Sunday, August 21, 2016

"The Blues Have Deep Reserves and They'll Be Here Long After We're Gone"--Here's How It Really Works

The denials about just how bad the Obmacare exchange situation is keep piling up.

Maybe the most uniformed and naive was this comment in the Dallas Morning News:
"The Blues have deep, deep reserves, and they'll be here long after we're gone,"[Sabrina] Collette [a research professor at Georgetown University], said. "They're probably calculating they can ride out this rocky time and emerge with a dominant position."
In the same article it was reported that local Dallas HMO Scott and While Health Plan is withdrawing from the exchanges. The article also pointed out that Texas Blue Cross has lost more than $1 billion on the exchanges over the last two years and is now seeking a rate increase of 60% for 2017.

These Blue Cross plans, particularly the community-based not-for-profits like Texas, do not have a bottomless bank account.

It's easy to look at the surplus accounts (reserves for outstanding claims are not the same as free capital, or surplus) of these Blue Cross plans and see unlimited bags of money. In fact, the not-for-profit parent company of Texas Blue Cross, Health Care Services Corporation (HCSC), has about $9 billion in surplus.

In May, S&P downgraded parent company HCSC's A+ rating to a still strong AA-. But S&P was clear that their continued confidence in the company was predicated on a return to profitability overall and in the Obamacare business specifically.

Fitch Rating Services was even more direct in their report from last October:
The deterioration in HCSC's risk based capitalization [the free surplus capital with which to offset losses] is material and places downward pressure on ratings...[Risk based capital] has declined significantly from 614% of the CAL [company action level at which point the enterprise is in danger of not having sufficient cushion reserves] at year-end 2013 [just before Obamacare], and Fitch estimates could fall to 400% by year-end 2015 if losses continue at the same rate as the first half of 2015.
Sorry for all of the brackets but this gets complicated. The most confusing part of all of this is that people look at $9 billion in surplus and think we can run the tank down to 1/2 or 1/4 and there is no problem. In October, what Fitch was saying was that, when you consider the point at which this company would be in real trouble, the parent company was in the process of losing about a third of its state regulated cushion (614% to 400% of the risk-based capital threshold) in just the first two years of Obamacare!

Now, read that last line in bold a second time. Ya, it's that bad.

Let's be clear, HCSC is still a well-capitalized and well-run company that operates Blue plans in a number of states. That they are giving 60% rate increases to their losing Texas Obamacare business speaks to their competence in this regard. But they have to see these Obamacare losses end and this business has to stabilize soon for the good of all of their other customers and their solvency. They don't have nine years to lose $9 billion.

This is why the clock really is ticking on Obamacare's exchanges.

With their backs against the wall, Blues plans might exit. They might also just keep raising the rates by large amounts knowing that the subsidized Obamacare subscribers will have these giant excess premiums paid by taxpayers no matter how big they are, while at the same time driving the millions of people that don't get subsidies out of the market with exploding rates. A really bad outcome either way.

Things will not magically improve. To fix this we have to see a big wave of healthy people sign up in the coming 2017 open enrollment.

Today 40% of the eligible exchange population is enrolled and we need closer to 75% to get a healthy risk pool, the health plans have requested 2017 exchange rates that are, according to Charles Gaba who closely tracks Obamacare, a national average of 24% more, the deductibles and co-pays will be bigger in 2017, and the networks will be narrower.

After all of this why should we expect that people will find the Obamacare plans more attractive during the next open enrollment and the risk pool will be better in 2017?


Thursday, August 18, 2016

Latest Proposals to Fix Obamacare Come Up Way Short--The Insurance Industry Trade Association Joins the List of Deniers

In my last couple of posts, I have lamented the degree to which prominent Obamacare supporters have been denial about the trouble The Affordable Care Act exchanges are in. Now we can add the insurance industry trade association, AHIP, to the list.

With the Obamacare exchange exits by the publicly traded health plans, the not-for-profit Blue Cross and regional HMOs now form the backbone of the Obamacare exchanges. I am not predicting any imminent exits on their part, but another year will be a different story if this isn't fixed. If you look at the size of their statutory surplus accounts and their staggering ongoing losses in the face of reports the risk pool continues to deteriorate, it's a simple exercise in math so see what's coming.

The clock is just plain ticking on the time left to fix Obamacare.

Wednesday, August 17, 2016

Obamacare on Life Support?

My comments on CNBC today.

