CBO: Obamacare costs revised downward, again. Finds lower than expected premiums.

[Emily's Cat]

The claims and projections were what they were, and the law was sold to the public according to those claims and projections. The reality is considerably worse than was claimed or "expected." There's really only three choices: the advocates got unlucky; or the advocates were flat out wrong and only the detractors were right; or the advocates were lying.

Personally, I'm partial to believing the third option. I think the insurers knew this was going to happen and expected to lose money, but didn't mind because the government was going to reimburse them for 95% of their losses by way of the risk corridors. Of course, they're screwed now, at least temporarily, thanks to Rubio's gutting of the risk corridors through some sneaky little legislating.

Yes and no. From a perspective as one of the detractors within the industry, I'd say it's a mix of the first and second in your list. The advocates got unlucky about some things AND they were wrong about some things. I don't think that most of the advocates were lying - they weren't intentionally skewing the truth. It's an inherently complicated system - much more complicated than many people realize.

The actual results for 2014 came out better than the detractors expected. In many ways, they came out better than the advocates expected - prices were lower than they anticipated, actual claim costs weren't as high as projected, etc. The prices for 2014 were based on a LOT of guess work. A lot of complex modeling and decision analysis, a lot of game theory, a lot of straight-up dart-board methodology at play. Nobody knew how the system was actually going to work. And yes - absolutely - most carriers made bets on the risk corridors. They were willing to take the risk of having a lower-then-necessary price because they had downside protection. I've seen at least one company go out of business in some areas because they bet too much on that mechanism.

For 2015, a lot of the problems we are seeing are because of a massive information lag. The products for 2015 had to be filed by end of April 2014. Insurers had no experience. We were trying to project a full year's worth of costs in a new marketplace, based on 2 months of data (the pricing and analysis is done in early march in order to incorporate product design and corporate objectives into the filing cycle). And the experience we had for January and February of 2014 was atypical - but we didn't know that yet. A lot of it has been garbage in, garbage out.

The rate increases for 2016 are largely a result of so many carriers having missed the ball by such a wide margin in 2015.

I personally expect the market to stabilize in about the next three years. By that point, the risk corridors and reinsurance will be out of the picture, and we'll have a few years worth of solid, complete, analyzable data to work with. We'll be able to start overcoming the information lag and developing more credible projections. The premiums may still be higher than everyone wants them to be... but the year to year swings should reduce by a fair bit.

That's my prognostication. We'll see how wrong I am in about 2019 or so

 

[Fudbucker]

i have a few friends that are alive now because of the ACA. This is not hyperbole, the had no health insurance prior to the ACA and ER care would not have sufficed to treat their illnesses. But some people are paying a little bit more for health insurance, so let's repeal the ACA and let the poor die.

I second this. Millions of people are insured who otherwise wouldn't be. But Obamacare is slowly unraveling. The only good news is if it nosedives completely, the only viable alternative is true UHC, and not this cobbled together mess that the ACA is.

 

[Emily's Cat]

I second this. Millions of people are insured who otherwise wouldn't be. But Obamacare is slowly unraveling. The only good news is if it nosedives completely, the only viable alternative is true UHC, and not this cobbled together mess that the ACA is.

No, it's not the only viable alternative. There are dozens of approaches that would be better than ACA. I base-coverage subsidized private system (like Switzerland) is a reasonable option. Similarly, a swap option approach (like Medicare Advantage) would probably work pretty well. There's a huge gamut of things out there that could be done, and all of them would probably be better than ACA. UHC is just one of them

 

[Fudbucker]

No, it's not the only viable alternative. There are dozens of approaches that would be better than ACA. I base-coverage subsidized private system (like Switzerland) is a reasonable option. Similarly, a swap option approach (like Medicare Advantage) would probably work pretty well. There's a huge gamut of things out there that could be done, and all of them would probably be better than ACA. UHC is just one of them

I lazily lumped all those into the UHC category. Something like Medicare for all, would be universal coverage. Point taken.

 

[twinstead]

No, it's not the only viable alternative. There are dozens of approaches that would be better than ACA. I base-coverage subsidized private system (like Switzerland) is a reasonable option. Similarly, a swap option approach (like Medicare Advantage) would probably work pretty well. There's a huge gamut dof things out there that could be done, and all of them would probably be better than ACA. UHC is just one of them

Apparently the ACA is the BEST that our lawmakers could do as far as health care reform, and many of them are still kicking and screaming about even that. The idea that a better plan could have been enacted is totally out of the question.

 

[Dr. Keith]

Well, to a large extent they knew they were setting their rates too low. This was done at the behest of the administration in order to make the optics of the Obamacare transition look better. The health insurers were willing to go along with it because the risk corridors made it so the government would reimburse almost all of their losses in the first three years (after which the insurers would raise prices on their "sticky" customers until they were profitable). The insurers are squealing like stuck pigs, however, because the government is reneging on its promise to reimburse them for their losses. As a consequence, the insurers are raising premiums faster than they intended (and what the administration wanted).

