healthcare

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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.

2013-10-11 12_57_27-Premium Estimation Tool _ HealthCare.gov

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.

  1. Does this price reflected an increased risk in the individual market due to the Affordable Care Act?
  2. 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.
  3. 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?
  4. Does the price reflect a “whatever the market will bare” pricing attitude by insurance company?

 

2013-10-11 12_59_28-Anthem_HIX_ShopnQuote

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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.

ehealthinsurance_2013-10-05_08-14-11 

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.

2013-10-07 14_00_28-Health Insurance Quote Page

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How Do We Measure Success With Health Exchanges?

One of the interesting problems with health exchanges is how do we measure success? Although the chaos and confusion the health exchanges experienced yesterday was amusing, it is likely to be temporary and not a good indicator of the success or failure of the exchange. So let us go look at some of the customers who tried to use the exchanges yesterday and why.

  • Preexisting Conditions — Obviously there were some people yesterday with pre-existing conditions who were more than willing to put up with a lot of hassles to get insurance from the health exchanges. Hopefully their new policies will reduce their out of pocket health care costs. From an insurance company standpoint these are the customers you dread. There is probably 99.9% chance that the insurance company will lose money on these customers but that is the big idea from the Affordable Care Act.
  • Checking out the Prices — That was me yesterday. I have an affordable, grandfathered plan that I am more than willing to stick with if it continues to be less expensive than plans on the exchange. Since I have not filed a claim in four years, insurance companies would probably refer to me as the “perfect” customer. I should be a customer that an insurance company selling on the exchange would like to poach.
  • Young, Healthy, and Uninsured — These young, healthy, and uninsured people are being asked to subsidize the customers who were uninsured because of preexisting conditions and to lesser extent the elderly. These are the people the insurance companies need to sign up but some preliminary search numbers indicated that they were using the site to figure out how they can avoid paying the penalty.

Between now and the end of the year the insurance companies probably expect to sign up a lot of people with preexisting conditions and a few young, healthy, uninsured customers. This is the expected result. This conclusion is based on the presumption that it is unlikely that a large group of young, healthy, uninsured who were unwilling to purchase health insurance when it cost over 50% less will be enthusiastic to sign up before they have to. The earliest they probably want to start playing the health insurance game is January 1st. So the key to success for health exchanges boils down to how many of these young people sign up in the open enrollment period between January 1st and March 31st. After March 31st we can probably assume that these young people are committed to paying the $95 penalty or that they have found an excuse for not paying the penalty.

Measuring the success of the health exchanges should be pretty easy after March 31st.  At this time the insurance companies will probably know the actual number of customers with preexisting conditions in the exchanges compared to the number of young people who will be supporting them. Maybe we will get lucky and find that in our state there are less people with preexisting conditions. Maybe we will get lucky and find that there are a lot of young, health, uninsured people who have the extra cash to pay the subsidized premium and are willing to overlook the fact that they are disproportionately supporting the health care for people with preexisting conditions. My guess is that we have plenty of people with preexisting conditions and that these young people will either find exemptions for not buying health insurance or are willing to pay the penalty 2015. This “least cost decision” follows the profile they established in the battle to get this group to pay for their illegally downloaded music and videos. If the young, healthy enrollment numbers do not meet expectations, then this would be the time when I expect the insurance companies and Affordable Care Act supporters to start panicking and a new round of chaos and confusion with the Affordable Care Act will begin.

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Where is the money coming from that is paying the subsidy in the exchanges?

Since the health exchanges are not working very well right now, I went back to the Kaiser Subsidy Calculator and ran my number through it. Here is what I got:

2013-10-01_11_23_58-SubsidyCalculator

 