"Those Whining Obamacare Insurers"

Affordable Care Act defenders need to understand that if we don't quickly move on to a robust conversation about how to fundamentally make the individual health insurance market viable many of the remaining often not-for-profit plans will have to walk away from the Obamacare exchanges.

See my post at Forbes

Thursday, August 4, 2016

According to Aetna We Have Two Kinds of Insurance Companies Under Obamacare: The "Less Worse Off" and the "Worse Worse Off"

Surviving Co-Ops Sue Feds Over Inadequate Obamacare Reinsurance Payments While Aetna Complains the Payments Aren't Enough For Their Only "Less Worse Off" Financial Results

I don't know if you noticed the recent juxtaposition between the surviving co-ops complaint that they shouldn't have to pay the big legacy carriers money under the Obamacare "3Rs" reinsurance scheme with Aetna's complaint this week that these same payments aren't enough for them to be confident they will continue in the exchanges.

Tuesday, July 19, 2016

Obamacare's 2017 California Rates to Increase an Average of 13% With the Biggest Players Going Up 17.2% and 19.9%

After last year's 4% rate increase, California's Obamacare insurance exchange rates appear to be catching up to the rest of the country.

The two biggest carriers are raising rates by much more than the average 13.2% increase. Blue Shield said its average increase was 19.9% and Anthem said it would increase rates an average of 17.2%

According to the LA Times, Covered California officials blamed the big increase on the "rising costs of medical care, including specialty drugs, and the end of the mechanism that held down rates for the first three years of Obamacare."

Well, once again when it comes to Covered California's explanations, not exactly.

On the argument blaming the rising cost of care, in late May Milliman published its Milliman Medical Index indicating that baseline medical cost trend was up 4.7% year-over-year––the lowest annual increase since Milliman first measured cost trend in 2001. And, of course, this 4.7% increase included the cost of specialty drug costs.

Wednesday, June 1, 2016

Everything Will Be Fine As Soon As The Obamacare Market "Stabilizes"––Not

North Carolina Family Plans Already Cost More Than $10,000 a Year With Rates Going Up By Double Digits for 2017

With one state after another announcing big 2017 Obamacare rate increases the latest refrain from Obamacare supporters is that with maybe one or two more years of rate increases everything will be fine.

Talk about missing the forest for the trees.

The latest example is in North Carolina where market leader Blue Cross, the biggest insurer with 330,000 people covered, is asking for an 18.8% 2017 rate increase. Aetna, with 130,000 customers is asking for 24.5%.
See My Post at Forbes
 

Wednesday, May 18, 2016

New York's 2015, 2016 and 2017 Obamacare Rate Increases

New York just announced the 2017 requested rate increases for individual health insurance.

I thought the history of New York's increases was interesting.

Monday, May 9, 2016

Why Are Centene and Molina the Exception To Most Big Health Plan Losses On the Obamacare Exchanges?

This paragraph in a recent AP story caught my eye:
Two companies that report exchange success so far, Molina Healthcare Inc. and Centene Corp., say they have focused on covering low-income customers in markets where they already have an established presence in Medicaid, the state-federal program that covers the poor. Molina sells coverage in nine states and is thinking about adding two for next year.
Why are these traditionally Medicaid carriers doing so well when most of the health plan market is losing their shirts in the Obamacare exchanges?

See my post at Forbes

Tuesday, April 26, 2016

"Figures Don't Lie But Liars Figure": The Disingenuous Obama Administration's Report That Claims Obamacare's Average Premiums Rose by Only 8% in 2015

The Obama administration is out with a report that the average 2015 Obamacare exchange premium increased by only 8% last year.

As best I can tell, that is a true statement.

It is also an incredibly disingenuous statement.

Thursday, April 21, 2016

United Healthcare Leaving the Obamacare Exchanges Is Not the Point––What's Happening to the People Who Have No Choice But to Buy Their Health Insurance Under Obamacare Is

Comments in a recent Politico article over United HealthCare's pullout from the Obamacare exchanges because of $1 billion in losses have me scratching my head.

"It's a nothingburger in terms of market impact, said insurance industry consultant John Gorman. But symbolically and politically, it's huge" He went on, "We're only about halfway through the drama of stabilizing these marketplaces. We've got another two or three years to go, and it's going to be a bloody two or three years."

Sunday, February 28, 2016

Selling Health Insurance Across State Lines––A Really Dumb Idea

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!

This is about as dumb an insurance "reform" idea as has ever been proposed.

Tuesday, February 16, 2016

John Kasich's Ohio Health Care Record: Making Lemons Into Lemonade

It's easy to be critical of Obamacare.

