I listened to the video clip on the page, Arrival of Obamacare forcing insurers to drop customers with low coverage, and started to wonder when the Affordable Care Act was going to recognize that the customer is always right. The Wikipedia entry for the customer is always right says it was popularized “by pioneering and successful retailers such as Harry Gordon Selfridge, John Wanamaker and Marshall Field” who “advocated that customer complaints should be treated seriously so that they should not feel cheated or deceived.” Here is my simple proposition. Here is my existing health insurance plan. Show me which part of this plan is going up and why. Put both plans on the table side by side and show me where the new Affordable Care Act is the better deal. It is put up or shut up time!
Healthcare
My Greatest Health Care Fear
I must admit that my greatest health care is not getting sick but having my grandfathered policy canceled. I dread picking up my mail every day. Every day I look at the prices for policies on the federal and private exchanges, I imagine that dynamic duo of Affordable Care Act supporters and insurance companies are licking their chops. To them they see health care reform as a revenue problem and see me as the perfect insurance customer, healthy and have not filed a claim in twenty years. They have grand plans for health care reform and they need more money. Even though I may agree with some of their goals I am constantly irritated that once again a small portion of the middle class has been chosen to bear a disproportionate share of the burden. I feel betrayed by the President. I do not think he was careless when he said “If you like your plan, you can keep it.” He was expressing a commonly held belief that our existing plans were adequate and the transition would be planned, gradual, and painless. Now we find out that the health exchange was not planned very well, that insurance cancellation notices are snowballing, and getting a new policy via the federal exchange is painful. All of this pain and suffering for a reform that they are pretty sure will not work. Yeah, we are in the best of hands!
I Finally Figured Out Why The Health Insurance Rates Increased So Much in 30 Days
CBS News has an article, HealthCare.gov pricing feature can be off the mark, which is a good explanation of the price increases I wrote about in the post, The Affordable Care Act ”” The Fix Is In. The rates on Healthcare.gov’s “window shopping” page and the downloadable spreadsheet were using the rates for a 40 year old couple and that price is dramatically different than the rate for a 59 year old couple. So if we look up the 2nd lowest silver plan for 2014 on www.ehealthinsurance.com we find that the monthly cost for a 40 year old couple is $632 compared to the September 24th estimate of $515. This is a more “palatable” 23% increase. I still do not understand how some people are reporting that the rates are going down in Ohio. Here are some of the 2013 plans for a 40 year old couple available at www.ehealthinsurance.com.
For those who are curious the 2nd lowest silver plan monthly cost for a 50 year old couple is $884 in 2014 and $1,288 for a 59 year old couple. For a person who is paying $391 a month for a plan that whose actuarial value is almost a silver plan, I am still trying to deal with a 229% price increase.
An Idea for Making the Affordable Care Act Better
Unlike the Affordable Care Act supporters I am trying to think of ideas on how to make the law more efficient and less partisan. My guiding principle is that we should pursue the simplest health care reform policies until we find a more complex form that actually provides some measurable benefit. This is a variation of Occam’s Razor or the KISS principle. Part of the problem with the Affordable Care Act supporters is that they have consciously pursued complex polices when a simpler policy would be more than adequate. As an example Josh Barro at Business Insider argues “If You Like Your Health Plan, You Probably Shouldn’t Be Able To Keep It”.
But here’s the thing: One of the key reasons that America needed health care reform is that a lot of existing health plans were bad. There are a lot of health plans that Americans shouldn’t be able to keep.
Some old plans were bad because they had big holes in coverage, like plans with annual and lifetime benefit limits that could leave beneficiaries destitute if they got hit with major illnesses. Other plans were bad because they covered too much, encouraging beneficiaries to consume needless care because they had little or no financial responsibility at the margin.
