The first interesting thing I learned from the Hobby Lobby case was that it was a narrow legal decision that said for this administrative law to trump a law passed by Congress it must pass the strict scrutiny test. The Administration failed to show the court a compelling state interest to declare the Religious Freedom Restoration Act of 1993 unconstitutional. In the classic whac-a-mole style the court wisely avoided a discussion of the role of religion in the workplace. Here is Judge Napolitano explaining the Hobby Lobby ruling.

The second interesting thing I learned from the Hobby Lobby case came from the reactions of the Affordable Care Act supporters. The Affordable Care Act supporters have not quite grasped the idea that companies view health insurance as a negotiable benefit. Increasingly companies see employer sponsored health insurance as an employee benefit whose time has come and gone. The reactions to the decision reminded companies of the risk that health care crazies pose. I don’t think it will be the sole reason for a company to migrate over to a defined contribution plan but for those companies who were already looking at defined contribution plans for cost reasons, the decision just got simpler. The lure of getting back to running the company without the health care drama is very attractive.

The wise choice for the Affordable Care Act supporters would have been to let this sleeping dog lie. The employer sponsored plans are part of the 85% that was not supposed to be significantly affected by the Affordable Care Act. Making a fuss over the court ruling is counterproductive since it will encourage more companies to drop employer sponsored plans and embrace defined contribution plans. The drawback to switching over to a defined contribution plan is that it will create employer-employee chaos at an inopportune time. I can see businesses biting the bullet in 2014 but the Affordable Care Act desperately needs to settle down in 2014 and the last thing its supporters need is to try to explain more employer-employee chaos. If we have more defined contribution plans then we will likely have more people whose purchasing decision will be aligned with the individual insurance market. This will likely make it more difficult to achieve income redistribution through health care. Several health care pundits have quietly argued that income redistribution is a necessary policy objective for real health care reform. That may be true in their world but in the real world I suspect that these pundits have forgotten how much easier it is to get money out of companies than healthy individuals. The complaints could get real interesting because healthy people are notoriously passive-aggressive about health care costs. If the Affordable Care Act supporters really want to give the ACA a chance of settling down and succeeding, this is not the time or place to pick a fight with employers who for all practical purposes have ACA compliant plans. It is as if they do not want the Affordable Care Act to succeed.

I was reading the latest Thoughts from the Frontline newsletter from John Mauldin and I was struck with the thought that if I substituted Veterans Administration(VA) for China in this passage I would be describing the current situation at the VA.

There is really no way to know what is happening in China today, much less what will happen tomorrow, based on widely available data. The primary data is flawed at best and manipulated at worst. Sometimes the most revealing insights lie in the disagreement between the official and unofficial reports… suggesting that official data is useful only to the extent that we think about it as state-sanctioned propaganda. In other words, it tells us what Chinese policymakers want the world to believe.

Over the last six years the VA has been held up as the model for the Affordable Care Act. I have no doubts that some of the stories about the VA successes such as using their purchasing power to drive down drug costs are true but I am increasingly suspicious of the rest of the data. When I try to balance the VA successes with the lack of transparency and accountability, I think they provide an ominous prediction for the fate of health care reform. Like we see in China, I think we are seeing that federal programs are more prone to state-sanctioned propaganda gambit than programs with a more distributed decision making and accountability process. In hindsight it probably took more work to make up the lie than to fix the problem but once they started telling the lie it looks like they failed to find sufficient motivation to change their ways until the scandal broke. Since the Administration knew about this problem six years ago and the problem remains unfixed, this is a good reminder why so few of the successful heath care systems are pure single payer systems. To err is human, to make a really big mess you need to get the federal government involved. So why do we expect to get smarter health care decisions in the future when our current system is stuck in the state-sanctioned propaganda mode?

The Federalist had an article that caught my attention, The Most Popular Republican Talking Point On Health Care Is Wrong. In that article Mr. Clancy says, “Of all the various Republican health care reform ideas, the most popular by far is letting people buy health insurance across state lines.” If this is the best the Republicans can come up with I think we are pretty safe from health care reform in 2014 and at least for me, that is a good thing. Here is my comment and a graph from a previous post,

As a healthy person who buys his health insurance in Ohio I doubt that I could get a more affordable health insurance plan from another state. Every year eHealth puts out a report on health insurance prices in the 48 states they sell polices in and as long as you are not living in Massachusetts or New York the costs are pretty close. You have to admire the rich irony of this Republican talking point. The people who stand to benefit the most are from those blue states, Massachusetts and New York. I think it is pretty safe to say that selling health insurance across state lines is not going to save me money and if this is the best the Republicans can come up with then we are pretty safe from more misguided health care reforms in 2014.

