Pinal County, Arizona was in danger of being the first second third fourth place where ObamaCare caused insurance markets to collapse. As of last month, every private health insurance company now selling ObamaCare coverage in the county announced it would no longer do so in 2017. Had that scenario come to pass, it would have tossed nearly 10,000 residents out of their Exchange plans and left them to buy ObamaCare coverage outside of the Exchange, with no taxpayer subsidies to make the coverage “affordable.” If they didn’t buy that unaffordable coverage, ObamaCare would still subject them to penalties, at least until the Secretary of Health and Human Services intervened.
It appears that Pinal County has avoided that fate. Blue Cross Blue Shield of Arizona has announced that, despite reservations, it will sell ObamaCare coverage in Pinal County next year. Pinal County now joins 13 other Arizona counties, one third of counties nationwide, and seven states that will have only one carrier in the Exchange.
Princeton economist Uwe Reinhardt supports ObamaCare. He also thinks the law’s health-insurance Exchanges are doomed. An exodus of insurers—lots of Exchanges are down to one carrier; Pinal County, Arizona is down to zero carriers—has taken supporters and the media by surprise. It shouldn’t. Similar laws and even ObamaCare itself have caused multiple insurance markets to collapse.
Reinhardt jokes ObamaCare’s Exchanges look like they were designed by “a bunch of Princeton undergrads.” Those Exchanges are now experiencing “a mild version” of “the death spiral that actuaries worry about.” The extreme version has happened before. “We’ve had two actual death spirals: in New Jersey and in New York,” Reinhardt explains. “New Jersey passed a law that had community rating but no mandate, so that market shrank quickly and premiums were off the wall. You look at New York and the same thing happened; they had premiums above $6,000 per month. The death spiral killed those markets.” Community rating is a system of government price controls that supposedly prohibit insurers from discriminating against people with preexisting conditions.
And it’s not just New York and New Jersey where ObamaCare-like laws have caused health insurance markets to collapse. It also happened in Kentucky, New Hampshire, and Washington State.
In fact, the death spiral Reinhardt sees in the Exchanges would itself be the fourth death spiral ObamaCare itself has caused:
- Before they even took effect, ObamaCare’s preexisting conditions provisions began driving insurers out of the market for child-only health insurance. Insurers ultimately exited that market in 39 states, causing the markets in 17 states to collapse.
- ObamaCare’s long-term care insurance program – the CLASS Act – failed to launch when the administration could not make it financially sustainable. President Obama and Congress repealed it.
- Exchanges effectively collapsed in every U.S. territory, again prior to launch.
- Now, a nationwide exodus of insurers has left one third of counties, one in six residents and seven states with only one carrier. In Pinal County, Arizona, every insurer has exited the Exchange. The exodus goes beyond greedy, for-profit insurers. It includes more than a dozen government-chartered nonprofit “co-op” plans.
The Wall Street Journal's James Taranto:
Meet Brendan Mahoney, the young man who is saving ObamaCare. He's 30 years old, a third-year law student at the University of Connecticut. He's actually been insured for the past three years--in 2011 and 2012 through a $2,400-a-year school-sponsored health plan, and this year through "a high-deductible, low-premium plan that cost about $39 a month through a UnitedHealthcare subsidiary." But he wanted to see what ObamaCare had to offer.
He tried logging in to the exchange's website at 8:45 a.m. yesterday..." He said the system could not verify his identity." So he called the toll-free help line, whose operator also encountered computer trouble. "But then he logged on a second time, he said, and the system worked."
"Once it got running, it was fast," Mahoney tells the Courant. "It really made my day. It's a lot like TurboTax." He obtained insurance through ObamaCare. Now, he says, "if I get sick, I'll definitely go to the doctor." Even better, if he stays healthy, he won't need to go to a doctor, and his premiums will support chronically ill policyholders on the wrong side of 40.
So, how much of a premium is strapping young Brendan Mahoney paying to help make ObamaCare work? Oops. The Courant reports that Mahoney "said that by filling out the application online, he discovered he was eligible for Medicaid. So, beginning next year, he won't pay any premium at all."
So the great success story of ObamaCare's first day is the transformation of a future lawyer who was already paying for insurance into a welfare case.
Remember that the next time someone says that people on Medicaid have no other options. HT: Jack McHugh
Obamacare's health insurance Exchanges opened for business, in most states, sort of, on Tuesday. Millions of people have reportedly flooded the Exchanges, but have had so much difficulty using the web sites that reporters have had a hard time finding anyone who has successfully enrolled in an Obamacare plan. The Washington Post's Sarah Kliff writes:
Just moments after writing a blog post Thursday morning, about the lack of information on Obamacare enrollees, Enroll America reached out with contact information for Chad Henderson, a 21-year-old in Georgia who had successfully enrolled in coverage on the federal marketplace.
