California Is What’s Wrong with Obamacare

In recent days, California lawmakers have finalized their budget. The legislation includes several choices regarding health care and Obamacare, most of them incorrect ones. Doling out more government largesse won’t solve rising health costs, and it will cause more unintended consequences in the process.

Health Coverage for Individuals Unlawfully Present

This move has drawn the most attention, as the budget bill expands Medicaid coverage to illegally present adults aged 19-26. California will pay the full share of this Medicaid spending, as the federal government will not subsidize health coverage for foreign citizens illegally present in the United States.

As to those who disagree with this move, one can study the words of none other than Hillary Clinton. In 1993, she testified before Congress in opposition to giving illegal residents full health benefits, because “illegal aliens” were coming to the United States for health care even then:

We do not think the comprehensive health care benefits should be extended to those who are undocumented workers and illegal aliens. We do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is. We certainly don’t want them having the same benefits that American citizens are entitled to have.

If Clinton’s words don’t sound compelling enough, consider one way that California may finance these new benefits: By reinstating Obamacare’s individual mandate. To put it another way, people who obey the law (i.e., the mandate) will fund free health coverage for people who by definition have broken the law by coming to, or remaining in, the United States unlawfully.

A Questionable Individual Mandate

This issue faces multiple questions on both process and substance. First, the budget bill includes about $8 million for the state’s Franchise Tax Board to implement an individual mandate, but doesn’t actually contain language imposing the mandate. The bill that would reimpose the mandate, using definitions originally included in the federal law, passed the Assembly late last month, but faces opposition in the Senate.

Third, implementing the mandate imposes legal and logistical challenges. I argued in the Wall Street Journal last fall that states cannot require employers who self-fund health coverage to report their employees’ insurance coverage to state authorities. The mandate bill the Assembly passed does not include such a requirement.

Without a reporting requirement on employers, a mandate could become toothless, because the state would have difficulty verifying coverage to ensure compliance—people could lie on their tax forms and likely would not get caught. However, imposing a reporting regime, either through the mandate bill or regulations, would invite an employer to claim that federal labor law (namely, the Employee Retirement Income Security Act) prohibits such a state-based requirement.

More Spending on Subsidies

While the budget bill does not include an explicit insurance mandate, it does include more than $295 million to “provide advanceable premium assistance subsidies during the 2020 coverage year to individuals with projected and actual household incomes at or below 600 percent of the federal poverty level.”

Obamacare epitomized the problems that policy-makers face in subsidizing health insurance. The federal law includes a subsidy “cliff” at 400 percent of the poverty level. Households making just under that threshold can receive federal subsidies that could total as much as $5,000-$10,000 for a family, but if their income rises even one dollar above that “cliff,” they lose all eligibility for those subsidies.

By penalizing individuals whose incomes rise even marginally, the subsidy “cliff” discourages work. That’s one of the main reasons the Congressional Budget Office said Obamacare would reduce the labor supply by the equivalent of 2.5 million full-time jobs.

California decided to replace these work disincentives with yet more spending on subsidies. This year, the federal poverty level stands at $25,750 for a family of four—which makes 600 percent of poverty equal to $154,500. In other words, a family making more than $150,000 will now classify as “low-income” for purposes of the new subsidy regime.

Hypocrisy by Officials

The individual mandate bill gives a significant amount of authority for its implementation to Covered California, the state’s insurance exchange. The bill says the exchange will determine the amount of the mandate penalty, and determine who receives exemptions from the mandate.

Who runs California’s exchange? None other than Peter Lee, the man I previously profiled as someone who earns $436,800 per year, yet refuses to buy the exchange coverage he sells. Or, to put it another way, if the mandate passes, Lee will be standing in judgment of individuals who refuse to do what he will not—buy an Obamacare plan.

If you think that seems a bit rich, you would be correct. But it epitomizes the poor policy choices and hypocritical actions taken by officials to prop up Obamacare in California.

This post was originally published at The Federalist.

Ocasio-Cortez Suddenly Realizes She Doesn’t Like Paying Obamacare’s Pre-Existing Condition Tax

On Saturday evening, incoming U.S. representative and self-proclaimed “democratic socialist” Alexandria Ocasio-Cortez took to Twitter to compare her prior health coverage to the new health insurance options available to her as a member of Congress.

