to create an Exchange is to create a taxpayer-funded lobbying group dedicated to fighting repeal. An Exchange’s employees would owe their power and their paychecks to this law. Naturally, they would aid the fight to preserve the law.
California was the first state both to reject my advice and to prove my point.
Officials operating California's exchange--which the marketing gurus dubbed "Covered California"--recently and deliberately misled the entire nation about the cost of health insurance under Obamacare.
They claimed that health plans offered through Covered California in 2014 will cost the same or less than health insurance costs today. "The rates submitted to Covered California for the 2014 individual market," they wrote, "ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions."
See? No rate shock. California's top Obamacare bureaucrat, Peter Lee, declared his agency had hit "a home run for consumers." Awesome!
Unfortunately, anyone who knows anything about health insurance or Obamacare knew instantly that this claim was bogus, for three reasons.
- Obamacare or no Obamacare, health insurance premiums rise from year to year, and almost always by more than 2 percent. So right off the bat, the fact that Covered California claimed that premiums would generally fall means they're hiding something.
- Obamacare's requirement that insurers cover all "essential health benefits" will force most people who purchase coverage on the "individual" market (read: directly from health insurance companies) to purchase more coverage than they purchase today. This will increase premiums for most everyone in that market.
- Obamacare's community-rating price controls (also known as its "pre-existing conditions" provisions) will increase premiums for some consumers (i.e., the healthy) and reduce premiums for others (i.e., the sick). So it is misleading for Covered California to focus on averages because averages can hide some pretty drastic premium increases and decreases.
What Covered California should have done was an apples-to-apples comparison, comparing the premiums that Californians are actually paying on the individual market today to the premiums they will have to pay under Obamacare. And even though premiums would come down for the sick, Covered California (and all other observers) should focus on how Obamacare will affect premiums for the healthy. Why? Because healthy consumers are the key to the entire enterprise. They are the ones who are vulnerable to rate shock. If they think the premiums are too high, they will pay the small penalty and wait until they are sick to buy coverage. If that happens, premiums will climb higher, more healthy people will drop out, and Obamacare will cause health insurance markets to collapse. Obamacare supporters are in a near-panic that young, healthy people won't sign up for coverage, and with good reason.
When others have tried to make the relevant apples-to-apples comparison, the results are strikingly different from Covered California's portrayal. The Hoover Institution's Lanhee Chen estimates that a 25-year-old male living in San Francisco might have to pay "anywhere from 38 percent to 53 percent more than he’ll have to pay this year for comparable coverage." The Manhattan Institute's Avik Roy crunched some numbers and found:
[T]he data that Lee released tells a different story: Obamacare, in fact, will increase individual-market premiums in California by as much as 146 percent... For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.
That sounds like rate shock to me. And it's pretty much what Covered California officials said they feared when they confided in federal bureaucrats six months ago.
But when it came time to speak to the public, rather than level with the public by using an apples-to-apples comparison, Covered California compared the Obamacare rates to average premiums for small-employer coverage. Why choose small-employer coverage as their basis for comparison? Precisely because small-employer plans already incorporate some of the costs that Obamacare imposes on consumers in the individual market. Small-employer plans already cover more of the additional benefits that Obamacare mandates (#2) and also incorporate a degree of community rating (#3). There's no reason consumers on the individual market could not purchase those, ahem, "consumer protections" if they valued them. But they don't, which tells us they don't value them. So what Covered California's bogus apples-to-oranges comparison actually tells consumers is, "See? Obamacare costs no more than this other expensive coverage you don’t want!"
Many in the media uncritically reported Covered California's deliberate and self-serving misrepresentations. The Washington Post reported, "California Obamacare premiums: No ‘rate shock’ here... Now we have California’s rates, and they appear to be significantly less expensive than what forecasters expected." At the New York Times, Paul Krugman gushed that "important new evidence—especially from California, the law’s most important test case—suggests that the real Obamacare shock will be one of unexpected success."
One wishes the media could be a bit more skeptical of official government pronouncements.
All of that supports my thesis: officials at Covered California, like those running all the other Obamacare exchanges, owe their power and their paychecks to Obamacare. They will fight to preserve the law, even if they have to deliberately mislead the public.
I was traveling when the Washington Post published this article on D.C.'s efforts to implement ObamaCare:
If you want to know what health reform in action looks like, here’s what you should picture: a nondescript conference room, on the fourth floor of a government building, with about four dozen people sitting in rows of red chairs and one fluorescent light that keeps flickering on and off...
