Tuesday, July 18, 2017

The Post-Republican Obamacare Market Will Be "Stable" and Very Profitable for Health Insurers

Predictions that the individual health insurance market will now implode are misplaced.

First, in the wake of the Republican collapse of efforts to replace Obamacare, Medicaid will continue on unaffected. The Obama Medicaid expansion is fully funded for years to come. The nineteen states that did not take the expansion will continue to be on the outside looking in as their taxpayers continue to fund the expansion in the 31 states that did expand. And, health insurers will continue to enjoy that growth in their business as states continue to benefit from the open-ended federal funding.

The individual health insurance market will not collapse.

With about 3,000 counties in the U.S., I can't give you an absolute guarantee that there won't be a few that will not have an insurance carrier serving the Obamacare market in 2018. But generally, the vast majority of people eligible for subsidies will have at least one carrier to buy from.

The Kaiser Family Foundation is out with a recent study looking at medical loss ratios in the first quarter of 2017. They concluded that "individual market insurers on average are on a path toward regaining profitability in 2017."

I wouldn't go so far as to say that participating health plans will generally make money in 2017––the first quarter medical loss ratio is always better early on as consumers satisfy their ever-growing Obamacare deductibles.

But I do think 2018 could be a decent bottom line year for most Obamacare exchange insurers. And, 2019 should be just fine.

Does this mean the Obamacare insurance exchanges are working well?

No.

If the stability and success of Obamacare is measured by insurance company profitability things are improving.

But if stability and success is measured by how the Obamacare insurance exchanges are impacting the people who have no other place to go for their health insurance, this program remains a disaster for at least the 40% of the market that are not eligible for subsidies.

First, Obamacare is a tale of two cities.
  1. The lower-income people who are eligible for Medicaid as well as the people who make less than 400% of the federal poverty level and are therefore capped in how much they will pay for health insurance––these people are doing fine. 
  2. The 40% of the U.S. population that live in households that make more than 400% of the federal poverty level and get no premiums subsidies and pay the full cost of premiums, out-of-pocket costs and any big rate increases––these people are getting clobbered.
This is why in a bizarre way we can have stability in the Obamacare insurance exchanges: If health plans increase their rates by 50% or charge premiums into the thousands of dollars a month, there is virtually no impact on those who get a subsidy. True, those making over 250% of the federal poverty level will bear the impact of the ever-larger deductibles, but none of the premium increase.

Health plans have all but given up on getting a healthy risk pool under Obamacare. After four successive open enrollments run by the Obama administration, the program never got close to the percentage of the eligible pool needed to be successful.

The carriers looked at this landscape and concluded the only viable strategy was to just keep boosting the rates until they reach profitability. And, that is what they have been doing and that is why their medical loss ratios are starting to improve.

But that has meant huge premiums and deductibles. It is now not uncommon to see the lowest cost unsubsidized plan in a market for a family cost at least $1,000 a month, $12,000 a year, with an individual deductible in the $6,000 to $7,000 range. I have seen many areas where the lowest premium is already at $1,500 a month, $18,000 a year. Even for upper income families this is intolerable with premiums well over 10% of their gross income and deductibles making the plans useless to all but the sickest.

This is what the Kaiser Family Foundation would call stable: "The individual insurance market has been stabilizing in most of the country and could continue just fine."

The big political irony is that it is not the traditional Democratic constituency––lower income people in Medicaid or eligible for exchange subsidies––that are getting hurt. It is the upper income people not eligible for any benefits that more often voted for Trump and this Republican Congress that are getting left out as the health plans raise their rates toward profitability.

Even if Trump kills the $7 billion in annual payments to the health plans for the lower-income cost sharing subsidies it will not alter this trajectory. The carriers will simply respond by increasing their rates as of January 2018 to be able to fund the low-income cost sharing subsidies they are required to give people under the Obamacare law.

Obamacare is not healthy. Premiums and deductibles will continue to rise because the pool is out of balance with too many sick people for the number of healthy that have signed up. That will only get worse as the unsubsidized get priced out of the market.

But health insurers will focus their business on what will be for them the ideal market––people immune to what they, or the taxpayer, have to pay for the product.

The people who are and will be getting hurt badly will be the higher income ones who more often vote Republican.

But, Obamacare is well on its way to "stability."

But it is a bizarre form of stability.

And, this will not change until this or another Congress and President change it.




Monday, July 17, 2017

Senate Republican Obamacare "Repeal and Replace" Bill Dead––Good Riddance To An Awful Public Policy Proposal

The Senate Republican Obamacare "repeal and replace" legislation––just like the House version––was an awful bill. Individual health insurance costs wouldn't have gone down they would have gone up and both bills would have screwed a lot of low-income people. The latest Cruz amendment bifurcating the market with the sick in one place and the healthy in another was the most cynical kind of public policy.