In effect he is arguing that we should throw the baby out with the bath water because there are holes in the coverage in the low cost plans and too much coverage in the high cost plans. I have a lot of problems with this argument. I looked at my current, grandfathered plan and it does not have any holes that I consider significant. I have a passion for the details so I ran it through the actuarial spreadsheet and it comes in at 64.1%. Considering that it has both a lower price, $391, and a lower deductible, $3000/$5000, than the Affordable Care Act plans, it looks like the better deal. Probably the biggest problem I have with his argument is that I am beginning to believe that the price for the plans is a top down decision that does not reflect the actuarial costs from closing holes in existing plans. The pricing appears to be based on what the government/insurance companies feel the market will bear without political consequences. There is a collusion/corruption smell coming from the Affordable Care Act and it shows up as higher prices. So we have replaced a somewhat efficient, honest individual insurance market with a less efficient, dishonest market. The price increases are a pretty good indicator that we are going in the wrong direction!
For me and most healthy people the Affordable Care Act plans are the 4th best health care reform option. So here is a simple solution that is not politically charged. Let the grandfathered plans coexist for a couple years more with the Affordable Care Act plans. When the Affordable Care Act supporters start embracing the value option for healthy people, these plans will quietly go away.
The Affordable Care Act — The Fix Is In
**Revision – See I Finally Figured Out Why The Health Insurance Rates Increased So Much in 30 Days for the explanation. In this case I think it is fair to say that the Department of Health and Human Services was incompetent rather than lying or in collusion with insurance companies.
For some time I wondered why the Kaiser Subsidy Estimator said I was not due a subsidy. The estimator said I should be able to find a plan for less than $4,750 a year but when I priced plans at www.ehealthinsurance.com it said the lowest bronze plan would cost a little over $12,000. This is not close! Although it is hard to find the web page on www.healthcare.gov, there is a web page that allows you to “window shop” the available insurance plans without logging in. I wrote about my experiences with the prices available in the post, Ohio Health Insurance Rates ”“ Curiouser and Curiouser. Once again I was puzzled why they had such low rates compared to www.ehealthinsurance.com and www.anthem.com. Then I saw an interesting report, Enrollment in Obamacare Exchanges: How Will Your Health Insurance Fare?, that said that the health care insurance for Ohio are going down compared to last year. If www.ehealthinsurance.com and www.anthem.com are correct then where were these people getting this erroneous data? Last week I solved the problem.
The source of the error was the Department of Health and Human Services. On September 24th, 2013, HHS released a table that “lists all health plans available in states where the federal government is operating the Marketplace”. So I downloaded the spreadsheet and looked up my data. It matched what the “window shopping” page said. For kicks I copied the prices from www.ehealthinsurance.com over to the spreadsheet and calculated how much the plans had increased in less than 30 days. Here is my report. It was 111%. When you round to the nearest integer every Anthem plan had gone up exactly 111%. Despite all of the differences between the plans the price increase was 111%. Hmm… that’s odd!
So I logged into www.healthcare.gov and copied the available policies for my family into the spreadsheet and calculated the price increase. Yeah, I got in. It helps if you have 30 years experience in IT. The first thing I noticed was that the price increase was 104% across twenty plans from five insurance companies. Wow, what a coincidence!
So what went wrong with insurance rates in Ohio in less than 30 days? I realize that climate scientists have set a pretty low bar for scientists but 104% in less than 30 days is a large, significant error. Why is the 104% price increase the magical number that all of the insurance companies agreed upon? Even though I am a skeptic I was at least hopeful that the Affordable Care Act would result in a more honest, bottom up pricing mechanism that would have resulted in some variation around 104%. Instead the price increase appears to be a top down decision with a rather large fudge factor added in. This top down decision making is what I see as the primary difference between a high cost state like Massachusetts and the rest of the country. Now we are left to ponder if this price increase is the risk premium that the Affordable Care Act brings to the table or Washington cronyism at its worst? It seems almost too convenient that many perfectly fine health insurance plans are being cancelled only to be replaced by a much more expensive plan with a higher deductible. Once again I am stuck with the question,
Was the Department of Health and Human Services incompetent, lying for political reasons, or something else when they released the insurance data one week before the exchanges opened?
Re: Obamacare Cost and Health Insurance Providers for an Individual,59 Years Old, in Batavia, OH
I think www.healthcare.gov has a problem with their rates for Ohio. I continue to think they are showing 2013 rates in their sample data. Here is some summary data from www.legalconsumer.com, Obamacare Cost and Health Insurance Providers for an Individual,59 Years Old, in Batavia, OH, which uses data it got from www.healthcare.gov. You can see that it says the 2nd lowest silver plan costs $515.13. This cost happens to be higher than the cost I guessed at in the post, Ohio Health Insurance Rates ”“ Curiouser and Curiouser. When I go to www.ehealthinsurance.com or www.anthem.com I continue to find their prices for 2014 to be about 100% higher than those posted in the sample data.
