecks in the system as soon as the customer enters the site and needs to register. It’s one of many reasons why companies like Amazon and Orbitz let their customers browse anonymously before creating an account. But the Administration took a completely different approach when designing the federally run exchange, and the AP explains why:

Health and Human Services spokeswoman Joanne Peters said Tuesday the government omitted a window-shopping function because officials first wanted consumers to know the amount of the subsidy they might be eligible for. Those income-based tax credits can dramatically reduce premiums for people with modest incomes, and personal financial information is needed to calculate the subsidies.

“Our process allows us to show consumers plans with prices that reflect what they will pay with the tax credit they may be eligible for,” Peters said. “Window shopping would not allow for this.”

One obvious reason why the Administration wants to highlight the cost of health insurance after the application of premium subsidies is because the law’s new mandates and requirements dramatically raise the cost of insurance before those subsidies are applied. But compiling and processing all the subsidy information for consumers has overwhelmed the exchange website—the warnings that “the federal exchange was not ready to launch” were not heeded, and the results have been obvious.

While running for President in 2008, then-Senator Obama promised his health plan would lower health insurance premiums by $2,500 per family. As many Americans are realizing, Obamacare is raising, not lowering, the cost of health insurance. Unfortunately, it appears that the Administration’s unwillingness to acknowledge this broken promise may have been at the root of the ongoing technological debacles with Obamacare’s exchanges.

This post was originally published at the Daily Signal.

Insurers Now “Scared to Death” of Obamacare

Bloomberg has a must-read story this morning highlighting yet more faults with Obamacare’s exchanges. Specifically, the faults in the exchanges’ computer software aren’t just hitting consumers trying to shop for plans—they’re hitting insurers as well:

Insurers are getting faulty and incomplete data from the new U.S.-run health exchange, which may mean some Americans won’t be covered even after they sign up for an insurance plan.…The companies are receiving electronic files that can’t open or have so much missing information on new enrollees they’re unusable, the consultants said.

Some insurers have been forced to fix entries by hand, said Bob Laszewski, an insurance-industry consultant based in Arlington, Virginia.

“If we don’t see substantial improvement by the end of this week, then I would throw up the yellow flag,” said Dan Schuyler, a consultant advising states and insurers on the exchanges. “If we don’t see it in the next two to three weeks, it’s time for red flags. The concern is some people could get to Jan. 1, and not have coverage.”

Last week, the Administration claimed that heavy volume was the prime cause of the exchanges’ delays. But today’s Bloomberg report, as with other news reports over the weekend, all suggest bigger issues with the federal data hub and other elements of the IT infrastructure needed to support enrollment.

The Congressional Budget Office (CBO) has estimated that 7 million individuals would enroll in exchanges for 2014. If even one in 10 applications has to be adjusted manually because insurance carriers receive inaccurate data from the exchanges, that would mean 700,000 applications would have to be processed by hand between now and the end of open enrollment in March—a staggering possibility, and a feat few insurers will be able to achieve.

Little wonder that the Bloomberg story ends with one consultant saying that “the insurance industry is scared to death” of the problems the exchange glitches may cause them. What started off sounding like a dream—millions of new customers, and more than $1 trillion in insurance subsidies—may turn out to be a horrible nightmare for the insurance industry. It’s a fitting metaphor for the law’s effects on the American people as a whole.

This post was originally published at the Daily Signal.

The Daily Show: Sebelius Swings–And Misses

Last night, Secretary of Health and Human Services (HHS) Kathleen Sebelius appeared on The Daily Show to talk about Obamacare (you can watch Part 1 and Part 2 of the extended interview). She attempted to defend the Administration’s botched opening of the law’s exchanges, but like the rollout itself, most of what she said in the law’s defense ended up falling flat:

“We have a terrific market.” Thus far, the facts speak otherwise. Even Sebelius was forced to concede the exchanges’ flaws, when she admitted to host Jon Stewart that she didn’t know how many people have “fully enrolled” in exchange plans. Sebelius claimed that “this is like a Kayak site, where you might check out what plane you want to get on.” However, I’m guessing that Kayak knows exactly how many customers have purchased plane tickets from its site.

“For the first time, people are going to have a chance to compare plans…You can also figure out if your doctor is in the plan that you want, if the network of hospitals is in the plan you want, what kind of drug you take is that in the plan you want. We’ve never been able to do that before…You would never know what is there.” The idea that the federal government “invented” shopping for health insurance holds about as much water as the idea that Al Gore invented the Internet. Companies have been selling health insurance online, and allowing people to compare plans, for more than a decade. And their websites didn’t crash last week, either.

“For about 85 percent of us, we don’t have to sign up for anything, because we have insurance that works…I think the President did not want to dismantle the health care that 85 percent of the country had and start all over again.” That may not have been intent of Obamacare—but it has been one of the law’s effects. Companies are already dropping health insurance for part-time workers and for spouses, causing individuals to lose their employer-provided coverage and raising the cost of federal insurance subsidies.

“We know about 6 out of 10 people will get a policy for under $100 a month—never happened before.” We also know that most of those individuals will be dumped into the Medicaid program—a form of coverage that its own members don’t even call “real insurance,” because low reimbursement rates prevent Medicaid patients from seeing actual doctors.

“Nothing that helps an individual get health insurance has been delayed at all.” That’s simply not accurate. The insurance subsidies may not have been delayed, but many elements of the insurance shopping experience—from a choice of insurance companies for those working for small businesses, to the basic health plan, to caps on out-of-pocket spending—have been delayed. All these Obamacare features were thrown overboard in an attempt to make the core elements of the exchanges work—which they haven’t.

The sharpest part of the interview came when Stewart pressed Sebelius on the delay in the law’s employer mandate, and the disparity in treatment between big business and the rest of America: “Geez, it looks like because I don’t have a lobbying group…I would feel like you are favoring big business because they lobbied you to delay it because they didn’t want to do it this year but you are not allowing individuals that same courtesy.” That is of course consistent with the attitude the Administration has taken towards the law from the start—reward “squeaky wheels” who hire lobbyists and make political noise by exempting them from some of Obamacare’s most harmful effects.

Stewart’s opening comment summed up the exchanges’ flaws: “I’m going to try and download every movie ever made and you’re going to try and sign up for Obamacare and we’ll see which happens first.” Sebelius may have played the part of a loyal trouper, but the facts speak for themselves.

This post was originally published at The Federalist.