With two conservatives withdrawing their support this evening from the current McConnell bill, it is dead.

Somewhat surprisingly, it was not the moderates that killed at least this effort—it was two conservative Republicans—Lee of Utah and Moran of Kansas. My sense is the blistering insurance industry criticism of the Cruz amendment made it impossible for any conservative to argue this bill would reduce insurance costs.

That means there are now four hard no votes. It is also important to note that the Trump administration failed miserably this weekend at the National Governor’s Conference to persuade key Republican governors from Medicaid expansion states to support the Senate bill. That result would have likely meant a number of more moderate Republican Senators would not have supported this bill.

So, in the end, about half of the ultimate Republican opposition would have come from the moderate ranks and the other half from the conservative ranks.

While I can’t say the overall Republican effort to repeal and replace Obamacare is dead, it is hard to see any realistic steps that they could take to revive the effort.

McConnell now says he will bring up a repeal only bill which would be set to take effect in two years.

Trump is also now calling for just repealing and then replacing later.

That was Plan A in January and that idea was dismissed because it would just cause more market calamity without a known replacement. I can’t see many Republicans going for that.

And a repeal only strategy begs a question: How are you going to replace Obamacare in two years when you failed so miserably this time?

Trump apparently also believes in the foolish notion that if Obamacare implodes on his watch Democrats will be desperate to bail him out. I don’t know of any Republican Senators who believe that.

Trump has also previously threatened to kill the low-income cost sharing subsidies if a replacement bill was not passed. These subsidies are worth about $8 million a month for every 100,000 low-income participants an insurance company has on the books. I wouldn’t put it past him.

The Democrats, and some Republican moderates, will now call for a bipartisan effort and we might even begin to see some meetings between those Senators. But the fact is that there is no common ground that could garner more than a handful of Republicans willing to save Obamacare. Such an effort would almost certainly now take 60 votes and would require the cooperation of the Republican leadership in both houses willing to let some of their caucus give the Democrats an enormous victory.

As the individual market continues to spiral out of control could we get some sort of short-term—maybe a year or two—patch? Perhaps. But that would even be a long shot and if that happened it would likely come as part of a must pass bill that had Senate and House Republican leadership permission to proceed. And, if that happened it would really anger both conservative Senators and Representatives, as well as the base. Any Republican Senator or House member that cooperated with Democrats to prop up Obamacare would likely get primaried at their next election. It is also hard to see how either Leader McConnell or Speaker Ryan could survive such an effort.

Or, Republicans could just let things in the individual health insurance market get worse and take that to the 2018 elections!

I have always believed that the market imperative to act is what would finally force Republicans to figure this out.

That said, there is no clear path out of this just as the individual markets continue to spiral downward partly because of the inherent issues in Obamacare’s market architecture and partly because of Republican efforts to make things even worse.

The only wisdom I can give you comes from Laurel and Hardy: “Well, here’s another nice mess you’ve gotten me into.”

And, from this moment forward it is a Republican mess.

Thursday, July 13, 2017

What's Really Behind the Cruz Amendment to the Republican Senate Plan to Replace Obamacare?

A Cunning Strategy to Back Door Risk Pools and Market Segmentation 

 

Ted Cruz has offered an amendment—since included in the latest Republican Senate draft—that would enable health insurance plans to offer stripped down coverage outside the current Obamacare compliant individual market. Anytime spent covered by them would be considered a break in service and subject the consumer to the six-month lockout provision should they want to get into the standard market. Carriers offering these plans could not deny pre-existing conditions but could up-rate sicker people.

Critics, including the health insurance industry trade associations, have come out against the idea because it would bifurcate the market into two separate pools—the healthier “Cruz pool” and the standard individual market subject to all of the current Obamacare consumer protections.

Tuesday, June 27, 2017

The Senate Republican Obamacare Repeal and Replace Bill Will Not Reduce the Cost of Health Insurance

At the core of Republican objectives for the "repealing and replacing" of Obamacare is bringing down the cost of health insurance––not just the premiums but the out-of-pocket costs people pay as well.

If implemented, the Senate Republican bill may actually end up increasing costs compared to Obamacare.

Wednesday, May 17, 2017

Here's Who Gets the Blame If Obamacare Fails (Hint It's Not Obama)

With Obamacare's individual health insurance market struggling, the debate has shifted to who takes the blame if it fails.
 
Supporters of the law are willing to admit that it is failing but that it's Trump's fault.
 
Trump's constant undermining of the ACA is giving his opponents ammunition in the blame game. 
 
