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.

There is an old actuarial saying about how numbers can be manipulated to suite the author's agenda: "Figures don't lie but liars figure." That the 2015 Obamacare exchange rates rose by 8% is as close to a prefect example of this old adage that I can think of.

And, from all the press stories that went out with this as the lead, it appears lots of reporters bought it hook line and sinker.

Here is the operative statement in the report:
"Two thirds (67%) of HealthCare.gov consumers selected a new plan in 2016: all new consumers plus 43% of returning customers. Taking into account shopping, the increase in the average premium was 8% between 2015 and 2016."
Here's the catch: The administration mentions nothing about what kinds of health plans these 43% of returning consumers gave up to lower their increases.

Let me illustrate. Let's say a consumer had a 2015 Silver Plan with a $2,000 deductible in 2015 that was going to increase in cost by 20% for 2016. Because of the big 2016 rate increase, that consumer moved to a much cheaper 2016 Silver Plan that produced only a 5% increase but to accomplish that the consumer had to accept a $3,000 deductible. As a result, and according to the administration's logic, the final rate increase this consumer would have gotten was 5% instead of 20%. To get a cheaper plan consumers might have had to accept a much narrower provider network and/or a much bigger deductible and other out-of-pocket costs.

The consumer in my example did manage to get themselves a lower cost plan and avoid the big rate increase. But here it is important to remember that rate increases come in three forms:
  1. Higher premiums.
  2. Narrower networks, and or
  3. Higher out-of-pocket costs.
A more truthful analysis of what really happened in 2016 would have looked at what those 43% of returning consumers gave up to keep their average rate increase at only 8%. How many of these folks ended up with much worse plans in order to keep their premiums affordable?

And such an analysis is already common in the employee benefits industry. Look at the various reports issued by the benefits consulting firms each year that report the higher average rate increases before benefit "buy downs" and the lower increases after the benefit "buy downs."

The Obama administration document also points out that the average rate increase was only 4% when government subsidies that cap exchange participants' premiums are taken into account.

Again a technically correct but disingenuous statement because:
  1. The document says nothing about what happened to those participants' networks or out-of-pocket costs. Again, how many people moved to plans that had less in the way of benefits or networks or just had their plans' benefits cut? An RWJ report found that "two-thirds of the insurance companies" that offered PPO plans in the exchanges in 2015 "reduced the number of PPO plans they offered or stopped offering PPO plans altogether for 2016."
  2. Eleven million people buying Obamacare compliant individual health insurance don't get a subsidy. As the administration points out, the 4% increase only applies to the 85% of people getting subsidies in the marketplace. Again, two correct figures. But what have they left out? According to the most recent CBO estimate, 9 million people in the individual insurance market buy outside the Obamacare exchanges and don't get a subsidy in addition to the 15% in the exchanges (another almost 2 million) that aren't subsidized. The administration has once again all but forgotten the substantial off-exchange market and made no attempt to evaluate the impact of the 2016 rate increases on almost half of the market that is not eligible for any subsidies––these are the people that pay the full price for their coverage.
And, what about the consumers that saw those big rate increases and dropped their coverage?

Another fact the Obama administration report does not mention is how many of the 2015 Marketplace enrollees dropped out for 2016 at the time they saw their new prices and benefits. The administration's report says that 9.6 million people bought health insurance on the federal exchanges for 2015. This report also says that 4 million were new indicating 5.6 million were holdover customers from 2015. But in their December 31 "Snap Shot" report, the administration said there were 6.3 million enrolled on the federal exchanges on December 31, 2015. What happened to the 700,000 that apparently did not renew on the federal exchanges on the same January 1 the rate increases became effective? Lots of people leave Obamacare every month for good reasons. But not 700,000 on the first of a typical month.

What is this Obama administration report all about?

The administration is scared stiff the 2017 rate increases, about to be made public, will be even worse than last year.

When we start hearing about the big increases the administration will just roll this report out once again and make the point that the latest 10% or 20% or 30% rate increases being reported really aren't 10% or 20% or 30% rate increases––after all those 2016 rate increases that were supposed to be so huge only averaged 8%!

If the press once again takes a pass on digging into all of these convenient facts, the Obama administration should have a lot of success with that spin.
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