Here is my problem. It said I qualified for a $7,593 subsidy. My current plan costs me $4,800 a year and fits within my HRA allotment with room to spare. Some pundits have argued that my plan is substandard. So I ran my grandfathered AARP-Aetna plan($3000/$5000/80%) through the CCIIO actuarial value calculator and it came up 64.1%. My plan does not cover maternity, office visits, and probably does not cover mental health problems. The only way I can imagine using the mental health feature is if my 59 year old wife gets pregnant. Except for the lack of maternity coverage it reminds me of my health insurance in the 1980’s. So I have a plan that is slightly better than a bronze plan that fits within my HRA allotment without a subsidy. The new features in the Affordable Care Act plans might be better for someone but I have zero value for them. What I find fascinating is that the silver plan from the exchange needs a 58% subsidy to be affordable. As a healthy, middle class person I assumed that the Affordable Care Act is asking me to pay extra to help subsidize the cost of health insurance for someone less fortunate. So who is paying the subsidy for my health insurance and why? Is this real money going into someone’s pocket or a high markup designed to make us feel like we are getting a bargain? Is the Affordable Act stupid, corrupt, or something else?

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Health Insurance Oddities

This year my son graduated from Virginia Tech and received his commission in the Army. Last month he reported for duty so I called Aetna to drop him from my health insurance. The customer representative said that I could not do that. I said, “Whoa! I am his dad and I am paying the bill. Are you saying I cannot drop him from the plan?” She said that since he was over the age of 21 he had to call or write them requesting to be dropped from the plan. Wow! Talk about stupid! I thought this might be an unintended consequence from the Affordable Care Act but I have not found any rules or regulations requiring the consent of the child if they are over 21.

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Welcome to Obamacare

I have a grandfathered health insurance plan paid for by a HRA. Based on Zane Benefits revised analysis on HRAs, New Guidance on Tax-Free Reimbursement of Individual Health Insurance, I am afraid I am screwed so I better start looking at Plan B. I tried to sign up on the health insurance exchange and here is what I got:

2013-10-01 10_37_41-Sign Up - Unsuccessful

 

This is slightly different than the screen image over at Welcome to ObamaCare. I guess that chaos and confusion will be the new normal for next couple of months.

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Why Not Delay the Individual Mandate?

I wrote most of this comment on the post, Why Not Delay the Individual Mandate?. Then I thought of another individual mandate alternatives and added it this post.

Okay, let’s get real. My family is healthy and we purchase our insurance through the individual market. Our rates are low compared to the proposed rates available via Affordable Care Act. We have a real possibility of 100% increase in our insurance premiums. I have skin in this game.

I read the Urban Institute article and I remain unconvinced by their argument. Although I am at the greatest risk for unintended consequences, I am still in favor of postponing and eventually getting rid of the individual mandate. Despite their arguments the Individual Mandate is still a really dumb idea. Here is my reasoning:

  1. If uncompensated hospital care is the primary problem, then I prefer our existing system in which these costs are spread over a much larger population.
  2. If adverse selection is the primary problem, the Affordable Care Act proposal is only slighter better than doing nothing. Even the ACA supporters recognize that their proposal most likely will not work if the a few high cost patients get insurance(charity) in the individual market. This market is just too small to support many high cost participants. The only workable solution is to spread this charity over a larger population group. There are several ideas on how this can handled.
    1. Some ACA supporters argue that we need to go to a single payer system and the failure of the individual market is part of the path to this final solution.
    2. A few others are arguing that we should single pay these high cost un-insurable patients. I call this the Medicaid solution.
    3. A variation of #2 is that we expand the high risk insurance pool. The ACA high risk pool is presently closed to new participants.
    4. Another possibility is a Federal re-insurance plan to cover high cost customers. When you go over a certain payout amount, the government re-insurance kicks in. I think the Dutch use a variation of this idea to limit the risk a single unlucky customer will bankrupt the insurance company. I call this the FDIC solution.

My gut feeling is that the most successful plan to create a workable individual insurance market is to stick the insurance companies with the un-insurables and let them lobby the state/Congress for help. When you piss off the middle class, you should expect that there are consequences.

