2015 Will Be Worse For Obamacare Than Its 2014 Debut As A Result Of New Burdens The White House Is Saddling Onto Insurers

Monday, November 11, 2013

2015 Will Be Worse For Obamacare Than Its 2014 Debut As A Result Of New Burdens The White House Is Saddling Onto Insurers

FORBES

An ominous and largely ignored outcome of Obamacare’s failed launch is that the large insurers have not signed up to offer health plans on the state exchanges.
The nation’s big insurers have mainly sat out of the program, even after a reported browbeating from the White House.
The reason is simple. Offering plans on the exchanges is a bad business deal.
This past week the White House took some additional steps to make that market even worse for big insurers (on top of the problems with the web site). The Obama team seems to be going out of its way to squeeze the insurers. These measures make sure that 2015 will be an even more dismal experience for Obamacare than 2014.
It’s already off to a bad start.
As I noted recently in the New York Post and on Forbes.com, Obamacare regulations force insurers to either be all in, or all out of a particular state exchange.
A survey of 36 federally run exchanges (plus six state exchanges where data was available) found that Aetna [NYSE:AET] was offering health plans in just eight states and was even more selective in the counties where they chose to play. In Florida, for example, Aetna was only operating plans in 23 of the state’s 67 regions.
Cigna [NYSE:CI] only entered five states. United Healthcare [NYSE:UNH] (the nation’s largest insurer) entered just 12.
Humana only went into 14 states. In Colorado it’s offering plans in just 2 of 11 regions and in Florida, just 12 of the 67 state regions.
The result? According to one recent analysis, just one or two insurance carriers are serving exchanges in more than half of the country’s 2,500 counties.
The problem is that the law was tilted against the health plans at its inception. These challenges are being magnified by the Obama team’s present day decisions that will discourage plans that sat out of the market in 2014 from entering in 2015.
One such ruling, made last week, will allow third parties (like drug companies and hospitals) to subsidize the cost of health plan premiums.
The decision was laid out in a letter sent by the Department of Health and Human Services to Representative McDermott (D-WA) indicating that the Obama team does not consider qualified health plans purchased through insurance exchanges to be “federal healthcare programs.” This includes plans purchased through state and federal exchanges, as well as plans for which consumers receive advance payments of premium tax credits and cost-sharing reductions.
This means that exchange plans are not subject to federal anti-kickback rules. So manufacturers can offer direct support to exchange enrollees. Most interpreted this to mean that drug companies can provide financial assistance to help offset drug co-pays. But the impact of the decision probably extends much further.
Drug companies, for example, can probably help offset the costs of plan premiums, under the ruling, and not just the costs of individual drugs. Simiularly, hospitals could help subsidize the cost of buying health coverage for a local population of uninsured individuals who are frequently admitted to their institutions. This would reduce the hospital’s bad debt (from unpaid bills) by getting these chronically ill individuals into insurance schemes. Even if these local residents were very sick, so long as they are young and poor, then purchasing entry-level coverage for them could cost very little (owing to premium subsidies and favorable age-based rating).
This ruling is clearly good for some consumers. It’s also good for the President. The decision will encourage the use of private-market subsidies to help more people purchase coverage (boosting the dismal enrollment numbers). The Obama team is trying to stuff as many people into the exchanges, as quickly as possible. Once these exchanges grow big enough, they become politically inevitable.
Even when a bare bones “bronze” plan saddles a lower-income beneficiary with hefty cost-sharing (that could go unpaid), to a local hospital, the covered portion of the hospital stay will still be worth the negligible cost of purchasing the plan for the consumer.
But you can see how the decision could spell trouble for health plans, which are already worried about adverse selection of a mostly older, sicker population of patients into the exchanges as a consequence of Obamacare’s failed launch.

Read More Here