Okay. Thanks.

A company that counts on the government to reimburse it for its losses deserves the pain. Too bad for us it is an insurance company, because they never experience pain, they are just pain conduits.

 

[sunmaster14]

Apparently the ACA is the BEST that our lawmakers could do as far as health care reform, and many of them are still kicking and screaming about even that. The idea that a better plan could have been enacted is totally out of the question.

I'm don't understand how you could possible justify this claim. It may have been the most disruptive change to the status quo that was politically feasible, but that's most definitely not the same thing as the BEST change to the status quo.

 

[sunmaster14]

Okay. Thanks.

A company that counts on the government to reimburse it for its losses deserves the pain. Too bad for us it is an insurance company, because they never experience pain, they are just pain conduits.

Not sure what you're driving at here. Probably I don't want to know.

 

[Dr. Keith]

There's a huge gamut of things out there that could be done, and all of them would probably be better than ACA. UHC is just one of them

This is why I think Obama will be labeled by history as a failure. This is like Clinton's "Don't Ask Don't Tell" - good intention, but just not quite far enough to actually be good. In fact, may actually turn out to be bad.

Sometimes a step in the right direction isn't.

 

[Dr. Keith]

Not sure what you're driving at here. Probably I don't want to know.

I abhor companies that rely on government handouts to do business. I don't like the risk corridors as you described them.

The pain comment is directed at the fact that insurance companies are uniquely designed to pass their losses through to customers because the consumer has very little comparative information at hand to shop for a new insurer. The ACA helps to remedy this to some extent, but still it is harder to shop for insurance than it is to shop for other commonly used products. Add in the uncertainty of losing your healthcare provider by changing policies and the customers become quite "sticky", as you put it. So, insurance companies rarely suffer losses for long, they are able to pass them on, hence my characterization of them as pain conduits.

 

[sunmaster14]

i have a few friends that are alive now because of the ACA. This is not hyperbole, the had no health insurance prior to the ACA and ER care would not have sufficed to treat their illnesses. But some people are paying a little bit more for health insurance, so let's repeal the ACA and let the poor die.

Frederic Bastiat wrote an essay called That Which is Seen and That Which is Not Seen where he discusses the fallacies which result from contemplating only easily observable benefits of economic activity and ignoring opportunity costs and unintended consequences.

You see the few friends that were able to afford health care and get life-threatening illnesses treated. What you don't see are the tens of millions of people who have much higher premiums and deductibles than they did before and are, as a consequence, foregoing some medical treatment that they otherwise would have sought. Or you don't see the tens of millions of decisions to cut back financially in other areas which might also decrease health, safety, and happiness. Or you don't see the reduced investment in medical technology and R&D, which is a natural consequence of the increased uncertainty regarding future health care spending and financing, as well as the higher taxes on investments and incomes. Or you don't see the disincentive for companies to hire more workers or let part-time workers work 30 or more hours per week, which leads to more underemployment (and underemployment leads to worse health and happiness).

Everything the government does affects tens of millions of people if not hundreds of millions of people in all kinds of ways which are difficult to comprehend. The fact that some people benefited tremendously does not mean the program created positive utility, on net.

 

[sunmaster14]

I abhor companies that rely on government handouts to do business. I don't like the risk corridors as you described them.

The pain comment is directed at the fact that insurance companies are uniquely designed to pass their losses through to customers because the consumer has very little comparative information at hand to shop for a new insurer. The ACA helps to remedy this to some extent, but still it is harder to shop for insurance than it is to shop for other commonly used products. Add in the uncertainty of losing your healthcare provider by changing policies and the customers become quite "sticky", as you put it. So, insurance companies rarely suffer losses for long, they are able to pass them on, hence my characterization of them as pain conduits.

Gotcha. I think we're in agreement here.

 

[Fudbucker]

This is why I think Obama will be labeled by history as a failure. This is like Clinton's "Don't Ask Don't Tell" - good intention, but just not quite far enough to actually be good. In fact, may actually turn out to be bad.

Sometimes a step in the right direction isn't.

That's funny. I view it as one of his greatest successes. Obama spent his substantial political capital on three things: The bank bailouts (TARP), the Stimulus, and the ACA. He had to make major concessions on the last two, but regarding health care, Obama succeeded in closing the door on the pre-existing condition nightmare forever. No matter what happens with the ACA, we will never go back to the days of people with pre-existing conditions dying due to lack of coverage. Even the GOP plans include subsidies to help people who can't get insurance. So I will always credit Obama with ending that sad chapter.

 

[Puppycow]

Well, I just got my renewal notice from Blue Cross Blue Shield of MA. My health insurance premiums are rising 27%.