Another point that I did not make in the original comment was the point that the Urban Institute article made that one of the objectives of the Individual Mandate was to “to maximize insurance coverage” as if this would magically lead to better health care outcomes rather than outright theft from the middle class. Their idea is that if you build it, they will come. I call this the “Field of Dreams” health insurance argument. Unfortunately health insurance was a product created for the middle class. The rich do not need it and the poor cannot afford it. It worked for the middle class when it was affordable thirty years ago but not so well for the rich and poor. Despite the fact that health insurance was not working for the middle class, the ACA supporters took this idea and said that if we subsidize the the health premiums it should work for lower income people. This is a variation of the “free health clinic” argument. Unfortunately our experience with “free health clinics” is that they have been for around for a long time and we are still dealing with the same health problems. Do the ACA supporters really expect that “free health insurance” will have a different result than the free health clinics? My best guess is that health insurance does not heal people. Hospitals do not heal people.  People heal people. Middle class people schedule doctor’s appointments when they find a health problem. Lower income people go to the emergency room when they find a health problem. Different strokes for different folks. As an example of the problem we are facing, for at least the last twenty years we have had approximately “free medical care”  for “at risk” mothers in Hamilton county. This “free medical care” was tied to an aggressive campaign by Cincinnati Children’s Hospital to reduce infant mortality and yet we still have an infant mortality rate for black mothers that is twice the rate of white mothers. I only have to drive thirty miles to be surrounded by third world infant mortality outcomes. Health care outcomes for the poor is truly “complicated” and health insurance is a small piece of puzzle. I have no confidence that the Affordable Care Act will improve health care outcomes for the poor and I doubt that any progress in health care outcomes will be the result of a federal program. It was purely a political maneuver completely disconnected from the needs and desires of the poor and middle class. I find it truly amazing that people who did not buy health insurance before will become magically happy when they are forced to make their first health insurance payment. Obviously they are better people than me. I do not remember ever being happy making an insurance payment. My most amusing thought is that the ACA supporters think that a single, working mother who is living paycheck to paycheck will pay a health insurance premium rather than buying the latest basketball shoe for her teenage son. Talk about someone who is out of touch. I was recently reminded of this situation when I listened to Planet Money’s podcast, Episode 487: The Trouble With The Poverty Line. As a volunteer for Habitat for Humanity I heard several variations of this same story. The outcome of each story is still the same. Poverty is complicated.

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Health Care Reform for the Forgotten Man

As a person who purchases their health insurance in the individual insurance market place I do not feel sorry for the Affordable Care Act supporters. I am keenly concerned with what I call Health Care Reform for the Forgotten Man will look like. I was recently reminded in a post by Harold Pollack on the Incidental Economist blog than the supporters of the Affordable Care Act are in a pissing match with the insurance companies about covering people who are both uninsured and un-insurable. Asking insurance companies to take customers they are going to lose money on is a dumb way to run an insurance company but that is the Affordable Care Act’s supporters big idea. As a healthy person I did not ask to be involved in their idiotic debate but in their perverted political logic they decided that healthy people like me can be coerced into helping them solve the problem with the un-insurables. This is the Forgotten Man scenario outlined by William Graham Sumner and made famous by the Amity Shlaes book, The Forgotten Man: A New History of the Great Depression. I thought we learned our lessons after a decade of failed grand ideas in the 1930’s. Good policies have to make sense to the people paying for them. Health insurance was a product created for the middle class and paid for the middle class. The rich do need it and the poor do not have the money to buy it. Do we really want to go down the path in which health care insurance reforms do not make sense to the man and woman who are ultimately paying the bill? Are we really asking the most price sensitive people in the health insurance market to bear a disproportionate share of society’s burden for un-insurables and hope that it turns out okay?

