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June 1, 2015

The (Un)Affordable Healthcare Act

Obama may say ObamaCare is working, but that depends on the definition of “working.”

As recently as March, Barack Obama insisted Republicans must embrace the “reality” that ObamaCare is working “better than even many of its supporters expected.” Based on the list of states reporting gargantuan rate hike requests by insurance providers for 2016, reality is a bummer. And as the saying goes, “You ain’t seen nothin’ yet.”

The list is daunting. In Maryland, CareFirst BlueCross BlueShield, the state’s largest health insurer, is requesting average rate hikes of 30.4%, with a range from 19.3% to 45.7%. In Tennessee, BlueCross BlueShield wants an average rate hike of 36.3%. South Dakota’s Wellmark proposes a 42.9% increase. Oregon’s Moda Health, serving about half that state’s population, wants an average rate hike of 25.6%. In New Mexico, Health Care Service Corp., the state’s market leader, is asking for an increase of 51.6%. Three more states — North Dakota, Kansas and Iowa — have reported rate hike requests of 43%, 38% and 18%, respectively.

The common denominator? As The Wall Street Journal reports, insurers “cite high medical costs incurred by people newly enrolled under the Affordable Care Act.”

It’s not all bad news — sort of. State insurance regulators can force insurers to scale back increases they are unable to justify, and the Obama administration can take a similar tack, asking any insurer to explain an increase of more than 10%. But that’s the extent of the administration’s legal power, and, if providers determine state regulators’ demands are too onerous, they can simply drop coverage in that state, causing a different kind of crisis as a result.

Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services (CMS), tried to paint a happy face on the problem, saying, “After state and consumer rate review, final rates often decrease significantly.”

Dr. David Hogberg, senior fellow at the National Center for Public Policy Research, had a different perspective: “Pundits like Paul Krugman saw the tiny premium increases for the second year of the exchange and concluded that predictions of the death spiral were wrong. But there is no rule saying that because a death spiral doesn’t happen in the first year it isn’t going to happen.”

To be fair, health care cost growth has increased by historically low rates in recent years, and there are states proposing relatively modest increases for 2016. In Washington, providers want an average increase of 9.6%, while Vermont checks in at 8.4%. In Indiana and Connecticut, the leading plans seek boosts of 3.8% and 2%, respectively. As of now Maine is the only state where the top insurance provider has proposed keeping rates generally flat.

Yet the relatively low 2015 rates reflected a lack of real world data. Data reflecting the reality that many plans have signed up sicker and older — that is, more costly — consumers. BlueCross BlueShield of Tennessee illuminates why premiums are headed upward in a big way: It lost $141 million from exchange-sold plans. “Our filing is planned to allow us to operate on at least a break-even basis for these plans, meaning that the rate would cover only medical services and expenses — with no profit margin for 2016,” said spokeswoman Mary Danielson. Maryland’s Care First offers another reason for escalating premiums, revealing that members’ monthly claims almost doubled to $391 in 2014 from $197 the year before.

In other words, rising costs mean rising premiums to cover them.

As of now, many Americans are insulated from a portion of these costs because their premiums are subsidized by the federal government, which is a nice way of saying taxpayers are picking up the tab. However, the Supreme Court will rule on King v. Burwell this month. When ObamaCare was written, federal subsidies were only available on health exchanges “established by the state.” Despite all the leftist obfuscation, Democrats wholly responsible for the passage of the law believed such an arrangement would force states to set up their own exchanges, because the pressure brought to bear by residents shut out from subsidies would be politically untenable. When it didn’t work out that way, and 34 states refused to set up those exchanges, the Obama administration rewrote the law and offered them anyway. If SCOTUS rules according to the law, millions of Americans will lose their subsidies.

Yet even if the Supreme Court bows to political pressure, the respite is temporary. When the law was set up, insurance providers were given a trio of cost buffers known as Risk Adjustment, Reinsurance and Risk Corridors. While they are somewhat complicated, suffice it to say the insurance providers who did better than expected would help defray the costs of those who did worse than expected. These buffers also allowed insurers to keep their rates artificially lower, knowing the feds would provide the ultimate backstop.

Unfortunately for ObamaCare fans, two more realities intrude. First, the CRomnibus budget bill enacted last year prohibits the CMS from transferring funds from other programs to fund risk corridors, making it revenue neutral — meaning taxpayers aren’t on the hook for an insurance company bailout as they were previously.

Second, and the you-ain’t-seen-nothin’-yet part of the equation, the latter two buffers expire completely at the end of 2016. In short, that’s when the training wheels come off ObamaCare and insurance companies will be forced to charge real-world premiums for real-world ObamaCare mandates. Real-world premiums that may be staggeringly high, even compared to this year’s rates.

What happens then? The feds can extend subsidies for insurance companies, or increase federal subsidy rates on Americans’ insurance premiums to compensate — both of which would add billions of additional dollars to the national debt. Billions of additional dollars to maintain a program sold on a web of lies by this president and his party to Americans “too stupid” to embrace it without them. A program that has narrowed networks, forcing many Americans to find new doctors and hospitals or pay out of pocket for their old ones. A program where many Americans may ultimately face the most invidious choice of all: stay healthy or go broke.

The only thing more galling is Democrats, in all their arrogant glory, insisting they’ve made health care “affordable.”

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