It shouldn’t shock most observers to realize that Congress gave itself a better deal than it gave most ordinary citizens. But Ocasio-Cortez’ complaints about the lack of affordability of health insurance demonstrate the way liberals who claim to support Obamacare’s pre-existing condition “protections”—and have forcibly raised others’ premiums to pay for those “protections”—don’t want to pay those higher premiums themselves.

She’s Paying the Pre-Existing Condition Tax

I wrote in August about my own (junk) Obamacare insurance. This year, I have paid nearly $300 monthly—a total of $3,479—for an Obamacare-compliant policy with a $6,200 deductible. Between my premiums and deductible, I will face paying nearly the first $10,000 in medical costs out-of-pocket myself.

Of course, as a fairly healthy 30-something, I don’t have $10,000 in medical costs in most years. In fact, this year I won’t come anywhere near to hitting my $6,200 deductible (presuming I don’t get hit by a bus in the next four weeks).

As I noted in August, my nearly $3,500 premium doesn’t just fund my health care—or, more accurately, the off-chance that I will incur catastrophic expenses such that I will meet my deductible, and my insurance policy will actually subsidize some of my coverage. Rather, much of that $3,500 “is designed to fund someone else’s medical condition. That difference between an actuarially fair premium and the $3,500 premium my insurer charged me amounts to a ‘pre-existing conditions tax.’”

Millions of People Can’t Afford Coverage

Because I work for myself, I don’t get an employer subsidy to pay the pre-existing condition tax. (I can, however, write off my premiums from my federal income taxes.) Ocasio-Cortez’s tweet referred to her coverage “as a waitress,” but didn’t specify where she purchased that coverage, nor whether she received an employer subsidy for that coverage.

However, a majority of retail firms, and the majority of the smallest firms (3-9 workers), do not offer coverage to their workers. Firms are also much less likely (only 22 percent) to offer insurance to their part-time workers. It therefore seems likely, although not certain, that Ocasio-Cortez did not receive an employer subsidy, and purchased Obamacare coverage on her own. In that case she would have had to pay the pre-existing condition tax out of her own pocket.

That pre-existing condition tax represented the largest driver of premium increases due to Obamacare, according to a March paper published by the Heritage Foundation. Just from 2013 (the last year before Obamacare) through 2017, premiums more than doubled. Within the last year (from the first quarter of 2017 through the first quarter of 2018) roughly 2.6 million people who purchased Obamacare-compliant plans without a subsidy dropped their coverage, likely because they cannot afford the higher costs.

Lawmakers Get an (Illegal) Subsidy to Avoid That Tax

Unsurprisingly, however, members of Congress don’t have to pay the pre-existing condition tax on their own. They made sure of that. Following Obamacare’s passage, congressional leaders lobbied feverishly to preserve their subsidized health coverage, even demanding a meeting with the president of the United States to discuss the matter.

Senators and representatives do have to purchase their health insurance from the Obamacare exchanges. But the Office of Personnel Management (OPM) issued a rule allowing members of Congress and their staffs to receive an employer subsidy for that coverage. That makes Congress and their staff the only people who can receive an employer subsidy through the exchange.

Numerous analyses have found that the OPM rule violates the text of Obamacare itself. Sen. Ron Johnson (R-WI) even sued to overturn the rule, but a court dismissed the suit on the grounds that he lacked standing to bring the case.

Liberals’ Motto: ‘Obamacare for Thee—But Not for Me’

Take, for instance, the head of California’s exchange, Peter Lee. He makes a salary of $436,800 per year, yet he won’t buy the health insurance plans he sells. Why? Because he doesn’t want to pay Obamacare’s pre-existing condition tax unless someone (i.e., the state of California) pays him to do so via an employer subsidy.

Ocasio-Cortez’ proposed “solution”—fully taxpayer-paid health care—is in search of a problem. As socialists are wont to do, Ocasio-Cortez sees a problem caused by government—in this case, skyrocketing premiums due to the pre-existing condition tax—and thinks the answer lies in…more government.

As the old saying goes, when you’re in a hole, stop digging. If Ocasio-Cortez really wants to get serious, instead of complaining about the pre-existing condition tax, she should work to repeal it, and replace it with better alternatives.

This post was originally published at The Federalist.

