RealClearMarkets – Obamacare Is a Problem For Much More Than the 5%

March 29, 2014

It is in the realm of actuarial value (AV) requirements where the law demands pointless standardization. AV measures the extent to which a policy covers the average enrollee’s medical expenses. On average, for example, a plan with an AV of 63 percent covers 63 percent of enrollees’ medical costs.

All ACA-compliant plans must fit within four “metallic” bands. A platinum plan covers around 90 percent of an enrollee’s costs, with a 2 percent tolerance in either direction. Thus, a platinum plan covers between 88 and 92 percent of costs. A less expensive gold plan covers between 78 and 82 percent of expenses. A silver plan’s AV falls between 68 and 72 percent. Finally, bronze plans cover between 58 and 62 percent.

A plan offered in 2013 can have any AV, but come January 1, 2014, all plans must fall within those four narrow metallic bands. Therefore, a plan that covers 59 percent of medical expenses is okay, because it’s within the bronze band. But a plan that covers 96 percent of expenses is unacceptable because its coverage is too generous; it is, by official rhetoric, subpar, substandard, bad insurance.

via RealClearMarkets – Obamacare Is a Problem For Much More Than the 5%.

ObamaCare’s Risk Corridor “Bailout” Just Got Bigger — Much Bigger | John Goodman’s Health Policy Blog |

March 20, 2014

The table below shows an insurance plan with $10 million cost target versus $11 million of allowable costs. Actual medical claims are $8.8 million. Using the formula for calculating its payout from the risk corridor, allowing 20 percent of administrative costs, the plan gets a $410,000 “bailout” (panel A). If it can add administrative costs up to 22 percent of allowable costs, the payout increases to $635,641 — an increase of 55 percent (panel B).

via ObamaCare’s Risk Corridor “Bailout” Just Got Bigger — Much Bigger | John Goodman’s Health Policy Blog |

Administration Does About-Face on Fate of ACA Cost-Sharing Subsidies | Committee for a Responsible Federal Budget

March 13, 2014

The administration’s Office of Management and Budget (OMB) released its report to Congress on Monday detailing the sequester’s impact on mandatory spending programs for Fiscal Year (FY) 2015, and it shows a notable about-face on the fate of the ACA’s cost-sharing subsidies. The OMB had previously indicated that they were subject to sequestration just last year.

The estimated $8 billion in cost-sharing subsidies scheduled to be paid to insurers in FY 2015 will therefore be spared the sequester’s roughly 7 percent haircut, as will the $156 billion projected to be spent over the following nine years.

via Administration Does About-Face on Fate of ACA Cost-Sharing Subsidies | Committee for a Responsible Federal Budget.

How Many Nongroup Policies Were Canceled? Estimates From December 2013 – Health Affairs Blog

March 5, 2014

The findings from HRMS  show that nearly one in five (18.6 percent) of those with nongroup health insurance at the time of the survey report the plan they had in 2013 will no longer be offered to them because it did not meet new coverage requirements. Estimates from the NHIS indicate that approximately 14 million people had non-group coverage at a point in time. Identifying the number of people enrolled in non-group insurance is challenging. Estimates in Abraham et al. (2013) ranged from 9.55 million in the Medical Expenditure Panel Survey to 25.3 million in the American Community Survey. We use the NHIS estimate since it corresponds with more recent estimates based on new NAIC enrollment data reported in the Supplemental Health Care Exhibit (SHCE).

Using this estimate, our findings imply that roughly 2.6 million people would have reported that their plan would no longer be offered due to noncompliance with the ACA. Another 6 percent reported that their plan was cancelled for other reasons, and 75.4 percent reported that they did not receive a notice of cancellation

via How Many Nongroup Policies Were Canceled? Estimates From December 2013 – Health Affairs Blog.

Ezekiel Emanuel Book Excerpt: End of Health Insurance Companies | New Republic

March 5, 2014

The good news is you won’t have insurance companies to kick around much longer. The system is changing. As a result, insurance companies as they are now will be going away. Indeed, they are already evolving. For the next few years insurance companies will both continue to provide services to employers and, increasingly, compete against each other in the health insurance exchanges. In that role they will put together networks of physicians and hospitals and other services and set a premium. But because of health care reform, new actors will force insurance companies to evolve or become extinct. The accountable care organizations (ACOs) (which I discuss in Chapter 8 of my new book) and hospital systems will begin competing directly in the exchanges and for exclusive contracts with employers. These new organizations are delivery systems with networks of physicians and hospitals that provide comprehensive care. This health delivery structure is in its infancy.

via Ezekiel Emanuel Book Excerpt: End of Health Insurance Companies | New Republic.

