As a strategy to improve Americans’ health status and reduce healthcare costs, the Affordable Care Act (ACA) allows employers to place up to 30% of total health insurance spending “at risk” for employees. Employees can keep/earn that share by participating in programs to reduce chronic disease risk factors and/or by controlling their cholesterol, blood pressure, and body mass indexes (BMI). Partly as a result of this provision, chronic disease risk factors have become a primary focus of many if not most major employers in America. Whether these wellness programs have worked is beyond the scope of this posting, but is unresolved. In 2010 Health Affairs published an oft-cited (albeit challenged and undefended) meta-analysis finding savings with these programs. This conclusion was directionally confirmed (except for randomized control trials, which showed a negative return on investment) by a 2014 meta-analysis in a wellness trade journal. Conversely, the Incidental Economist published several pieces on the questionable finances and other concerns raised by these programs. The Bloomberg BNA Healthcare Policy Report published a concise summary of the “con” argument. A 2014 RAND study of PepsiCo found no savings.
The history of medical spending can roughly be described using Fuchs’ law: medical spending increases have exceeded GDP increases by about 2.5 percentage points annually since 1950. In the past three or four decades, the differential has been closer to 1.0 and 1.5 percentage points. Consistent with this, the Actuaries project that the growth of medical spending will exceed the growth of GDP by 1.25 percentage points annually between 2017 and 2025. Regardless of the exact differential, the qualitative conclusion is the same: if medical costs increase more rapidly than GDP, medical care will grow as a share of the economy.The continuity between past and future is critical to this conclusion. Generally speaking, what happened in the past is likely to repeat itself in the future. But what if the continuity is wrong? What if fundamental changes have reduced the long-run growth of medical spending relative to the economy?
National Health Expenditure Projections, 2015–25: Economy, Prices, And Aging Expected To Shape Spending And EnrollmentJuly 13, 2016
Health spending growth in the United States for 2015–25 is projected to average 5.8 percent—1.3 percentage points faster than growth in the gross domestic product—and to represent 20.1 percent of the total economy by 2025. As the initial impacts associated with the Affordable Care Act’s coverage expansions fade, growth in health spending is expected to be influenced by changes in economic growth, faster growth in medical prices, and population aging. Projected national health spending growth, though faster than observed in the recent history, is slower than in the two decades before the recent Great Recession, in part because of trends such as increasing cost sharing in private health insurance plans and various Medicare payment update provisions. In addition, the share of total health expenditures paid for by federal, state, and local governments is projected to increase to 47 percent by 2025.
What’s happening in North Carolina is repeating itself in state after state across the country and represents the most acute structural threat to the marquee achievement of President Barack Obama’s presidency. A POLITICO review of 2015 financial filings from nearly 100 health plans across a dozen geographically and politically diverse states found that less than a quarter of them hit the standard break-even point for insurers, at which payouts are kept to about 85 percent of premiums taken in. And 40 percent of them had medical costs that outright exceeded the premiums they brought in. The bottom line: many of those insurers lost tens of millions of dollars on their Obamacare policies last year.
Source: Obamacare’s sinking safety net
Haislmaier said that in the individual health insurance market, 15 companies had to pay penalties despite having a loss ratio of greater 116 percent, meaning that for every $1 they collected in premiums, they paid out $1.16 in claims. Yet those companies had to pay an average risk adjustment penalty of 7.7 percent of their premiums.
Source: Obamacare Going Bust | LifeZette
Rather than stabilizing in 2016 as many experts predicted, the Affordable Care Act (ACA) is leading to large premium hikes and less choice and competition in the individual insurance market as plans prove unattractive to relatively young, healthy, and middle-class people. In order to achieve a better understanding of the ACA’s impact, a new Mercatus Center working paper compared insurers’ performance selling individual Qualified Health Plans (QHPs) with three other markets: the individual non-QHP market, the small group QHP market and the small group non-QHP market.
The Last Embassy: ACA/Obamacare: When the Price Isn’t The Price Because The Price Is a Political PriceJune 24, 2016
“Amid reports that consumers could be hit with Obamacare health insurance premium hikes of 10 percent or more, the administration is providing state insurance regulators with $22 million to encourage them to beef up their reviews of requests for rate hikes from the health insurance industry.