But from the time The Affordable Care Act was passed until a new President and Congress have a chance to change things in 2017, America's governors haven't had the luxury of just complaining about it. They have had to govern.

Governor Kasich and his team have made big health care change a reality by collaborating with the key stakeholders in Ohio. On that score they have made lots of Obamacare lemons into lemonade.

Read my op-ed today at the National Review.

And, my post last fall at Forbes regarding Kasich's Medicaid expansion in Ohio. 

Thursday, February 4, 2016

Obamacare Hits 12.7 Million Enrollments––But Only Grows 8.5%

Today the administration announced that 12.7 million people signed up for coverage in the Affordable Care Act's insurance exchanges.

Said the HealthCare.gov CEO, "We knocked the lights out this year. We did a great job."

Let's take a closer look.

Monday, February 1, 2016

Why the Obamacare 2016 Open Enrollment Stalled: The Big Unwritten Story About Obamacare––How Unaffordable It Is For the Working and Middle Class

Back on December 22nd when the President triumphantly announced 6 million enrollments on HealthCare.gov and the administration pointed to "unprecedented demand" on the exchanges, I was the skunk at the garden party arguing in the Washington Post that it was all just churn as existing customers were only trying to escape all of the big rate increases.

Well guess what? It was all churn.

The administration will shortly announce the total number of people who signed up for Obamacare under the Affordable Care Act.

The number signing up in 2016 will turn out to be not much more than the number who signed up last year after those who don't pay are netted out––no sizeable gain in enrollment has been accomplished on a national basis. [February 4 Update: The increase was 8.5% over 2015.]

Tuesday, January 5, 2016

2016 Obamacare Outlook

One of the more Obamacare fluent reporters just emailed me a set of questions regarding the 2016 outlook for Obamacare.

I thought I would share my responses with you:

Thursday, November 19, 2015

UnitedHealth Group Losing Big Money and Threatening to Leave the Obamacare Exchanges--Because the Obamacare Insurance Business Model Does Not Work

It's official. The Obamacare insurance company business model does not work.

UnitedHealth Group just announced they expect to lose $700 million in the Obamacare exchanges and are seriously considering withdrawing from the program in the coming year.

This morning, the Wall Street Journal reported just about everybody else is losing their shirts in Obamacare as well:
Several other big publicly traded insurers also flagged problems with their exchange business in their third-quarter earnings Anthem Inc. said enrollment is less than expected, though it is making a profit. Aetna Inc. said it expects to lose money on its exchange business this year, but hopes to improve the result in 2016. Humana Inc. and Cigna Corp. also flagged challenges...

There are signs that broad pattern has continued--and in some cases worsened--this year. A Goldman Sachs Group Inc. analysis of state filings for 30 not-for-profit Blue Cross and Blue Shield insurers found that their overall company wide results were "barely break-even" for the first half of 2015.

Goldman analysts projected the group would post an aggregate loss for the full year--the first since the late 1980s. The analysis said the health-law exchanges appeared to be a "key driver" for the faltering corporate results, and the medical-loss ratio for the Blue insurers' individual business was 99% in the first half of 2015--up from 91% at that point in 2014, and 82% for the first six months of 2013.
Every health plan I talk to tells me that they don't expect their Obamacare business to be profitable even in 2016 after their big rate increases. That does not bode well for the rate increases we can expect to be announced in the middle of next year's elections.

Monday, October 26, 2015

Crocodile Tears Over the Failing Obamacare Co-Ops--The Canaries in the Obamacare Coal Mine

I can't believe what I've been hearing recently from Obamacare defenders over the failing Obamacare co-ops--the most recent count has eight of them going bust.

The biggest complaint seems to be that those mean Republicans forced these co-ops out of business because of a provision they included in the last budget.
Read my post at Forbes

Sunday, October 18, 2015

Flat Enrollment Estimates For 2016--Has the Obama Administration Given Up on Obamacare?

On Thursday, the Obama administration said they expect to have 10 million people enrolled on the Obamacare insurance exchanges in 2016. They further said they expect to sign-up only one in four of those still uninsured and eligible during the 2016 open enrollment scheduled to begin on November 1.

These are astonishing admissions.

In 2013 the Congressional Budget Office (CBO) estimated that the Obamacare insurance exchanges would enroll an average of 22 million people during 2016.

Given the original expectations how can we now not say this program is a terrible failure?

Read my post at Forbes
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