By Grace-Marie Turner
The White House is trying to manufacture good news about ObamaCare, but cold realities lie ahead that will reveal the truth about the law’s success or failure. All we have to do is follow the money.
Who has paid? This is crucial to determining how many of the eight million that the president says “enrolled” in federal and state exchanges actually completed the purchasing contract by paying the premium. If the news were good, we’d assume the administration would have released it.
A McKinsey survey estimated that only 53% of previously uninsured enrollees had paid their premiums, while 86% of previously insured enrollees had paid.
Georgia Insurance Commissioner Ralph Hudgens said that insurance companies participating in the ACA exchanges in his state have received payment from only about half of those who applied for coverage. Georgia insurers received more than 220,000 applications for health coverage, but premiums had been paid for only 107,581 of those policies by the end of March.
The number of paying customers may be higher in other states. But how many who do pay the first month’s premium will pay the second, third, and fourth month, especially after they learn of the limited benefits and high deductibles the policies carry?
Big premium increases: The Obama administration has touted a Congressional Budget Office report that says the health law will cost about $5 billion less than originally projected this year and $104 billion less over 10 years. That’s partly because the Supreme Court made Medicaid expansion optional for the states and because the Obama administration has made (mostly illegal) changes to the law that give more people escape hatches.
CBO numbers are one thing, but pocketbook costs are another. Avik Roy writes in Forbes that individual-market premiums this year are 41% higher on average than last year and, in some states, more than 100% higher.
Lower spending for the government doesn’t mean lower costs for people. Sticker shock is coming for next year’s rates, according to insurance company executives. While companies are trying to keep premiums low to keep and attract enrollees, analysts expect premiums to triple in some states. People will begin to learn just how high the new prices will be this fall before the next enrollment period begins in November.
One reason premiums will increase next year is because the exchanges have not succeeded in enrolling enough healthy young people to pay more than their share of premiums, partly because young people up to age 26 were allowed – even encouraged – to stay on their parents’ plans. Another factor: After strong blowback from people angry their plans had been cancelled, the administration is letting states allow people to keep their old health plans instead of forcing them into the new exchanges. This worked against the administration’s goal of attracting a normal risk pool in the exchanges.
Sicker enrollment mix: Pharmaceutical benefit manager Express Scripts found that enrollees in the ObamaCare exchanges are likely to be more expensive than patients in commercial risk pools. Its new study shows that enrollees in federal and state exchanges have a 47% higher use of specialty medications than in commercial plans in general. The rate for HIV medications in ObamaCare exchange plans is four times higher, and the proportion of pain medication prescribed was 35% higher than commercial plans.
While it was to be expected that those with more health needs would have a greater incentive to sign up for coverage, their higher costs will not be offset by the 40% of healthy younger people who the administration needed to enroll and pay disproportionately higher rates for their insurance. Only 28% of enrollees were in the coveted 18-34 age group.
All of this is likely to add to the sticker shock to come.
Payback: While the penalties for not having compliant health insurance are relatively modest the first year, the bigger financial burden for some exchange enrollees could be paying back extra subsidies they may receive. People who make more money in 2014 than they estimated on the ObamaCare enrollment form will likely receive a larger subsidy than they were eligible for. They will have to pay back the difference, or some part of it, to the federal government when they file their tax returns next year. This could be an unexpected hit of several thousand dollars for some people.
Paying through rationing of providers: Millions of Americans are facing much higher health insurance costs as a result of the law’s mandates, and many more are finding it difficult to find a doctor to see them because of the tiny networks in the ObamaCare health plans. This is especially vexing for patients with chronic illnesses who are losing their doctors and who are seeing treatments interrupted or even stopped.
Washington State has decided to create more bureaucracy to try to “fix” the problems caused by having too much bureaucracy. Insurance Commissioner Mike Kreidler is expected to approve new rules this week that would make it harder for health insurance companies to offer narrow networks in order to keep premiums down. Consumers shouldn’t have to drive too far or wait too long for care and should be able to find specialists who will see them, he insists, adding that he doesn’t believe prices will increase as a result.
“This is called the Affordable Care Act, not the Accessible Care Act,” said Bill Hinkle, a former state legislator. According to Seattle’s KPLU radio:
Board member Bill Baldwin lobbed a string of adjectives at Kreidler’s proposal: “burdensome,” “bureaucratic,” “complicated,” “excessive,” “countercompetitive,” “counterproductive” and “kind of Big Brother.”
Sydney Smith Zvara of the Association of Washington Healthcare Plans says the new rules would require stacks of paperwork, including thousands of maps.
“The sheer weight and volume of the administrative and reporting requirements that come along with that have the effect of just smothering the ability to provide more innovative networks,” Zcara said.
Companies in the private marketplace compete vigorously to provide American consumers with the best value for their money. But that’s not how ObamaCare works. Instead, companies are forced to jump through an endless array of regulatory hoops to appease government bureaucrats.
The result is high deductibles, high premiums even after subsidies, and limited choices of doctors and hospitals, jeopardizing health coverage for those who get insurance at work when the employer mandate is reactivated.
The administration is bragging that the health law is a success and says critics should keep quiet. But tell that to the 6.5 million people whose coverage was cancelled because it didn’t comply with ObamaCare’s mandates and regulations and to the millions more who are facing high costs for less desirable coverage.
People will figure out for themselves whether or not ObamaCare is a success.
Posted on Forbes, April 22, 2014