ACA/Obamacare: The Recent Tax Bill and Obamacare

Q: How did "Obamacare" wind up in the tax bill?

A: The Senate version repeals the Affordable Care Act's tax penalties on people who don't have health insurance. That would result in government savings from fewer consumers applying for taxpayer-subsidized coverage, giving GOP tax writers nearly $320 billion over 10 years to help pay for tax cuts.
What's more, repealing the fines would deal a blow to the Obama-era health law after a more ambitious Republican takedown collapsed earlier this year.

Q: Those fines have been very unpopular, so how could repealing them undermine the health law? Other parts of the ACA will remain on the books.

A: Premiums will go up, and that's never popular. The fines were meant to nudge healthy people to get covered. Because insurance markets work by pooling risks, premiums from healthy people subsidize care for the sick.

Without some arm-twisting to get covered, some healthy people will stay out of the pool. That's likely to translate to a 10 percent increase in premiums for those left behind, people more likely to have health problems and need comprehensive coverage, says the Congressional Budget Office.

The CBO also estimated that 13 million more people would be uninsured in 2027 without the penalties. If they have a serious accident or illness, uninsured people get slammed with big bills, and taxpayers wind up indirectly subsidizing the cost.

Q: So just taking away an unpopular penalty would destabilize the health insurance law?

A: Repealing the fines is part of a broader context. - Q&A: Tax bill impacts on health law coverage and Medicare, Newser, 12/05/2017

Link to the entire article appears below: 

http://www.newser.com/article/4729348d72844801ae4686e91afbb1fb/qa-tax-bill-impacts-on-health-law-coverage-and-medicare.html

ACA/Obamacare: A Scheme Consolidating Other Schemes

“Unwise public policies have allowed this market [ACA] to become a dumping ground for people who are older and sicker than average. The states were allowed to end their high-risk pools and send their enrollees to the exchanges. The federal government did the same thing with the (Obamacare) risk pool (the Pre-Existing Condition Insurance Plan). Cities and counties are ending their post-retirement health care programs (which are almost always unfunded) and sending people to the exchanges, where they pay premiums that are well below the cost of their care thanks to limited age rating. That includes, for example, 8,000 former employees of the city of Detroit.” - How We Can Repeal the ACA and Still Insure the Uninsured, Independent Institute, 01/20/2017

Link to the entire article appears below:

http://www.independent.org/newsroom/article.asp?id=8979

ACA/Obamacare: The Death Spiral of Rising Prices

ACA/Obamacare: When Insurance Theory Becomes Reality Theater

‘UnitedHealth Group, the largest insurance company in the U.S., on Thursday slashed its earnings outlook, citing new problems related to Obamacare, and told investors it may exit the program's exchanges.

"In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated," Stephen J. Hemsley, chief executive officer of UnitedHealth Group, said in a press release.

The release added that, "UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. The company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017."

In a conference call with investors, Hemsley offered a sober assessment of the exchanges' future viability. He said that claims data have been getting worse as time has gone on, and there's no evidence pointing toward improvement.

Asked about whether the company could sustain losses past 2016, he was blunt: "No. We cannot sustain these losses. We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."

The year 2017 is significant for insurers, because that's the year when several programs designed to mitigate risk for insurers through federal backstops go away. The hope was that those programs would act as training wheels for Obamacare in its first few years of implementation, but after that, the insurers were supposed to be able to thrive on their own. UnitedHealth's statement suggests otherwise.’ - Nation's largest insurer may exit Obamacare due to losses, Washington Examiner, 11/19/2015

　

Link to the entire story appears below:

http://www.washingtonexaminer.com/article/2576726

Narrow Networks and the 2015 Version of ACA

"More directly, Obamacare is eliminating access to many of the best specialists and best hospitals for middle-income Americans. To meet the law's requirements, major insurers all across the country are declining to participate in the exchanges, or only offering plans that exclude many of America's best doctors and hospitals. McKinsey reported 68% of Obamacare insurance options only cover narrow or very narrow provider networks, double that of one year ago." -If you like choice in health care, look to Republicans, Scott Atlas, CNN


http://www.cnn.com/2014/11/18/opinion/atlas-obamacare-failings/index.html


Atlas is correct, the vast majority of the choices on the ACA exchange are that of narrow networks regarding the 2015 offerings (effective 01/01/2015).

Last year, James and Jane Goodfellow would have had a tough time discerning what was a broad or narrow network of providers as insurers used their pet names regarding what was broad or narrow. This go around, after the insurers pet name appears, regarding PPO's (preferred provider organizations), there is inserted the term "board network" or "limited network" as a clarification for consumers.

However, once you get outside the PPO, the HMO (health maintenance organization) offerings do not explain or add a clarification what an HMO is and how it functions. One might say the HMO was/is the original narrow network (only those inside the HMO are one’s providers).