Projected Obamacare Rates for an Individual, Age 59, in Batavia, Ohio
- Lowest Catatrophic Plan = $367.15/mo
- Lowest Bronze Plan = $443.13/mo
- Lowest Silver Plan = $485.75/mo
- Second Lowest Silver Plan* = $515.13/mo
- Lowest Gold Plan = $608.16/mo
When I look up the price for the "Anthem Silver DirectAccess w/HSA – cbey" plan on www.healthcare.gov it says it will cost $611.82 for a couple. When I first looked up the price on www.anthem.com it says it cost $1246.26 for a 5000/5000/10%. I checked again today and the price is $1288.32 for a 4000/8000/10%. The closest 2013 plan offered by Anthem to this plan is the Premier Plus 0%(5000/10000/0%) at $704.90 per month which has lower coinsurance, 0% versus 10%. I am guessing but I expect that if the Premier Plus 0% was re-priced for 10% coinsurance the price would be pretty close to the $611.82 shown on www.healthcare.gov.
Re: Enrollment in Obamacare Exchanges: How Will Your Health Insurance Fare?
This is an interesting report, Enrollment in Obamacare Exchanges: How Will Your Health Insurance Fare?. When I enter my data for Ohio I show a 100% increase in rates from 2013 to 2014 when I use Anthem’s web site to price it. Hmm…
Results
Individuals in most states will end up spending more on the exchanges. It is true that in some states, the experience could be the opposite. This is because those states had already over-regulated insurance markets that led to sharply higher premiums through adverse selection, as is the case of New York. Many states, however, double or nearly triple premiums for young adults. Arizona, Arkansas, Georgia, Kansas, and Vermont see some of the largest increases in premiums.[5]
The last time the government expanded health care, it was different!
Sarah Kliff wrote a very nice article, “The last time the government expanded health care, it was also kind of a disaster”, about the last time the government expanded health care through an online exchange. She highlighted some of the problems when the government launched online shopping for the prescription drug program and pointed out that “about 90 percent of seniors say they are satisfied with their Part D coverage”. Unfortunately that is where the comparison starts to fall down. When the government expanded Part D there were a lot of “winners” and very few “losers”. At the end of the article she quoted an expert who said, "They don’t remember the glitches in the first weeks of getting coverage. It’s the coverage that sticks with people." That is why this time it is different.
When you focus on the coverage there are a lot more “losers” in this “reformed” individual health insurance market. Most of the people who purchased health insurance in the individual market in prior years are in for a nasty surprise. The vast majority of them are healthy and their insurance bill just went up. For those who have had their plans canceled and are now forced to use the exchange to find a new plan, they have found that the closest substitute to their plan costs 100% higher in the exchange. In many cases their existing plan is better and cheaper but they are being forced to pay a disproportionate share of society’s burden to care for the less fortunate. The Affordable Care Act supporters just whipped the sleeping dog and are now wondering why people are unhappy? The bottom line is that individual market reforms are not fair and even the Affordable Care Act supporters agree that there is a high likelihood that these health insurance reforms will not work. Health insurance was a product created for the middle class. The high income folks do not need it and the low income folks have more important things to spend their money on. At some point we have to recognize that this feeble attempt at Schumpeter’s creative destruction is not working. What we have gotten instead is plain, old destruction any idiot could conjure up and a new entitlement system that no one can control.