So where do we go from here? Once again Harold Pollack reminds us that there is no room for debate. Recently he dismissed a fairly modest proposal for individualized health insurance plans as a non-starter. As a healthy person I think that an individualized health insurance plan is the next logical step for health care reform. In fact I will go one step further. My perfect health care plan is an individualized health care plan issued from my local hospital that includes my local doctor. The perfect plan for the business I work at is a defined contribution plan. If we combine both of these together we arrive at the conclusion that if health care is to evolve to a more perfect system then it will be primarily a local solution with possibly some state-wide or regional features. This local focus does make you wonder how a federal program became the big player in an inherently local problem. If health care is to evolve into a better system then the Affordable Care Act looks like a step in the wrong direction. My second choice is a plan similar to the one they offered when I first started working in 1976. Everyone signed up for the plan because it was inexpensive and inclusive. When the third party payer system is working right and large group plans are cheaper than individual plans, this type of solution is a no-brainer. Unfortunately we have strayed far from the path since 1976. Since most large group plans are more expensive than the individual plans it is easy conclude that the third party system is already dead and that businesses will enter into a defined contribution arrangement as quickly as possible. My third choice would be to keep my existing plan and rates. Every time a supporter for the Affordable Care Act says that there are no alternatives I grit my teeth. It is bad enough that my rates are rising rapidly but now my insurance company, Aetna, has announced that they are not going to participate in the state exchange. All of this uncertainty and fear was not supposed to be happening to healthy people who had health insurance. If the plan by the Affordable Care Act supporters was to make everyone miserable, they have succeeded. Yea, I am pissed. So I am left with my fourth choice, the Affordable Care Act. It does nothing for me except cost more. The supreme irony of the Affordable Care Act is that it is littered with so many failed programs, delayed mandates, and confusing regulations that it is the poster child for smaller government. I doubt a libertarian could have deliberately screwed up the Affordable Care Act as well as its well intentioned supporters have. The best way to judge the Affordable Care Act reforms is to see whether the reforms can stand on their own or whether they require the IRS to enforce them. Most of us can still remember when we had perfectly good health care plan without IRS involvement. The supporters of the Affordable Care Act are now arguing that although there are some flaws in the Act this is a good first step for health care reform. From what I have seen of the reforms that is akin to throwing a grenade into a crowded room and saying that is a good first step at getting people to exercise more. At some point we have to start realizing that the Affordable Care Act is not a creative destructive force of good but a plain old, well intentioned, destructive force. This is something that the unions and the general population agree on. We have seen the future of health care and it looks a lot like Detroit.

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What Explains the Slowdown in Health Care Spending?

John Goodman wrote a post, What Explains the Slowdown in Health Care Spending?, and included the following quote from a NYT article by Uwe Reinhardt.

One concludes from this analysis that both year-to-year fluctuations in national health spending and the longer-term trend in that growth rate are driven primarily by current and prior-year changes in macroeconomic conditions.

I was curious about how he reached his conclusions since it reminded me of the John McDonough’s macroeconomic premise in the article, “Does Massachusetts Have the Nation’s Highest Health Insurance Premiums? It Depends.” In that article Mr. McDonough speculated that the reason Massachusetts has the highest health insurance premiums in the country is because they have the highest median income. In other words health insurance premiums migrated to the highest price the Massachusetts market would bare. In Mr. Reinhardt’s article, Controlling Health Care Spending, Revisited, I found a fascinating graph of the year to year growth in real per capita health care spending. My immediate question is what happened to real per capita income over the same time frame? Since I know how to get income data from FRED here is my version of the two indicators on the same graph. For those who are curious I estimated the year to year growth in real per capita health care spending from the NYT graph so I could put it into an Excel spreadsheet. It sure looks like the year to year increases are trending down to the increase in real disposable income. This would be a logical result in an environment where out of pocket costs are increasing and the country is increasingly sensitive to health care spending increases that exceed the general inflation level. If the large businesses and government entities that sponsor large group health insurance plans are unwilling to expand their contribution to health care spending, you have to wonder how we can expand our health care spending without a major increase in GDP and real per capita disposable income. If the predictions of slow GDP growth are correct then it looks like we are playing a game of musical chairs and the music is winding down. Even if there is no health care inflation then “someone” is being set up for a cost squeeze as we expand the health care system and its not likely to be the consumer. They look like they are tapped out. This reminds me of the typical problems faced by out of control entitlement systems. We have seen the future of health care and it looks a lot like Detroit.

RealDPIvsHealthSpending1

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Probably The Smartest Thing The Affordable Care Act Has Done

A couple of years ago I purchased my health insurance using eHealthInsurance.com. It was easy to use and it had a large selection of plans available. I think that eHealthInsurance.com is what healthcare.gov and the state exchanges aspire to be when they grow up. Now I see that they have seen the future and are comfortable with letting the professionals do the work.

The federal government has signed a landmark deal setting the stage for leading online insurance exchange eHealthInsurance.com to enroll potentially millions of people on new Obamacare marketplaces being operated by the government, it was revealed Wednesday in a filing with Securities and Exchange Commission.