Here are my insurance premiums for the last few years (note that I added my business partner's family to the plan in 2014, and he's much younger than I, so it averaged down the premiums for my small business plan):

$1,156.60 (2012)
$1,262.56 (2013)
$1,220.09 (2014)
$1,342.29 (2015)
$1,708.43 (2016)

I'm not sure what's driving the huge increase this year, but I suspect it has to do with the losses BCBSMA is suffering on its Obamacare exchange plans, where people are gaming the system by signing up for insurance and either dropping it without paying a thing after 3 months, or paying for a while, getting a lot of health care, and then dropping it. People can play this game every year of course.

Who would have thought human beings would be so clever?

That's what you have to pay every month?

I'm an American expat living in Japan and employed by a Japanese company. I have a wife and 2 kids, so this is for a family of four: $250/month for health insurance and another $40/month for long-term care insurance. Also, Japan spends less than half what the US does per capita on health care. Japan of course has a national insurance system. Somehow, health care costs have not spiraled out of control here like they have in the US.

 

[Aepervius]

I am thinking this must be yearly fee, because 1700$ per month seems excessive, even with UHC that's an order of magnitude too high.

 

[Puppycow]

I am thinking this must be yearly fee, because 1700$ per month seems excessive, even with UHC that's an order of magnitude too high.

Nope. It must be monthly. This is America after all, most expensive healthcare in the world by a long shot. If it were yearly that would be a great deal.

https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita

In 2013 per capita health care expenditures were $8713. That's per individual so for a family of 4 that would be over $34,000. Insurance premiums of 1700$ per month is $20,400 per year. Less than the per capita average, although that includes the old people of course.


It really is getting to be just mind-bogglingly expensive and needs to be fixed again somehow.

I think the problem lies in too many middle-men between the patient and the doctor. You have the employer first of all, because most people get insurance through their employer. Then you have the insurance companies. Then all the administrative people at the hospital. Some kind of national insurance scheme would be much better than all these private insurance companies, each one negotiating with each health care provider individually.

 

[sunmaster14]

Yes, it's monthly. That's 100% of the cost, since it's my company. Fortunately, it's tax-deductible, so I'm, in effect, paying only 55% of that after tax (assuming my company remains profitable).

It's kind of a premium plan, even though it's an HMO. Only a $500 deductible, and the network includes the best hospitals in the world.

Overall Deductible

$500 per member per plan year
$1,000 per family per plan year
Deductible does not apply to preventive health services and certain other services as noted.

Out-of-Pocket Maximum

$3,000 per member per plan year
$6,000 per family per plan year
Calculation includes deductible, copayments and coinsurance.

Overall Benefit Maximum
None

Doesn't include dental though. That costs me another $160 per month, even thought it covers virtually nothing and is capped at $500 per person per year, not including the semiannual cleanings. Yes, it wouldn't make sense economically except for the tax deductibility of premiums but lack of deductibility for dental costs.

What's weird is that it is actually written into Obamacare law that a health plan has to cover pediatric dental care. Yet, somehow all the insurance companies have received an implicit waiver from that because it would have had too large an impact on premiums. Not even an explicit waiver. The Obama administration is just simply ignoring that part of the law. Of course, this isn't the only example of that.

 

[ehcks]

That's funny. I view it as one of his greatest successes. Obama spent his substantial political capital on three things: The bank bailouts (TARP), the Stimulus, and the ACA. He had to make major concessions on the last two, but regarding health care, Obama succeeded in closing the door on the pre-existing condition nightmare forever. No matter what happens with the ACA, we will never go back to the days of people with pre-existing conditions dying due to lack of coverage. Even the GOP plans include subsidies to help people who can't get insurance. So I will always credit Obama with ending that sad chapter.

Ended pre-existing conditions, put a cap on out-of-pocket expenses, required that family insurance cover children up to 26, and made health insurance a requirement.

Sure, it's still not enough, but those are hugely beneficial changes we've needed for a long time. The perfect should not be the enemy of the good.

 

[Blue Mountain]

Yes, it's monthly. That's 100% of the cost, since it's my company. Fortunately, it's tax-deductible, so I'm, in effect, paying only 55% of that after tax (assuming my company remains profitable).

It's kind of a premium plan, even though it's an HMO. Only a $500 deductible, and the network includes the best hospitals in the world.

If you were an employee instead of the owner, what would your portion as an employee be? And is that amount flexible, in that the company portion can range from 0% to 100% of the total premium?

 

[Emily's Cat]

I'm don't understand how you could possible justify this claim. It may have been the most disruptive change to the status quo that was politically feasible, but that's most definitely not the same thing as the BEST change to the status quo.

You've just go the emphasis wrong, that's all The best that OUR lawmakers could do...