Will the Senate Make Exchange Heads Purchase Exchange Coverage?

This week, the Senate will likely consider a package of several appropriations measures. The legislation provides an opportunity for senators to offer, and possibly vote on, an amendment defunding the District of Columbia’s new health insurance mandate.

Because such an amendment, proposed by Rep. Gary Palmer (R-AL), passed in the House last week, if a similar amendment passes the Senate, it would almost certainly remain in the final version enacted into law. As a result, residents of the nation’s capital would not face the threat of having their property seized if they cannot afford to purchase “government-approved” health insurance.

A Firsthand Display of Hypocrisy

I have seen up close how the heads of exchanges do not purchase exchange coverage. In the fall of 2016, CareFirst Blue Cross cancelled my exchange insurance policy, in part due to regulations promulgated by the District’s exchange authority.

To find out the reasons for the cancellation, I attended a meeting of the authority board. When I asked whether employees of the exchange purchase exchange coverage themselves, Mila Kofman, the exchange’s director, responded that doing so would cause employees to forfeit their employer insurance subsidy, making coverage unaffordable.

That explanation makes sense for junior employees making $40,000, $60,000, or even $80,000 annually. But it seems much less justifiable for Kofman. Kofman did not disclose it at the meeting I attended, but I later learned through DC public records that in 2016, she received a salary of more than $217,000—more than Mayor Muriel Bowser herself.

If Kofman cannot, or will not, purchase the exchange plans she sells without a subsidy, why would she, and the exchange board, support requiring residents making a fraction of her income to do so, and punishing them with taxes—and the threat of property seizure—if they do not?

‘1 Percenters’ Won’t Buy Exchange Coverage

Nor do the double-standards remain confined to the District of Columbia. The head of California’s exchange receives a salary putting him in “the 1 percent,” yet refuses to purchase the plans he sells.

I had previously recounted how Peter Lee, Covered California’s executive director, admitted to me at a briefing that his health insurance coverage comes through California’s state employee plan—at taxpayer expense, of course. Yet Covered California’s website lists his current monthly salary at a rate of $36,400, or a whopping $436,800 per year.

With all that money, does Lee really need to have taxpayers fund his health benefits as well? Does he think the policies Covered California sells so unaffordable, or so poor in quality, that he refuses to buy them? Or does he just feel entitled to have taxpayers fund his benefits on top of his fat paycheck because he thinks he’s better than we are?

The Amendment Concept

In theory, the Trump administration could have solved this problem months ago, by issuing regulations requiring all CEOs of state-run exchanges—and, for that matter, their board members too—to purchase plans from the exchanges. If those individuals consider exchange plans so inferior or unaffordable that they will not purchase them for themselves, then they have no business selling them in the first place.

(In case you were wondering, yes, I do believe that at the federal level, the U.S. secretary of Health and Human Services and Centers for Medicare and Medicaid Services administrator should buy exchange plans. I previously criticized former CMS Acting Administrator Andy Slavitt for failing publicly to disclose that he held exchange coverage during a Democratic administration, and I would be remiss not to point that out under a Republican one.)

At that point, people like Mila Kofman and Peter Lee will have a choice to make. They can determine whether they care more about keeping their taxpayer-funded health insurance benefits, or ensuring their constituents continue to have access to insurance subsidies. In short, they can choose whether they will finally put their principles ahead of their own pocketbooks—which they should have been doing all along.

This post was originally published at The Federalist.

Three Unanswered Questions on Covered California’s Bogus Premium “Study”

On Thursday, Covered California, the state’s health insurance Exchange, released a purported study providing estimates of premium increases over the next three years. The report itself provides precious little specificity regarding premium increases — not least because no one can know such details so far in advance. It seems purposefully designed around a blaring headline — “Premium Increases of Up to 90 Percent!!!” — with the rest largely window dressing.

The report also contains premium estimates for all 50 states. There seems little reason for the California state Exchange to commission a report on premium levels nationwide — particularly because the report does not provide anything more than a possible range of premium increases in each state. Either the Exchange views itself as part of the #Resistance to President Trump, it wants to use the headlines to motivate Congress to pass a “stability” package — or both. (Probably both.)

Is Covered California’s Actuary Biased?