 
 

Tuesday, May 9, 2017

How ObamaCare Could Become ZombieCare

The individual health insurance market is becoming more unstable as last year's rate increases are beginning to take their toll on the health of the risk pools––particularly among the almost half of the consumers in the market that are not eligible for subsidies.

The Trump administration is making an already bad situation worse.

President Trump is wrong when he says the system will suddenly "explode" forcing Democrats to beg him to fix Obamacare––actually it will be mostly his constituents who will be begging for relief.

See my op-ed at CNBC.com

Thursday, March 30, 2017

Is Anthem Exiting the Obamacare Exchanges? The Trump Administration Needs to Decide if They Are In or Out

Bloomberg is out with a report that Anthem may exit most of their Obamacare exchange markets next year:
Anthem, Inc. is likely to pull back from Obamacare’s individual insurance markets in a big way for next year, according to a report from analysts who said they met with the company, a move that could limit coverage options for consumers at a politically crucial time for the law.

Sunday, March 26, 2017

Trump and the GOP Should Face It: There's Only One Option Left to Fix Health Care

I've been saying for years that Obamacare will never be "repealed and replaced," but it will have to be fundamentally fixed, and that fix will inevitably have to be bipartisan.

But with the developments of the past week, I learned something new: Trump and the Republican leadership are ideologically closer to most Democrats than they are to their own far right wing in the House and Senate.

See my post at CNBC.com


Monday, March 13, 2017

Let’s Not Let the Republicans Make the Obamacare Replacement Debate About the Congressional Budget Office—Fewer People Will Be Covered and Many Will See Big Cost Increases

If you carve a huge chunk of revenue out of Obamacare and shift more subsidies to the middle class it should not be a surprise that the lower income folks will pay the price


The Congressional Budget Office (CBO) has estimated that 14 million of people would lose coverage in 2018, 21 million in 2020, and 24 million in 2026 if the House Republican plan is allowed to significantly amend the Affordable Health Care Act (Obamacare).

In my last post, I called the House Republican bill "mind boggling" for the negative impact I believe it would have on the number of those uninsured and the viability of the individual insurance market. Guess the CBO agrees with me.

The CBO's report came after the Brookings Institute estimated 15 million people would lose Medicaid and individual health insurance coverage at the end of ten years under the Republican plan. The arguably more business oriented S&P Global estimated between 6 million and 10 million people would lose coverage between 2020 and 2024.

Republicans are jumping on the CBO estimate reminding us that the CBO’s Obamacare projections haven’t been perfect in the past.

This is not the issue.

What Republicans are proposing, and how those proposals will impact how many people have insurance in this country, is the issue.

Tuesday, March 7, 2017

The House Republican Obamacare Replacement Plan: Mind Boggling

It won't work.

Obamacare works for the poorest that have affordable health insurance because all of the program's subsidies tilt in their favor.

Obamacare doesn't work well for the working and middle class who get much less support––particularly those who earn more than 400% of the federal poverty level, who constitute 40% of the population and don't get any help.

Because so many don't do well under the law, only about 40% of the subsidy eligible have signed up and, with so many insurers losing lots of money, the scheme is not financially sustainable because not enough healthy people are on the rolls to pay for the sick.

To fix it, House Republicans are proposing a very attractive program for the better off and, with the Medicaid rollback, gutting the program for the poor to be able to pay for it.

Wednesday, March 1, 2017

The Cockroach Proposal––Selling Insurance Across State Lines

I call support for giving insurance companies the ability to sell insurance across state lines the cockroach proposal.

As bad as it is, you just can't kill the damn thing!

Last night, President Trump once again listed this idea in his address to Congress as one of his health care talking points.

Here is a post about the idea I published on this blog a year ago in the midst of the Republican presidential primary:

Any candidate that suggests such a scheme only shows how unsophisticated he and his advisers are when it comes to understanding how the insurance markets really work––or could work. 

I gave a speech to 750 health insurance brokers and consultants in DC last week.

When selling health insurance across state lines, something Trump and a number of other Republican presidential candidates have been pushing, was mentioned the audience literally laughed. That's what health insurance professionals who spend their days in the market think of it!

Tuesday, February 28, 2017

Obamacare's Insurance Exchanges Are Self-Destructing––and That is Why Obamacare Needs to Be Fixed in 2017

Obamacare was self-destructing the day before Donald Trump was elected, and the Republican victory, with their talk of "repeal and replace," has only accelerated things.

Aetna's CEO recently said that the Obamacare insurance exchanges are in a "death spiral."

Cynthia Cox, of the "non-partisan" Kaiser Family Foundation responded that the insurance exchanges "are not really in a death spiral yet." She would know more than the Aetna CEO whose company lost $450 million in the Obamacare individual market last year.

