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."

Then this, "Analysts at Standard & Poor's now predict that Obamacare markets won't stabilize until 2018, two years later than previously anticipated."

Or this, "United's exit could matter in selected markets, but nationally it's a blip," said Kaiser senior vice president Larry Levitt.

Talk about missing the forest for the trees.

First, United's financial results in the Obamacare exchanges are more than a blip, they are indicative of what is happening in almost all of the states to almost all of the health plans operating in the insurance exchanges. You have heard the litany: In 2015 the not-for-profit Blue Cross plans lost money in the aggregate for the first time since the 1980s because of their Obamacare exchange losses, more than half of the Obamacare co-ops are already broke and the vast majority of the rest are on solvency watch, Health Care Services Corporation alone (which includes Blue Cross in Illinois and Texas) says they lost $1.5 billion in 2015 and $767 millon in 2014, Humana's profits fell 30% in the fourth quarter primarily driven by the $176 million reserve they set up on account of Obamacare. Virtually every insurance company participating in Obamacare is losing money three years into this.

Beyond a seeming ignorance of the consequences from this bigger picture there now seems to be a narrative that says this only means we just have a couple more years beyond what we had originally thought to get Obamacare to "stability."

Here's a headline: Obamacare is not about the insurance companies it is about the consumers that have nowhere else to purchase individual health insurance in the United States and are already finding the offerings––with subsidies or without––lousy deals.

Have any of these people considered what it will mean to the consumer once the insurance companies repeatedly raise the rates, tighten the networks more and increase the out-of-pocket costs in order to get themselves to a "stable" place in the years ahead?

In a recent blog post I took a look at what unsubsidized Obamacare costs consumers and what they get for it (in this case a family of four with mom and dad age-40). In Omaha, for example, the lowest cost Bronze Plan cost $725 a month for a $12,900 deductible plan while the lowest cost Silver Plan cost $926 a month with a $7,000 deductible. In Eugene, the lowest cost Bronze Plan cost $660 a month for a $10,000 deductible plan while the lowest cost Silver Plan cost $814 a month with a $4,000 deductible. In Manchester, it as $601 a month for the lowest cost Bronze Plan that had a $12,600 deductible. The lowest cost Silver Plan cost $778 a month and had a $7,000 deductible.

So now the argument is that after a couple more years of big rate increases, narrower networks and bigger out-of-pocket costs to get the health plans to stability we should all be happy that we will finally get to the place we knew all along we were going?

I suppose the counter argument would be that these costs are the unsubsidized costs and only 15% of the people on the exchanges pay the full cost.

A few points:
  • Who is going to pay these ever higher full costs for the consumers who get subsidies? The health insurance fairy?
  • While only 15% of those on the exchanges pay full price, 100% of the individual health insurance market in the United States comes under the Obamacare rules and premiums. About 40% of the off and on exchange market does not receive a subsidy and has to pay the full price. An insurance broker recently emailed me that one of her clients looked at these prices and responded, "That is more than my house payment!"
  • Subsidized people do get hurt when these prices increase. Unless they move to at least the second-lowest cost Silver plan, they bear the full brunt of the increase. Imagine a consumer covered by the wide network Blue Cross plan that has to move to a cheaper narrow network plan with a bigger deductible in order to avoid the increase. As these costs rise, the subsidized consumers just continue to get squeezed into narrower network and higher deductible plans in order to take full advantage of the subsidy.
And, why are these rates going up so high?

Because three years in only about 40% of those eligible for the Obamacare subsidies are buying the program and that means there aren't enough healthy signing up to pay the bills for the sick. In fact, only about 20% of those making between 251% and 300% of the federal poverty level have signed up for the program––the insurance plans offered are already that unattractive even for those who get big subsidies.

When I hear people say it will be just a couple of more years before the insurance companies, and therefore the market, gets to stability I wonder what they are thinking? Is Obamacare about the market and the insurance companies or is it about the people that have no choice but to buy their health insurance through the new heath law?

Yes, if the carriers raise their rates another 10% to 30% this year and even more the year after the insurance companies could well reach a point of actuarial stability.

But what about the people who rely on these health insurance policies and have no other choice?

How Obamacare will have to be fixed: Consumer-Friendly Obamacare Fixes - USA Today Op-Ed
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