A footnote in the paper notes that “the leadership on the analysis” in the paper was “provided by Covered California’s Chief Actuary, John Bertko.” Bertko’s name came up in another document, one I received last summer, following a Public Records Act request to Covered California. In the September 2016 email exchange, Bertko forwarded an article to colleagues regarding the status of legal action on cost-sharing reductions (CSRs), along with a note stating that “I think the court case on CSRs is unlikely to go the wrong way.”

He was wrong factually, of course. Judge Rosemary Collyer ruled that the Obama Administration lacked a valid appropriation to make CSR payments in May 2016, and Judge Vince Chhabria last fall denied a motion by state attorneys general requiring the Trump Administration to make the payments.

Why Did Covered California Not Prepare for Instability?

When it comes to the CSR issue discussed above, I wrote back in May 2016 that the incoming administration could withdraw the payments unilaterally, and that as a result, “come January 2017, the policy landscape for insurers could look far different” than it did under President Obama.

What did Covered California do regarding that warning? Exactly nothing. My Public Records Act request for all records relating to cost-sharing reductions and rates for the 2017 plan year yielded but two documents. The first, the Bertko e-mail chain referenced above, related solely to how the federal government had addressed the CSR issue. Bertko sent it two months after Covered California announced its rates for the 2017 plan year, and the Exchange’s model contract with insurers mentioned nothing about the federal government not funding CSRs — both demonstrating that Covered California failed to conduct due diligence about whether CSRs could disappear.

The second document Covered California disclosed is an e-mail chain starting on November 21, 2016, two weeks after the election. Covered California Executive Director Peter Lee requested an urgent legal analysis of the CSR issue, allowing Covered California to redact most of the email chain on attorney-client privilege grounds. (I separately removed personal contact information that Covered California left unredacted in the document sent to me.) That said, it doesn’t take a rocket scientist to understand the general context: “Oh ^!%^@#!@—Trump actually got elected! What can he do about CSRs now…?”

Will Peter Lee Actually Enroll in Obamacare Himself?

The Covered California paper claims that regulatory actions taken by the Trump Administration “are expected to draw consumers out of the individual market, sowing market instability and raising the specter of large premium increases in 2019 and beyond.”

However, one person definitely won’t be drawn out of the individual market: Peter Lee, Covered California’s Executive Director — who never went into the individual market in the first place, because he refuses to buy the policies his own Exchange sells. As I have previously written, Lee lets taxpayers pay for his health insurance coverage, even though he makes a salary of $436,800 annually.

Alternatively, Lee believes the Exchange coverage he promotes throughout California is good enough for others to buy, but not good enough for him—a similarly offensive concept. What exactly is the point of an Executive Director going on a bus tour promoting “quality, affordable coverage” if that individual won’t purchase that same coverage — either because he finds it unaffordable or of low quality?

Lee can release all the reports about increasing Exchange enrollment that he wants, but in reality, he has failed to put his money where his mouth is — quite literally. Unless and until he swallows his pride, joins the hoi polloi, and actually purchases the coverage he himself sells, the advice Covered California gives isn’t worth the paper it’s printed on.

This post was originally published at The Federalist.

California’s Health Insurance Debacle

When it comes to the changes in health insurance markets this year, Peter Lee, the head of California’s health insurance Exchange, is quick to criticize officials in other states: “Shame on the insurance commissioners who didn’t think ahead,” he told Politico in October. But to quote Winston Churchill, Mr. Lee should be more modest—because he has much to be modest about.

Responses to Public Records Act requests reveal that neither Mr. Lee nor any official at Covered California, the state-run Exchange, even considered the withdrawal of cost-sharing reduction payments to insurers when setting rates for the 2017 plan year. Just as Mr. Lee has accused others of not preparing for insurance market changes in the coming year, so too he and his colleagues failed to anticipate the sizable changes that took place this year when setting 2017 rates last fall.

This October, President Trump withdrew those cost-sharing reduction payments to insurers. His decision should not have come as a shock, and not just because he had threatened to do so for some time. The payments themselves had been on shaky ground for over a year; Judge Rosemary Collyer called the payments unconstitutional and ordered them stopped in a May 2016 ruling.

When California and other states finalized 2017 premium rates last summer, the cost-sharing payments appeared in significant jeopardy. Judge Collyer had stayed her May 2016 ruling as the Obama Administration appealed it, but another court could have ordered the payments stopped. Moreover, as I noted last year, the incoming Administration could easily stop the payments unilaterally in a matter of days—what President Trump ultimately did in October.