CMS and 1600 Pennsylvania Avenue are stating that one can keep one’s premium level (current ACA policyholders) or with a slight increase by switching insurers i.e. buy one of the new offerings. They fail to point out the particulars of their claim of level or slightly increased price. By switching to a more narrow network or from old insurer narrow network to new insurer narrow network, one might keep premium increases modest. However a secondary and as important phenomena is at work regarding the claim of modest price increase by switching insurers: anti-selection. How so?

Consider 10/01/2013 and the initial availability of ACA with effective date 01/01/2014. Crowded at the starting line, like a group of marathon runners awaiting the starting pistol, were hundreds of thousands of chronically ill people. This group, the existence thereof caused by a variety of reasons, wanted to obtain coverage immediately and so they did. Hence the initial group of insurers that appeared on the ACA exchange for the 2014 offering ended up with large numbers of chronically ill insured’s. Stated alternatively, rather than attracting a wide variety of homogeneous exposure units spread over a wide geographic area they attracted an inordinate number of chronically ill exposure units.

The initial group of insurers offering ACA products, attracting the chronically ill, suffered losses that that drove up loss ratios and hence premium increases were called for to offset losses.

Now comes the 2015 offerings and a new set of insurers appear. The new insurers have the knowledge that anti-selection has already occurred regarding the initial insurers. They also know that the chronically ill are less apt to change insurers for a lower price but healthy insured’s, face with a price increase yet having made no claims are very apt to change insurers based on price. The new insurers offer a slightly lower premium rate to attract the healthy away from the initial insurers. Hence the new insurers attract the healthy exposure units while the initial insurers, in the main, lose the healthy but retain the chronic.

The entire process ends with the initial insurer faced with few new entrants into their plan due to spiraling price increases and an ever increasing exodus of healthy insured’s must close the book of business regarding the offered plan and transition the remaining insured’s to a new plan or merely exit ACA.

ACA/Obamacare: ObamaCare Numbers “Worse” Than Expected, Back End Still Not Up And Running

Kathleen Sebelius: Four and One Half Minutes of Political Spin …..Then Spin-Brain-Freeze. Oops!

The entire interview can be seen here: http://www.news9.com/category/116601/video-page?autostart=true&clipId=10001484

What is that Light at the End of The Obamacare Tunnel? That’s the Risk Pool Freight Train Coming Your Way......

The Scheme
Imagine government G, through a series of highly regulated insurers of the same government G, heavily advertises a new taxpayer subsidized insurance plan, independent of underwriting criteria (all comers), and such plan receives only a tepid response attracting less than 400,000 applicants. (1) (2) (3)

The plan is very difficult to apply for and application for such plan does not guarantee the plan was issued. Hence one must spend hours, if not days, applying for coverage and once what appears to be a successful application is finally submitted one must follow up by correspondence and phone calls to assure the application was accepted. Even then many applications can not be found or where transmitted with errors.

Meanwhile, government G, through a series of third party administrators has been maintaining a high risk plan of 101,000 insured‘s. Government G's published intention (known-known) is to end the high risk plan with an inordinately high loss ratio and dump the high risk plan into the aforementioned heavily advertised, taxpayer subsidized, independent of underwriting criteria plan that is difficult to apply for and determine issued-bound coverage. (4) (5)

Since the plan is very difficult to apply for yet has no underwriting criteria, the vast majority of those applying, those that would take enormous amounts of time to apply and follow up to make sure coverage adhered, are likely those that would benefit from the non-underwriting criteria plan. Stated alternatively, the subject of the insurance at hand, given the non-underwriting aspect, strongly attracts those wanting the insurance subject at hand, due to the non-underwriting aspect.

Does the above sound familiar? Please note that the above description is not of insurance, rather it is a description of a scheme known as Obamacare. As Thomas Sowell has noted many times: Not everything called insurance is insurance.


Nicolaus Copernicus, They Are Not

　
If one examines Obamacare’s latest enrollment figures one finds about 1.2 million applicants with 800,000 going into Medicaid and 400,000 going into subsidized private insurance (note that 1.2 million applicants does not indicate 1.2 million insured as no one appears to be able determine coverage adhesion). The 400,000 subsidized private insured’s are very likely made up of, in large portion, of those desperate for coverage and the despair leading to a grand incentive to take advantage of non-underwriting criteria and hence spending hours if not days applying for coverage and doing all the follow up to make sure coverage is effective. (6)

Rewinding a few years one finds that the Affordable Care Act (ACA) authorized a “Risk Pool” that covered applicants with pre-existing conditions. Approximately 101,000 remain in this pool. Further, state run risk pools that have existed longer than ACA have approximately 235,000 members. Meaning the 336,000 risk pool members will be added to the 400,000 non-underwritten applicants described above on or before 01/31/2014. (7) (8)

Hence the scheme has 400,000 members who’s make-up is likely an inordinate amount of chronically ill which in turn is combined with 336,000 chronically ill to produce a 736,000 anti-selection case that likely rivals or even surpasses anti-selection in another non-insurance insurance scheme known as Flood Insurance.