Ohio Health Insurance Rates – Curiouser and Curiouser
Last week I was finally able to compare this year’s insurance plans to next year’s insurance plans. The federal site, www.healthcare.gov, has finally opened up a portion of their site to “window-shopping”. Considering my curious problems using the Kaiser Subsidy Calculator, I identified the 2nd lowest silver plan on the exchange and was surprised to find that the premium displayed looks like 2013 premiums. Since I expected most people would be shopping for 2014 insurance this was just another oddity from this web site. All was not lost. If I was correct then I had a good estimate of the 2nd lowest silver plan for 2013 and I could compare this premium to the 2nd lowest silver plan for 2014. The Affordable Care Act supporters loath to make this comparison because they do not like to be reminded that the 2013 plans for healthy people are very much like the 2014 plans except they cost considerably less. The 2nd lowest silver plan is the benchmark used by the Affordable Care Act used to calculate the amount of subsidy everyone gets and is probably a pretty good index of how much the Affordable Care Act has increased health insurance premiums. For Ohio using my demographics, 59, married, and healthy, the 2nd lowest silver plan costs $505.84.
Since I cannot get 2014 prices without logging in, I chose to look up silver plans at the Anthem Blue Cross and Blue Shield web site. I chose them because they were the first well known company listed on the www.healthcare.gov screen image who probably is participating in the exchange for both 2013 and 2014. The 2014 prices on their site should be pretty similar to the 2014 exchange prices. According to their site the 2nd lowest silver plan for 2014(cbey) will cost $1246.26 or 146% higher than 2013 2nd lowest silver plan offered by the exchange. If I compare the 2014 rate to the 2013 rate for that plan it is 104% higher. This rate increase is considerably higher than the 55% to 85% estimate provided by 2011 Milliman report for Ohio that had so many people upset. It is hard to believe we are looking at a 55% to 65% increase as the good old days. Although estimates of health care cost increases are typically wrong on the low-side, the magnitude of this cost increase begs closer scrutiny and reminds me once again that my current grandfathered plan is so much better than the exchange plans.
- Does this price reflected an increased risk in the individual market due to the Affordable Care Act?
- Does this price reflect a gaming of the subsidy market by the insurance companies? The higher the 2nd lowest silver plan, the larger the subsidies.
- If there is a 2014 budget for the subsidy, will this higher than expected cost for the 2nd lowest silver force the government to pay more subsidy than they were expecting?
- Does the price reflect a “whatever the market will bare” pricing attitude by insurance company?
Ohio Health Insurance Rates – 2013 versus 2014
Okay, let’s take another trip down the ACA rabbit hole. Since the healthcare.gov website is down I had to resort to using 3rd party systems to try to figure out how the Affordable Care Act subsidy affects me. The results were startling. I tried about six calculators and about half of them said I was not due a subsidy. Just last week the Kaiser Subsidy Calculator said I would get a $7,593 subsidy. This week its says that I am not due a subsidy. The problem with the subsidy calculators is in determining the cost of the 2nd lowest silver plan in my area. Last week Kaiser said the unsubsidized annual health insurance premium in 2014 would be $13,198. This week it says that premium is only $4,750. Hmm…
So I went to www.ehealthinsurance.com and looked up the rates for 2014. Here is what I found. The 2nd lowest silver plan for 2014 is going to be a lot more expensive than $4,750. The $4,750 may be the 2nd lowest plan for 2013 but based on the numbers below I suspect the annual premium for the 2nd lowest silver plan in 2014 is probably pretty close to $13,198. I wonder where they are getting their numbers.
For kicks the screen image below is the 2013 health insurance offerings using the same demographic data. Oh my! I expected the young to get screwed but I was hoping a couple of healthy 59 year-olders would get a little grace. It is not surprising that health insurance has become costlier but I was hoping for unsubsidized prices starting at my tipping point, $500 per month. Anything over $500 a month comes out of my pocket. Hopefully my grandfathered plan increase 2014 is closer to the tipping point. If I was surprised with the 2014 plan costs and subsidies, I wonder what the 2014 ACA budget expected.
What has been surprising is the turmoil with non-subsidy people getting squeezed into lower values plans that cost a lot more. How about the situation where employees will ask their bosses to not give them a raise since it will cause them to lose their subsidy and end up costing them more money? If you find unintended consequences as raw material for commedians, then the Affordable Care Act is the gift that keeps on giving. From a health care market standpoint it is fascinating so see that the companies participating in the Ohio market dropped from 5 to 2 and the number of plans dropped from 70 to 20. The Affordable Care Act modeled itself after the highest cost, least competitive health insurance market in the country. I think they succeeded. With this type of leadership and vision, I cannot wait to see them try to bend the cost curve for this entitlement system.