Given this tenuous environment for cost-sharing payments, what due diligence did Covered California undertake last year to determine whether the federal government would continue making payments in 2017? In a word, nothing. Not an e-mail, not a legal analysis, not a memo—nothing.

Only months after Covered California finalized its premium rates for 2017 did Mr. Lee finally jump into action. Two weeks after Trump’s election, a series of urgent e-mails including Mr. Lee discussed the court case regarding cost-sharing payments. Covered California invoked attorney-client privilege to redact the contents of the e-mail chain, but it doesn’t take a rocket scientist to determine that the chain consisted of panicked officials responding to events they had not anticipated.

Because they did not anticipate those events when setting 2017 premiums last summer, California health insurers will suffer financial losses. Insurers must now lower deductibles and co-payments for low-income individuals—a federal requirement under the health care law—without the federal government reimbursing them for that reduced cost-sharing. As a result, insurers in the Golden State will incur their share of up to $1.75 billion in losses nationwide, according to a recent court filing by the industry’s trade association.

Just as they failed to anticipate the loss of cost-sharing subsidies when setting rates for 2017, California officials have failed to accept responsibility for their regulatory failure. When in June I wrote that California’s Insurance Commissioner, Dave Jones, also failed to consider the impact of cost-sharing payments on rates for 2017, Mr. Jones responded with a series of attacks on President Trump. But if Mr. Trump represents such a threat to California’s health insurance market, then Messrs. Jones and Lee both should have spent time analyzing the impact of a Trump presidency on that market prior to his election. The record clearly demonstrates that neither did so.

Mr. Lee’s negligent behavior towards California’s individual health insurance market may stem from the fact that he does not participate in it himself. Despite receiving an annual salary of $436,800, and bonuses in the tens of thousands of dollars, Mr. Lee refuses to buy the Exchange policies he sells, choosing instead to have taxpayers fund his health insurance through CalPERS.

Perhaps Covered California should make a one-percenter like Mr. Lee purchase his insurance with the hoi polloi, so that he might understand the needs of Exchange customers by actually becoming one himself. Better yet, it could find a new Executive Director, one who spends less time tooting his own horn and more time anticipating changes in the market that were predictable—and predicted—long ago.

This post was originally published at the Orange County Register.

The Limousine Liberals Who Won’t Join Obamacare

Even by government standards, it’s an outlandish story of wealth and hypocrisy: A bureaucrat who made more than one million dollars selling Obamacare insurance plans, but won’t buy one for himself? The sad thing is, it also happens to be true.

Meet Peter Lee, Executive Director of Covered California. In the past three years alone, Mr. Lee has made well over one million dollars running California’s Obamacare Exchange. He received massive raises the past two years, going from a salary of $262,644 in 2014 to $420,000 beginning this July. On top of that nearly $160,000 raise, Peter Lee received two other whopping bonuses of $52,258 in 2014 and $65,000 in 2015—winning more in one lump sum than many families make in an entire year. But at a September briefing, I asked Mr. Lee point blank what type of health coverage he holds, and he said he was enrolled in California’s state employee plan.

Think about that: a bureaucrat whose salary comes from selling Exchange plans—Covered California’s operating budget derives from surcharges on plans sold through the Exchange—but yet won’t buy one of the plans he sells for himself. It’s enough to make a person ask how much Mr. Lee would have to make before he would actually break down and buy one of the plans he sells—a million dollars? Two million? Five million?

Liberal One-Percenters: Good for You, Not for Me

I’ll concede right now that Obamacare’s Exchanges were designed primarily for those without employer coverage. Individuals whose employers do offer “affordable” coverage cannot receive subsidies on Exchanges, although they can enroll without a subsidy, if they so choose. Most Americans choose employer coverage, because firms heavily subsidize them—to the tune of an average of $12,865 for family coverage. For the average worker making $60,000, or even $80,000, per year, turning down the employer subsidy to purchase an unsubsidized Exchange plan represents a substantial pay cut, one many families could not afford.

