Tag: AHIP

Is ObamaCare Pushing Rope?

Regarding ObamaCare’s first adverse-selection death spiral, Julie Rovner posts this over at Shots, the NPR health blog:

The advocacy group Health Care for America Now was the first to bring the action to widespread attention. “Even for the insurance industry this behavior is surprisingly brazen,” HCAN Executive Director Ethan Rome wrote in a blog entry for the Huffington Post. “They don’t like the rules, so they’re going to take their ball and go home.”

But the insurance industry trade group America’s Health Insurance Plans rejected HCAN’s contention that the companies’ refusal to sell to all comers is somehow a violation of a promise made earlier this year by AHIP CEO Karen Ignagni that insurance companies would comply with regulations regarding children and pre-existing conditions.

In an interview, AHIP spokesman Robert Zirkelbach said Ignagni was responding only to promises that children wouldn’t be excluded from their parents’ plans and that if the kids are covered, the policies would include treatment of their pre-existing condition.

What emerged in the regulations, however, Zirkelbach said, was, in effect, a  requirement that insurance companies accept children even if they are already sick. That, he said, would be tantamount to exactly what companies want to avoid with the adult population — letting people wait until they are sick to sign up for insurance. Which is exactly why the insurance industry is so insistent on a coverage mandate: It needs premiums of healthy people to help cover the costs of those who are not.

In effect, ObamaCare supporters said to the public, “Give the government more power over insurance companies and the government will make health insurance more accessible and secure.”  These few paragraphs capture how that strategy has turned into a cat-and-mouse game with insurers, and is turning ObamaCare’s most attractive selling point – guaranteed coverage for kids with pre-existing conditions – into an empty promise.

In stark contrast stands the individual insurance market.  Yes, insurers there generally (but not always) charge premiums that correspond to risk, and sometimes turn people down – but that market has also been remarkably innovative when it comes to protecting sick people from higher premiums.  RAND Health economist Susan Marquis and her colleagues write, “a large number of people with health problems do obtain coverage” in the individual market: “Our analysis confirms earlier studies’ findings that there is considerable risk pooling in the individual market and that high risks are not charged premiums that fully reflect their higher risk.”  Even as Congress debated ObamaCare, UnitedHealthcare introduced an innovative new product that protects people with employer-sponsored coverage from facing sky-high premiums when they leave their company plan.  Economist John Cochrane predicts that further innovations can make health insurance more secure and improve the quality of medical care.

Which process seems more likely to improve quality and reduce costs?  The political process, where politicians and regulators try to force insurance companies to act against their financial self-interest?  Or the market process, where self-interest forces insurers to find innovative ways to give consumers more of what they want?

Secretary Sebelius Slips on the Brass Knuckles

This week saw more bad news for ObamaCare.  So the Obama administration slipped on the brass knuckles.

Last week brought news that health insurance premiums grew by a smaller increment in 2010 than in any of the past 10 years.  On Tuesday, The Wall Street Journal reported that ObamaCare appears to be turning that around:

Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections. Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.

The Journal even included this handy chart, where the blue bars show how much ObamaCare will add to the cost of certain health plans in 2011.

Source: Wall Street Journal

In addition, a Mercer survey of employers found that 79 percent expect they will lose their “grandfathered” status by 2014, and therefore will become subject to many more of ObamaCare’s new mandates—a much higher figure than the administration had estimated.  Employers expect those additional mandates will increase premiums by 2.3 percent, on average, and boost the overall growth of premiums from 3.6 percent to 5.9 percent in 2011.

In response to the health insurers’ claims, HHS Secretary Kathleen Sebelius fired off a letter to the head of the health insurance lobby.  The news release on the HHS website makes her purpose plain:

U.S. Department of Health and Human Services Secretary Kathleen Sebelius wrote America’s Health Insurance Plans (AHIP), the national association of health insurers, calling on their members to stop using scare tactics and misinformation to falsely blame premium increases for 2011 on the patient protections in the Affordable Care Act.  Sebelius noted that the consumer protections and out-of-pocket savings provided for in the Affordable Care Act should result in a minimal impact on premiums for most Americans.  Further, she reminded health plans that states have new resources under the Affordable Care Act to crack down on unjustified premium increases.

In the letter, Sebelius cites HHS’s internal analyses and those of Mercer and other groups to support her claim that ObamaCare’s impact on premiums “will be minimal” — somewhere in the range of 1 percent to 2.3 percent, on average.  Sebelius tells insurers that she will show “zero tolerance” for insurers who “falsely” blame premium increases on ObamaCare, and promises aggressive action against those who do:


[We] will require state or federal review of all potentially unreasonable rate increases filed by health insurers… We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014.  Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

First of all, how does Sebelius know these claims are false?  The analyses she cites project a 1-2 percent average increase in premiums. As I blogged back in June, her own agency estimated that just a couple of ObamaCare’s mandates will increase premiums for some health plans by 7 percent or more.  Is 9 percent really that far off?  Didn’t her own agency write that a “paucity of data” means there is “tremendous,” “substantial,” and “considerable” uncertainty about the reliability of their own estimates?

More important: so what if insurers believe that ObamaCare is increasing premiums by 9 percent, while Sebelius believes it only increased premiums 7 percent?  What business does she have threatening insurers because they disagree with her in public?  ObamaCare gave the HHS secretary considerable new powers.  Is one of those the power to regulate what insurers say about ObamaCare?  Excluding insurers from ObamaCare’s exchanges is not a minor threat.  Medicare’s chief actuary predicts that in the future, “essentially all” Americans will get their health insurance through those exchanges.  Does anyone seriously doubt that Sebelius’ threat is about protecting politicians rather than consumers?

When President Obama promised that he would sell ObamaCare to the American people, most people probably assumed he meant with his rhetorical skills.  But National Journal reports, “Remember how the administration was going ‘to sell’ the controversial legislation once it passed? Obama is not doing much pitching.”  He can’t even sell Jon Stewart on ObamaCare.  The administration seems to have settled on a different sales strategy: intimidate those who say unflattering things about ObamaCare.

Earlier this year, I predicted that ObamaCare would get uglier and more corrupt over time.  I didn’t know I’d be proven right so quickly.