[T]his is actually a pretty important place. It’s where government officials decide what the Obama administration’s signature legislative achievement will look like for residents of the nation’s capitol...
It started with the first agenda item: Deciding what set of essential health benefits the District of Columbia will require all insurance carriers to cover. Even in one of the most Democratic-leaning districts in the country, there’s was not exactly enthusiasm for this new piece of federal regulation.
“This is mandated by the law,” District of Columbia insurance commissioner Bill White noted. “This is not something anyone here decided to do.”
Still, they did have to set an essential benefit package...
That sounds like to me like bureaucratic hell in action more than health care reform in action. And the last part, about ObamaCare or federal bureaucrats requiring D.C. to make these decisions, isn't even true.
One consolation is that it looks like not even the 14 states that want to establish ObamaCare's health insurance Exchanges will be able to do so on time.
Even with widespread support, the District still has a to-do list that stretches 11 PowerPoint slides long...
All of it is supposed to be done by Jan. 1, 2013, but officials here recognize, despite their commitment, it’s just not possible. Even the most stalwart of Obamacare supporters just simply have too much work to meet that deadline...
“No state is going to be able to be fully certified on Jan. 1,” said Bonnie Norton, D.C’s acting director of health reform.. “When they passed the ACA, they were highly optimistic about the timeline for states to implement exchanges."
Does anyone really think that ObamaCare's Exchanges will be up an running on time by October 1, 2013?
ObamaCare directs the Secretary of Health and Human Services to define the "essential health benefits" that all consumers in the individual and small-group health insurance markets must purchase. HHS Secretary Kathleen Sebelius kicked that decision to the states, giving them a deadline of this past Friday, September 30. Kaiser Health News reports that all of 16 states submitted an Essential Health Benefits (EHB) benchmark to HHS by the deadline.
But did Sebelius have the authority to kick this decision to states? In a September 26 letter to Sebelius, Pennsylvania Insurance Commissioner Michael Consedine writes:
[T]he PPACA clearly states that the Secretary of HHS is to define the EHB package for policies offered both inside and outside of health insurance exchanges. While the language in PPACA was plain that this statutory responsibility fell on HHS, in December of last year HHS issued guidance preliminarily indicating states must select a benchmark design, with HHS potentially acting as final arbiter...of that selection. (Emphasis added.)
Is September 30 even a deadline?
Some communications from your agency indicate that this is a suggested response date while others indicate that it is a deadline of some sort. We again are asking for clarity.
Letting states make that decision will increase flexibility, though. Right?
[I]n reality the guidance placed additional restrictions on the EHB selection rather than flexibility. HHS guidance appears to render the states' ability to innovate and to make an independent choice illusory. (Emphasis added.)
Indeed, the 16 states who have complied may be in for a rude awakening.
HHS indicated that any selection by the states will be subject to additional review, but we have no definitive guidance as to what, if any, weight will be given to a state's selection. The minimum amount of information provided to date invites concern that your agency will alter or override a state's submission...raising serious questions as to whether states have any meaningful ability to make a definitive selection of an EHB benchmark. (Emphasis added.)
Pennsylvania thus declined to submit one, and effectively told Sebelius to do her job.
Louisiana went a step further, threatening to hold Sebelius accountable if she doesn't. In a September 27 letter, Louisiana's Secretary of Health and Hospitals Bruce Greenstein and Insurance Commissioner James Donelson noted that the December 2011 "bulletin" merely stated that HHS "intend[s] to propose" a deadline of September 30 for making that decision—meaning that the bulletin "neither... has the force of law, nor commits federal regulators to any particular course of action." Moreover:
[I]t is our State's conclusion that while the bulletin states a decision is to be made by [September 30], this "deadline" has never been formalized through the official rulemaking process. As long as formal rules do not exist, the federal government can change its approach. Since the federal government is not bound by these bulletins, neither are the States. As such, the State of Louisiana is not legally required to submit a benchmark preference by [September 30,] 2012. The State of Louisiana will not permit the federal government to dictate to our residents a default benchmark plan, as the federal government, in its disregard of the requirements of the Administrative Procedure Act regarding essential health benefits and other provisions of the PPACA, has no authority to do so under federal or Louisiana law until regulations are published in the Federal Register, following established notice and comment procedure.
The process developed for defining the essential health benefit benchmark has been a completely new method of establishing law without proper rulemaking. Implementation of new policies without open and public comment and publication in the Federal Register is in clear violation of the law.