But well-paid liberals like Peter Lee—who over the last two years received raises more than twelve times the average employer’s subsidy for health coverage—have no real financial excuse not to join the Exchanges—other than liberal elitism. As the owner of a new small business who likely won’t make six figures this year, I have little patience to hear supposed believers in Obamacare with far more means than I who won’t give up a few thousand dollars in employer subsidies to enroll on the Exchanges themselves. After all, aren’t liberals the ones who believe in social solidarity and “paying your fair share” anyway…?

Well-Heeled Bureaucrats and Think Tankers’ Hypocrisy

For instance, Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt literally cashed in to the tune of over $4.8 million in stock options on joining the Administration—more than enough to forego any employer subsidy for his health coverage. He recently responded to a questioner on Twitter asking him why he wasn’t on Medicare by stating that he was only 49 years of age—too young to qualify. Within minutes, I sent Slavitt a follow-up tweet: “If Obamacare is so great, are you on the Exchange—and if not, why not?” Slavitt has yet to reply.

Both Slavitt, and Health and Human Services Secretary Sylvia Burwell (net worth: $4.6 million), have plenty of financial resources to forego an employer subsidy and purchase Exchange coverage. Even at a total premium of $15,000 for his family, one year’s insurance costs would total less than 0.3% of the stock gains Slavitt cashed in on when joining the Administration—to say nothing of the millions he likely will make when he “cashes in” on his government experience in just a few months.

Did Slavitt just not see my tweet asking him about his health coverage? Did he not reply because the person in charge of selling Exchange policies doesn’t think they’re good enough to buy one himself? Or does he believe that someone who made millions a few short years ago is too “poor” to give up a few thousand dollars in employer subsidies for his health care?

The ranks of well-paid liberals clamming up when asked about their health benefits extends beyond government, into the think-tank ranks as well. In September, the Urban Institute published a paper claiming that Exchange coverage was actually cheaper than the average employer plan. I e-mailed the papers’ authors, asking them a simple question: Had they taken steps to enroll in Exchange coverage themselves—and encouraged the Urban Institute to send all its employees to the Exchanges?

I have yet to receive a reply from the three researchers. But after doing some digging, I found the Urban Institute’s Form 990 filing with the IRS. The form reveals that one of the study’s authors, John Holahan, received a total of $313,932 in compensation in 2014—$267,051 in salary, and $46,881 in other compensation and benefits. Does Mr. Holahan therefore believe that giving up his subsidized benefits, and relying “only” upon his $267,051 salary, presents too great a sacrifice for him to bear financially? If he and his colleagues truly believe Exchange plans are more efficient than employer coverage—as opposed to just coming up with a talking point to rebut Obamacare’s massive premium increases—then shouldn’t they enroll themselves?

I Make $400,000—So Quit Whining about Your Cost Hike

Then there’s Larry Levitt, a Senior Vice President at the Kaiser Family Foundation. Last week Levitt tweeted that Exchange premium increases don’t apply to many people—a talking point that Drew Altman, Kaiser’s CEO, has also made in blog posts. I replied asking whether Levitt himself, or other people using this talking point, actually have Exchange coverage—to which Levitt gave no response.

Care to guess how much these scholars claiming Exchange premium increases are overrated make themselves? According to Kaiser’s IRS filing, Levitt received $333,048 in salary, and $48,563 in benefits, in 2014. His boss, Drew Altman, pulled down a whopping $642,927 in salary, $149,509 in retirement plan contributions, and a $13,545 expense account—nearly $806,000 in total compensation.

The contradictions from the Kaiser researchers are ironic on two levels. One could certainly argue that an executive making nearly $400,000, let alone over $800,000, doesn’t need comprehensive health insurance—except to protect from severe emergencies, like getting hit by the proverbial bus. However, both appear loathe to give up their employer-provided health coverage—and equally quick to minimize the impact of Obamacare’s premium increases nationwide. As I noted on Twitter, that’s easy for people who refuse to join the Exchanges to say.

Stupid Is What Stupid Does?

Last, but certainly not least, on the hit parade is MIT professor Jonathan “Stupidity of the American Voter” Gruber. Last week Gruber said both that the law “was working as designed” and that people who lost their coverage thanks to the law “never had real insurance to begin with.” Unfortunately, MIT’s tax filings don’t include his salary. However, given that Gruber’s infamous undisclosed contract with the Obama Administration totaled nearly $400,000, and that he literally made millions from other contracts, it’s fair to say Gruber could afford to purchase his own health insurance outside his employer—if he wanted to. So I e-mailed him, and asked him whether he gave up his employer coverage to purchase that “real insurance” that Obamacare provides. Wouldn’t you know, I have yet to receive a reply.