The most interesting thing happening in November is that we will probably know the insurance rates for 2015 and how many healthy people are still paying into the system. Unlike auto insurance health insurance has a very large redistribution and political component to it. That is its fatal flaw. Since 1976 when I started working I have seen large group plans struggle to work around this flaw. Over the years the large group plans became increasingly more stupid about health care until we got to the present situation where we lead the world in health care spending per capita. When I look at a graph health care spending per capita by various countries, we are off the chart bad. What does the future hold for us in health care reform? Politics and government incompetence are the most important drivers. If the Administration continues to postpone the Affordable Care Act taxes and healthy people seep out of the exchanges, the exchange funding question will rear its ugly head. Although politically inconvenient I expect based on past history that the Administration will kick this can down the road and postpone most of the Affordable Care Act through 2017. This is the politically smart thing to do since the Republicans do not have much of an appetite for health care reform. For people seeking to repeal the Affordable Care Act this the next best thing but it does lead to an interesting endgame scenario. My health insurance policy is grandfathered and it costs me less than exchange plans since it does not cover maternity care and other things I have no use for. Since my insurance company does not participate in the exchange, I expect my insurance company will continue to do what ever they can to offer me the best rates to keep me from buying a plan on the exchange. This is good for me since I need affordable health insurance but bad for the exchanges since they desperately need healthy people like me. In this scenario I am best served if the Republicans and Democrats do as little as possible. Eventually the exchanges will suffer a TennCare-like funding breakdown. This is not pretty but it is the most likely scenario.

Last month I wrote a post, Year-Round Sales Of Health Plans, that acknowledged a common fallacy I heard from folks looking at going without health insurance is that they could go get a health insurance plan anytime they needed one. John Goodman wrote a nice article on the subject, You Can’t Buy Insurance Until Next November, at The Independent Institute. Here was my comment,

Nevada mandates year-around sales of health plans, http://www.kaiserhealthnews.or…. It may sound counter-intuitive to Affordable Care Act supporters but insurance companies and exchanges should grab customers whenever they can if they want to reduce the number of uninsured. The biggest threat to the exchanges is that healthy customers might get comfortable going without health insurance. I asked my state representative to submit a bill mandating year-around sales of health plans and he said he would look at it.

I hate to give advice to Affordable Care Act supporters since I am pretty happy with all of the delays but my inner MBA says if you want the exchanges to work, you have to start running them like a business. I have seen Christmas stores that are open longer during the year than the exchanges.

One of the advantages of having a grandfathered health insurance plan is that you can look around and kick the tires of the new health insurance market place. A common fallacy I have heard from folks looking at going without health insurance is that they could go get a health insurance plan anytime they needed one. That is incorrect for most states. Most states allow health insurance to be sold without restriction only during the “open enrollment” period which recently went from October 1^st to March 31^st. The only state that mandates year-around sales of health plans is Nevada. The argument against year-around sales is the impact of adverse selection. The interesting question is how does this reduce adverse selection and health care costs?

Let us look at an example. Suppose in August your wife gets a call from the hospital and they say there is a dot on the mammogram and they recommend a biopsy. The earliest they can schedule the operation is in September. Is the insurance company better off if their prospective new customer delays their operation to October? In the immortal words of Hillary Clinton, what does it matter? How are they avoiding adverse selection by delaying treatment to October?  For  better or for worse the Affordable Care Act has made adverse selection a moot point for insurance companies. For those who are curious my wife’s diagnosis was just another false positive. Hmm… Maybe I need to write my state representative and see if he wants to piss off his party some more.

I was surprised when Neil Cavuto announced on Thursday night on Fox Business(FBN) that the 7.1 million enrollee figure the White House was celebrating was celebrating was off. How much off were the numbers? Here is what FBN said.

Try about a million enrollees.

Not a million fewer enrollees. A million net new, paying enrollees.

Yes, we crunched the data, separated out as best we could those who already had insurance, so weren’t exactly “new” to getting insurance. Then, with the help of an expert, separated from the remaining group those actually paying for the coverage.

And lo and behold we arrived at that slightly more than 1 million paying ObamaCare customers.

Now, the White House fumed that we were leaving out the millions signing up for Medicaid and kids staying on their parents’ policies longer, thanks to ObamaCare. Fair enough, we told them, which is also why we excluded the millions more Americans who lost their health care coverage altogether.

As a numbers guy I was surprised. Obviously they were not getting the numbers from the Administration so I started looking for details how they came up with their number and what is so important with the 7 million number?

My best guess is that the 7 million number was an arbitrary goal set up by the Administration last year that they thought would indicate an approximate health of the Affordable Care Act(ACA) process and in particular the viability of the exchanges. I don’t think anyone put much thought into the 7 million number. It has always been more of a political goal rather than an operational goal. Considering the ambiguous nature of this number I do not have a problem with the Administration celebrating this achievement since they have so few accomplishments to celebrate. Achieving this goal is something you celebrate at Happy Hour while reminding yourself that the blind pursuit of political goals breeds incompetence. If you really want the ACA to work, you have to throw your political hat into the closet and put on your manager hat . It is time to start managing for success and the road to success starts with effective goal management. If we recognize that the people who signed up for Medicaid is a separate and distinct issue from the issues affecting the viability of the exchange then we can see why FBN  focused on the new, paying enrollees who were previously uninsured. There lies the difference. FBN has the manger hat on and the Administration still has the political hat on and the goal posts have vanished. Obviously the number of new, paying enrollees who were previously uninsured is probably a more important to the health of the individual health insurance market than the Administration’s number of enrollees. It was hoped that the demographics of the new enrollees  would be dominated by healthy millennials to assure the viability of the market. Although it will probably take several months before we get a report on the demographics, Fox and others can and should start making initial assessments based on the information that is available. If FBN’s report of a about a million new, paying enrollees is correct then we probably have too few new people in the market regardless of the demographics. If exchanges are going down a path that looks like a lot like a slow motion death spiral, maybe it is a good time to start looking at a different way to pay for pre-exisiting conditions before it actually becomes a death spiral.