Chad is evidently a scarce commodity.
It was a little difficult to reach Henderson, mostly because so many other reporters wanted to talk to him. "I'm supposed to talk to the Chattanooga Times Free Press in a half hour," Henderson said. "And The Wall Street Journal is supposed to call."
Luckily, Henderson managed to squeeze me in for a few minutes.
Kliff reports that after a three-hour ordeal, Chad bought an Obamacare plan that cost him $175 per month -- pretty steep, considering he makes less than $11,500 per year. His Obamacare premium comes to least 18 percent of his income. And no, Chad is not eligible for subsidies.
Compare that to what Chad could have paid if he bought one of the pre-Obamacare plans still available on eHealthInsurance.com until December 31. The cheapest such plan for someone meeting Chad's profile is just $44.72 -- as little as 5 percent of his annual income and about one-quarter of his Obamacare premium.
I can't yet say whether Chad's $175 premium is the lowest-cost plan available to him through the Exchange. (I'm in the process of researching that. Let's just say it'll probably take a few hours.) But it's probably close. The cheapest plan available to him through eHealthInsurance.com after Obamacare's community-rating price controls take effect in 2014, and drive up premiums for young, healthy people market-wide, is $190.23. That's with the maximum cost-sharing allowed under Obamacare. So it appears Obamacare quadrupled Chad's premiums, and Enroll America thinks that is a success story.
To me, the most interesting part is that Chad didn't buy health insurance when it was available to him for just $45 per month, but did buy it at an unsubsidized $175/month premium. Why? Again, Kliff:
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He describes himself as a supporter of President Obama who has anxiously awaited Obamacare's rollout...
Part of his decision was ideological: He wants the health-care law to succeed.
On Monday, The New Republic's Jonathan Cohn admitted that President Obama "made a misleading statement about Obamacare rates" during his press conference on Friday. The magazine's Twitter feed (@tnr) announced:
Whoops! The president (accidentally, we think) told a little #Obamacare lie on Friday.
During his press conference, the president said:
[When it comes to people without access to employer-sponsored coverage,] they're going to be able to go on a website or call up a call center and sign up for affordable quality health insurance at a significantly cheaper rate than what they can get right now on the individual market. And if even with lower premiums they still can't afford it, we're going to be able to provide them with a tax credit to help them buy it. [Emphasis added.]
The problem, Cohn writes, is that:
while some people will pay less than they pay today, some will pay more. They will primarily be young, healthy men who benefited from preferential pricing in the past, were content with coverage that had huge gaps, and are too wealthy to qualify for the law’s tax credits—which are substantial but phase out at higher incomes...
But somebody listening to Obama’s press conference probably wouldn’t grasp that distinction. They’d come away thinking their insurance will be cheaper next year. For some, it won't be. Obama isn’t doing himself, or the law, any favors by fostering a false expectation.
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People in 36 of Mississippi's 82 counties may not be able to buy health insurance through the new federal online marketplace when it starts enrolling customers in October. Insurance Commissioner Mike Chaney says two insurers have announced offerings so far, planning to serve 46 counties.
Unless more companies sign up or the existing companies expand their plans, consumers in the remaining counties won't be able to buy health insurance through the online exchange. Coverage under those policies begins Jan. 1.
"I don't know what to tell you about the other 36 counties," Chaney told The Associated Press in a phone interview this week. "You're just out of luck."
That means they won't be able to use federal tax credits offered to consumers with incomes of between 133 percent and 400 percent of the federal poverty level. That's up to about $46,000 for an individual and about $94,000 for a family of four, with those at the top end getting little or no subsidy.
People who don't buy insurance are required to pay a $95-a-year penalty starting in 2014. A spokeswoman for the U.S. Treasury Department couldn't immediately say Thursday whether people would be penalized in counties without offerings.
My reading of the statute is that this should have little effect on the penalties that Mississippians face under Obamacare, since the state's refusal to establish an exchange has already exempted 128,000 residents from penalties under the individual mandate, and all Mississippi employers from penalties under the employer mandate.
But assuming the IRS gets away with illegally offering Obamacare's penalty-triggering "premium assistance tax credits" in states that have refused to establish exchanges, Mississippi employers cannot be penalized for failure to provide "affordable" health insurance to residents of those 36 counties because without any exchange at all, those residents will not be able to receive the tax credits. But employers could be penalized for failing to provide those residents "minimum value" coverage--if a firm employs even a single person in one of the other 46 counties that do receive such a tax credit.
Individuals would still seem to be subject to the individual mandate as they otherwise would. But without an exchange, fewer of them would qualify for the unaffordability exemption from the individual mandate, because there would be no "annual premium for the lowest cost bronze plan available in the individual market through the Exchange" with which to calculate whether they are eligible for that exemption. Of course, the federal Department of Health and Human Services could just throw residents of those counties a hardship exemption.
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.
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