Monday, February 27, 2017

Rethink 'repeal and replace'

This is an op-ed that I authored in USA Today––two years ago.

Wouldn't change a word of it:

Rethink 'repeal and replace': Column
Robert Laszewski
7:29 PM ET January 14, 2015

Obey health care customers, not political orthodoxy,  when proposing Obamacare fixes

The Republicans seem determined to "repeal and replace" Obamacare. They simply cannot bring themselves to consider fixing what they have come to revile.

Being against the president's namesake legislation has been a big winner in at least two out of the past three elections. But now that Republicans are in charge of the Congress, just attacking Obamacare won't work. They have to put something on the table.

However, they need to come up with something better. An effort to repeal and replace Obamacare would be a huge political mistake. There is no issue that presents a worse political minefield than health care. Each and every potential reform means somebody will be losing something and will be very motivated to stop it.

See the remainder of the op-ed here. 

Wednesday, February 8, 2017

Reports of the Demise of Obamacare Repeal and Replace Are Greatly Exaggerated

Many recent press reports have centered around the notion that Republicans are stuck in the mud trying to get their repeal and replace promises moving.

That line appeared to be reinforced over the weekend when President Trump said, in a pre-Super Bowl interview, that the process could draw out into next year. My sense is that what Trump was talking about was the fact that the whole process, that includes implementing the replacement, could take well past 2017. Trump, never one for getting the details right, was taken literally by the press looking to write stories about how the whole process was foundering.

Speaker Paul Ryan quickly countered in his press briefing that Republicans will legislate a repeal and replace of Obamacare this year.

As I have reported to you a number of times, that process, especially the replace part, will be very difficult to achieve given the need to have at least eight Democrats onside with a complete replace bill.

But, I can also tell you that the repeal part is still on track to occur this spring, as I have been reporting for some time, likely in March.

Tuesday, January 24, 2017

How Republicans and Democrats Could Come to a Bipartisan Compromise Over Obamacare

It's not a question of whether or not Republicans and Democrats will come to a compromise over replacing Obamacare.

The Republican attempts to repeal and replace aside, the law is unsustainable in its current form.

Since it will take 60 Senate votes, and the Republicans only have 52 seats, there is no way we can get to a solution to the Obamacare conundrum without a bipartisan compromise.

So, what might that look like?

See my op-ed at CNBC.com 

Saturday, January 21, 2017

Is the Trump Administration on Its Way to Its Own "If You Like Your Health Plan You Can Keep It" Fiasco?

On Friday night the administration issued an executive order giving Trump administration appointees enormous flexibility in modifying how the Obamacare individual health insurance market works.

Specifically, President Trump has given his administration the power "to waive, defer, grant exemptions from or delay the implementation of any provision or requirement of [Obamacare]."

The administration has not been clear about just exactly what it is they now want to do.

Their action raises a basic question: Why grant this flexibility if it is not their intent to materially change the way Obamacare works in the individual health insurance market?

Tuesday, January 17, 2017

"Repeal and Replace" Obamacare: How Will All of This Sort Itself Out?

Will the Republicans Follow Through on Their Promise to Repeal Obamacare?
Yes.

You have probably been reading press stories that bring into question whether or not Republicans will actually keep their campaign promise to "repeal" the Affordable Care Act (ACA). In fact, there is much discussion going on among Congressional Republicans about repealing key funding elements of the ACA as part of a budget process prior to having a replacement ready to pass the Congress.

But, they will defund the core elements of Obamacare sooner rather than later on their way to replacement. They have to. Repealing Obamacare as a first priority was a core campaign promise. If Congressional Republicans and President Trump fail to do this they will suffer a precipitous drop in credibility with their base.

Do Republicans Have a Replacement Plan?

Friday, January 13, 2017

Fixing Health Insurance Reform is a Zero Sum Game: The Only Way Republicans Can Lower Costs is to Provide Less Coverage––Wrong!

Don't Underestimate the Value of Rearranging the Deck Chairs

Anna Wilde Mathews and Louise Radnofsky have a well-done story in yesterday's Wall Street Journal. They point out that a relatively few sicker people account for most of the cost of care:
Congress has begun the work of replacing the Affordable Care Act, and that means lawmakers will soon face the thorny dilemma that confronts every effort to overhaul health insurance: Sick people are expensive to cover, and someone has to pay.
That is right.

But, this statement would seem to infer, as I have observed the general discussion about fixing Obamacare has often inferred, that there is a certain cost to health insurance and that Republicans can rearrange the deck chairs any way they want but the cost will be the same.

Wrong!

What I think this story, and the general discussion about how to cover people in the future is missing, is that Obamacare is so flawed that by itself it is manufacturing plan premium levels that are at least 30% to 40% higher than they need to be.
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