The administration has charged states to build what the federal government mandates, but the federal government has provided [only] informal guidance and incomplete rules and regulations...Accordingly, there will be no essential health benefits package for the State of Louisiana, and we will pursue all avenues to prevent the federal government from selecting one on behalf of our state. (Emphasis added.)
As I have written previously, "implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task."
The Washington Post's Sarah Kliff writes that the Department of Health and Human Services has decided to "punt" on the "monumental" task of dictating exactly what types of coverage those who get health insurance through the individual market or small employers must purchase. HHS has decided to let each state decide for its own residents what constitutes "essential health benefits." It was a shrewd move: under the guise of decentralized decision-making, HHS is offering to let state officials take the blame for an inevitably controversial decision and the inevitable higher costs that will result. Yay, federalism! States have until the end of this month to decide just how much coverage they are going to help ObamaCare force their citizens to purchase.
Kliff reports that many states are now wrestling with the unanswerable question, "What health-care benefits are absolutely essential?"
Is acupuncture essential health care? Weight-loss surgery? Under Obamacare, states choose...
California legislators say acupuncture makes the cut. Michigan regulators would include chiropractic services. Oregon officials would leave both of those benefits on the cutting-room floor. Colorado has deemed pre-vacation visits to travel clinics necessary, while leaving costly fertility treatments out of its preliminary package...
A Virginia advisory board recommended that the state adopt a plan that includes speech therapy and chiropractic care. A District subcommittee has endorsed a plan pegged to an existing BlueCross BlueShield package, and public comment remains open through Friday Sept. 28...
Of course, an objective definition of "essential" coverage is impossible. Like "medical necessity," the only way to determine whether health coverage is "essential" is if the benefits exceed the costs. That is an inherently subjective question that no legislator or regulator, state or federal, can or should try to answer for a diverse population of consumers. When they do, health care providers invariably hijack the process, demanding that consumers be required to purchase coverage of their services. Since the legislators/regulators are handing out benefits while consumers and taxpayers shoulder the costs, the result is predictable: health insurance premiums rise.
Thanks to HHS's punt, providers now have an even greater incentive to lobby states to mandate coverage of their services. If a state creates its own list of "essential health benefits," then any benefits the state mandates will be eligible for federal subsidies. If not, the cost of state-mandated benefits continues to fall on consumers or employers, who tend to complain. (Again, shrewd. Corrupt and irresponsible. But shrewd.)
But since ObamaCare is on the books, and HHS gave states a choice, what should states do?
The choice is identical to what states face with regard to health insurance Exchanges: states have the option to implement part of ObamaCare themselves, but no matter what they decide, Washington is ultimately running the show.
The federal government will not let states pick a menu of "essential health benefits" or establish an Exchange with fewer regulatory controls than HHS would impose itself. Since less regulation than the federal government would impose is not an option, implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task.
Instead of doing the feds' dirty work, states should use this opportunity to show how ObamaCare rigs the game against states and consumers alike. State officials that want to rid the nation of ObamaCare should submit to HHS a "benchmark" EHB plan that they know HHS will refuse. It could be either the most affordable health plan they can find in their individual or small group markets, or a plan that state officials designed themselves. Leave out benefits that HHS considers dealbreakers. Push the deductible as high as you dare. Allow annual or lifetime limits. The less coverage you include in your EHB benchmark, the more choice consumers will have and the lower the premiums will be. Submit such a proposal to HHS and dare them to reject it. Let your voters see that under ObamaCare, choice is a mirage. Dare HHS to explain why they rejected affordable health plans and forced the Treasury to subsidize more-expensive health plans.
Alternatively, state who are not inclined to confrontation can tell the Obama administration the same thing they should say with regard to health insurance Exchanges: it's your stupid law, you implement it.
Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.
(AP Photo/Noah Berger)[/caption]
Many Cato @ Liberty readers will get it immediately. They can stop reading now.
For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.
Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente's offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn't steal it) plus his time. He probably even felt good about himself afterward.
Unfortunately, the money and time this genius spent vandalizing other people's property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).
The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church's efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.
In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market's ability to discover cost-saving innovations that bring better health care within the reach of the needy. That's to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente's, the Catholic Church's...
I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people's rights as well as their own stated goal of "health care for everybody."
Of course, it is always possible that, as with their foot soldier in Oakland, the Church's efforts are as much about making a statement and feeling better about themselves as anything else.