It’s bad enough that the individuals above apparently refuse to give up their platinum-plated health plans to join the Exchanges—even though it would cost them at most a few percentage points of their total compensation to do so. They also wish to cast stones from their ivory towers at those of us who are facing higher premiums, rising deductibles, fewer (if any) choices of insurers, and smaller doctor networks thanks to the law they claim to support.

So to all those well-heeled Obamacare supporters who can afford to enroll in Obamacare themselves, but simply won’t, I’ll make one final point: Disagree with me if you like, but I’m working my damnedest to stop Obamacare’s bailouts—even though I know that if I “win” on the policy, I could lose my health coverage. It’s called standing on principle. It’s a novel concept—you might want to try it sometime.

This post was originally published at The Federalist.

Obamacare’s Exchanges Have Become Medicaid-Like Ghettoes

The October surprise that Washington knew about all along finally arrived yesterday, as the Obama administration announced that premiums would increase by nearly 25 percent nationally for Obamacare’s individual insurance. With the exchanges already struggling to maintain their long-term viability, the premium increases place the administration in a political vise, as it tries to encourage people to buy a product whose price is rising even as it presents a poor value for most potential enrollees.

In the 40-page report the Department of Health and Human Services (HHS) released, breaking down premium and plan information for 2017, one interesting number stands out. Among states using Healthcare.gov, the federally run exchange, the median income of enrollees in 2016 topped out at 165 percent of the federal poverty level (FPL). In other words, half of enrollees made less $40,095 for a family of four. And 81 percent earned less than $60,750 for a family of four, or less than 250 percent of the FPL.

The new data from the report further confirm that the only people buying exchange plans are those receiving massive subsidies — both the richest premium subsidies, which phase out significantly above 250 percent FPL, and cost-sharing subsidies, which phase out entirely for enrollees above the 250 percent FPL threshold. If the House of Representatives’ suit challenging the constitutionality of spending on the cost-sharing subsidies succeeds, and those funds stop flowing to insurers, Obamacare may then face an existential crisis.

Even as it stands now, however, the exchanges are little more than Medicaid-like ghettoes, attracting a largely low-income population most worried about their monthly costs. To moderate premium spikes, insurers have done what Medicaid managed-care plans do: Narrow networks. Consultants at McKinsey note that three-quarters of exchange plans in 2017 will have no out-of-network coverage, except in emergency cases. And those provider networks themselves are incredibly narrow: one-third fewer specialists than the average employer plan, and hospital networks continuing to shrink.

In short, exchange coverage looks nothing like the employer plans that more affluent Americans have come to know and like. Case in point: At a briefing last month, I asked Peter Lee, the executive director of Covered California, what health insurance he purchased for himself. He responded that he was not covered on the exchange that he himself runs but instead obtained coverage through California’s state-employee plan. Which raises obvious questions: If Covered California’s offerings aren’t good enough to compel Lee to give up his state-employee plan, how good are they? Or, to put it another way, if exchange plans aren’t good enough for someone making a salary of $420,000 a year, why are they good enough for low-income enrollees?

Therein lies Obamacare’s problem — both a political dilemma and a policy one. Insurers who specialize in Medicaid managed-care plans using narrow networks have managed to eke out small profits amid other insurers’ massive exchange losses. As a result, other carriers have narrowed their product offerings, making Obamacare plans look more and more alike: narrow networks, tightly managed care — yet ever-rising premiums.

While restrictive HMOs with few provider choices may not dissuade heavily subsidized enrollees from signing up for exchange coverage, it likely will discourage more affluent customers. The exchanges need to increase their enrollment base. The combination of high premiums, tight provider networks, and deductibles so high as to render coverage all but useless will not help the exchanges attract the wealthier, and healthier, enrollees needed to create a stable risk pool. By reacting so sharply to its current customer base, insurers on exchanges could well alienate the base of potential customers they need to maintain their long-term viability. In that sense, Obamacare’s race to the bottom could become the exchanges’ undoing.

This post was originally published at National Review.