Upon Further Review

Consider for a moment that the ACA risk pool had to begin turning away applicants the first week in March, 2013 as the plan was going bankrupt as the $5 billion of taxpayer money (subsidy) used to initiate the pool and the premiums paid by members of the pool were not enough money to offset the claims of the pool. Hence any new applicants could not be accepted as current premiums paid by members plus the $5 billion of taxpayer money was calculated to exhaust by 01/01/2014 which met the criteria for dumping the pool into Obamacare. (9)


Insurance (Scheme) Death Spiral

The premiums paid, including taxpayer subsidy, will not sustain a 736,000 member plan that is likely made up of the chronically ill to a very large degree. Historical insurance plan results predict that losses will easily exceed premium causing a major premium adjustment upward. The upward premium adjustment will cause many healthy insured’s to find the plan too costly and they will drop out. As the healthy drop out one ends with an ever increasing concentration of the chronically ill. Round after round of premium increases occur until, theoretically, premium paid equals benefit derived. However, the premium equals benefit point is never reached as the plan implodes prior to that point as even the chronically ill find the plan too costly. (10)

But The Group Will Become Larger and That Will Solve the Problem


Nay, nay! The law of large numbers is only one criteria within legal reserve insurance. The oft mentioned mantra of “pooling the risk”, and all problems are solved, is a misnomer.

A pool of homogeneous exposure units spread across a wide geographic area, subject to underwriting criteria, with risks priced according to potential loss, with future losses fully reserved, is a totally different concept than some fuzzy panacea of: “pooling the risk”.

Furthermore, the accumulation of the group into the future, if indeed it does accumulate; each and every new applicant, healthy or chronic, is faced with the original price driver as mentioned above, as well as, the future price driver of risks not subject to underwriting criteria, with risks not priced according to potential loss. Stated alternatively, cross subsidy exits in that each applicant is either a subsidizer or a subsidized.

It becomes a fiction that at price subsidized (Ps), that all can insure off one another at price Ps. Price does not function as a signal nor rationing agent, price merely becomes a political price (a price based upon politics, not economics).

Moreover, the younger, who are more healthy and less wealthy, cross subsidize the more wealthy and less healthy in regards to base premium, beyond the non-priced-risk phenomena and price subsidized fiction (Ps). Therefore the more healthy and less wealthy produce an additional subsidy for the benefit of the more wealthy and less healthy, which is directly related to price having become based upon politics, not economics.


　
Notes:

(1) New Enrollment Figures Show Obamacare is Not on Track, breitbart.com, 12/11/2013

http://www.breitbart.com/InstaBlog/2013/12/11/New-Enrollment-Figures-Show-Obamacare-is-Not-on-Track


(2) Obamacare’s Medicaid enrollment crowding out private plans, Daily Caller, 10/29/2013

http://dailycaller.com/2013/10/29/obamacares-medicaid-enrollment-crowding-out-private-plans/


(3) 70% of ObamaCare Enrollees Are In Medicaid, breitbart.com, 12/11/2013

http://www.breitbart.com/Big-Government/2013/12/11/70-of-ObamaCare-Enrollees-Are-For-Medicaid


(4) Health insurance and high-risk pools, health insurance.org, 12/12/2013

http://www.healthinsurance.org/risk_pools/


(5) High Risk Insurance Pool Enrollees Losing Coverage Because of Obamacare, 11/19/2013

http://insurancenewsnet.com/oarticle/2013/11/20/high-risk-insurance-pool-enrollees-losing-coverage-because-of-obamacare-a-424373.html#.UrbiHml3t1s


　

(6) Economist: ‘Triple Whammy' Could Send Obamacare Exchanges Into ‘Death Spiral’ - cnsnews.com, 10/21/2013

http://www.cnsnews.com/news/article/barbara-hollingsworth/economist-triple-whammy-could-send-obamacare-exchanges-death


(7) Funds run low for health insurance in state ‘high-risk pools’, Washington Post, 02/16/2013

http://www.washingtonpost.com/national/health-science/2013/02/15/cb9d56ac-779c-11e2-8f84-3e4b513b1a13_story.html?hpid=z1


(8) Obama administration extends state high-risk pools through January, Washington Post, 12/12/2013

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/12/obama-administration-extends-state-high-risk-pools-through-january/


　

(9) Funds run low for health insurance in state ‘high-risk pools’, Washington Post, 02/16/2013

http://www.washingtonpost.com/national/health-science/2013/02/15/cb9d56ac-779c-11e2-8f84-3e4b513b1a13_story.html?hpid=z1


(10) Economist: ‘Triple Whammy' Could Send Obamacare Exchanges Into ‘Death Spiral’ - cnsnews.com, 10/21/2013

http://www.cnsnews.com/news/article/barbara-hollingsworth/economist-triple-whammy-could-send-obamacare-exchanges-death


　

　

　


　

John Goodman Discusses ‘Insurance Death Spirals’ in Relation to Obamacare