The Strange Effects Of The Health Insurance ‘Annual Fee’ Tax

February 20, 2014

The ACA’s individual tax penalty for not having health insurance is widely known. What is less well-known is that the ACA also imposed a tax that will fall on those who do buy health insurance. Recently, I examined this tax with an eye toward estimating how much this tax would increase average premiums. (The full report is here; a summary by Philip Klein of the Washington Examiner is here.)

via The Strange Effects Of The Health Insurance ‘Annual Fee’ Tax.

Obamacare’s Latest Surprise for Taxpayers? – Bloomberg

February 18, 2014

Industry sources tell the Washington Examiner’s Susan Ferrechio that the Barack Obama administration is thinking of extending the Affordable Care Act’s “risk corridors,” the federal reimbursement program for health-insurance companies that lose money by participating in the newly created health-care exchanges. This is not the first time we’ve seen this idea floated, and frankly, believing that the administration is considering it is all too easy.

via Obamacare’s Latest Surprise for Taxpayers? – Bloomberg.

Cigna Expects to Lose Money on Health-Law Marketplaces –

February 8, 2014

Cigna Corp. CI -9.25% became the latest insurer to say it expected to lose money on the health-law marketplaces this year, citing smaller-than-expected enrollment and a skew toward older enrollees.

Humana Inc. HUM -0.71% and Aetna Inc. AET -1.71% also said this week that they expect negative margins on their exchange business in 2014.

The shortfalls stem at least partly from early glitches in the federal site that slowed sign-ups and the move to allow people to keep old, pre-health-law plans for an extra year.

Cigna Chief Executive David M. Cordani said the company is seeing “a much smaller book of business than anyone anticipated,” while “on average you have an older book of business.”

Cigna is now projecting around 50,000 to 60,000 exchange enrollees for 2014, less than half of its original expectation, he said. Cigna is selling marketplace plans in five states, and it is a small part of the company’s overall business. Analysts said the projections raise concerns that insurers may seek large premium hikes.

via Cigna Expects to Lose Money on Health-Law Marketplaces –

An Obamacare Report Card | The Weekly Standard

February 7, 2014

Here’s the bottom line: Obamacare has failed miserably on nearly every major promise made about it (Grade: F). The processes used to enact and implement the law have been tarnished by actions of questionable legality and a pervasive lack of transparency (Grade: D). On actual outcomes, Obamacare has fared better in the short term (Grade: C+), but there are worrisome signs that by most measures, the law’s performance will get significantly worse by the time final grades are handed out.

I’ll admit, I’m a pretty tough grader. In this era of grade inflation, some Americans may be inclined to be more generous. But after doing this for nearly four decades, I think I’m a fairly good judge of health policy work and its likelihood of success when put into practice. We’re only at midterm, but I’d have to say the long-term outlook for Obamacare is very poor indeed.

via An Obamacare Report Card | The Weekly Standard.

Obamacare ‘Bailout’ For One Insurer Will Cost Up To $450 Million In 2014 – Forbes

February 7, 2014

Humana announced that it expects to tap the three risk adjustment mechanisms in ObamaCare for between $250 and $450 million in 2014. This amounts to about 25 percent of the insurer’s expected exchange revenue. This money is needed to offset losses that the insurer will take as a result of slower enrollment in its ObamaCare plans, and a skewed risk pool that weighs more heavily toward older and less healthy members than it originally budgeted.

More than half of the money will come from the $25 billion reinsurance pool that ObamaCare provides (collected through a tax on employer-sponsored health plans). The other half will come mostly from the risk corridors. Humana is expected to book the money as revenue to offset shortfalls between what it collects in exchange premiums and pays out in medical claims.

via Obamacare ‘Bailout’ For One Insurer Will Cost Up To $450 Million In 2014 – Forbes.


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