Will the Trump Administration Help Republicans Expand Obamacare?

For all the allegations by the Left about how the Trump administration is “sabotaging” Obamacare, a recent New York Times article revealed nothing of the sort. Instead it indicated how many senior officials within the administration want to entrench Obamacare, helping states to expand the reach of one of its costly entitlements.

Thankfully, a furious internal battle took the idea off the table—for now. But instead of trying to find ways to increase the reach of Obamacare’s Medicaid expansion, which prioritizes able-bodied adults over individuals with disabilities, the Trump administration should instead pursue policies that slow the push towards expansion, by making the tough fiscal choices surrounding expansion plain for states to see.

What ‘Partial Expansion’ Means

Following the court’s decision, the Obama administration determined expansion an “all-or-nothing” proposition. If states wanted to receive the enhanced match rate for the expansion—which started at 100 percent in 2014, and is slowly falling to 90 percent for 2020 and future years—they must expand to all individuals below the 138 percent of poverty threshold.

However, some states wish to expand Medicaid only for adults with incomes below the poverty level. Whereas individuals with incomes above 100 percent of poverty qualify for premium and cost-sharing subsidies for plans on Obamacare’s exchanges, individuals with incomes below the poverty level do not. (In states that have not expanded Medicaid, individuals with incomes below poverty may fall into the so-called “coverage gap,” because they do not have enough income to qualify for subsidized exchange coverage.)

States that wish to cover only individuals with incomes below the poverty line may do so—however, under the Obama administration guidance, those states would receive only their regular federal match rate of between 50 and 74 percent, depending on a state’s income. (Wisconsin chose this option for its Medicaid program.)

How ‘Partial Expansion’ Actually Costs More Money

The Times article says several administration supporters of “partial expansion”—including Health and Human Services (HHS) Secretary Alex Azar, Centers for Medicare and Medicaid Administrator (CMS) Seema Verma, and Domestic Policy Council Director Andrew Bremberg—believe that embracing the change would help to head off full-blown expansion efforts in states like Utah. An internal HHS memo obtained by the Times claims that “HHS believes allowing partial expansion would result in significant savings over the 10-year budget window compared to full Medicaid expansion by all.”

In reality, however, “partial expansion” would explode the budget, for at least three reasons. First, it will encourage states that have not embraced expansion to do so, by lowering the fiscal barrier to expansion. While states “only” have to fund up to 10 percent of the costs of Medicaid expansion, they pay not a dime for any individuals enrolled in exchange coverage. By shifting individuals with incomes of between 100-138 percent of poverty from Medicaid to the exchanges, “partial expansion” significantly reduces the population of individuals for whom states would have to share costs. This change could encourage even ruby red states like Texas to consider Medicaid expansion.

Second, for the same reason, such a move will encourage states that have already expanded Medicaid to switch to “partial expansion”—so they can fob some of their state costs onto federal taxpayers. The Times notes that Arkansas and Massachusetts already have such waiver applications pending with CMS. Once the administration approves a single one of these waivers, virtually every state (or at minimum, every red state with a Medicaid expansion) will run to CMS’s doorstep asking for the federal government to take these costs off their hands.

Medicaid expansion has already proved unsustainable, with exploding enrollment and costs. “Partial expansion” would make that fiscal burden even worse, through a triple whammy of more states expanding, existing states offloading costs to the federal government through “partial expansion,” and the conversion of millions of enrollees from less expensive Medicaid coverage to more costly exchange plans.

What Washington Should Do Instead

Rather than embracing the fiscally irresponsible “partial expansion,” the Trump administration and Congress should instead halt another budget gimmick that states have used to fund Medicaid expansion: The provider tax scam. As of last fall, eight states had used this gimmick to fund some or all of the state portion of expansion costs. Other states have taken heed: Virginia used a provider tax to fund its Medicaid expansion earlier this year, and Gov. Paul LePage (R-ME)—who heretofore has steadfastly opposed expansion—recently floated the idea of a provider tax to fund expansion in Maine.

The provider tax functions as a scam by laundering money to generate more federal revenue. Providers—whether hospitals, nursing homes, Medicaid managed-care plans, or others—agree to an “assessment” that goes into the state’s general fund. The state uses those dollars to draw down new Medicaid matching funds from the federal government, which the state promptly sends right back to the providers.

For this reason, politicians of all parties have called on Congress to halt the provider tax gimmick. Even former vice president Joe Biden called provider taxes a “scam,” and pressed for their abolition. The final report of the bipartisan Simpson-Bowles commission called for “restricting and eventually eliminating” the “Medicaid tax gimmick.”

If Republicans in Congress really want to oppose Obamacare—the law they ran on repealing for four straight election cycles—they should start by imposing a moratorium on any new Medicaid provider taxes, whether to fund expansion or anything else. Such a move would force states to consider whether they can afford to fund their share of expansion costs—by diverting dollars from schools or transportation, for instance—rather than using a budget gimmick to avoid those tough choices. It would also save money, by stopping states from bilking the federal government out of billions in extra Medicaid funds through what amounts to a money-laundering scam.

Rhetoric vs. Reality, Take 5,000

But of course, whether Republicans actually want to dismantle Obamacare remains a very open question. Rather than opposing “partial expansion” on fiscal grounds, the Times quotes unnamed elected officials’ response:

Republican governors were generally supportive [of “partial expansion”], but they said the change must not be seen as an expansion of the Affordable Care Act and should not be announced before the midterm elections. Congressional Republican leaders, while supportive of the option, also cautioned against any high-profile public announcement before the midterm elections.

In other words, these officials want to expand and entrench Obamacare, but don’t want to be seen as expanding and entrenching Obamacare. What courage!

Just as with congressional Republicans’ desperate moves to bail out Obamacare’s exchanges earlier this year, the Times article demonstrates how a party that repeatedly ran on repealing Obamacare, once granted with the full levers of power in Washington, instead looks to reinforce it. Small wonder that the unnamed politicians in the Times article worry about conservative voters exacting a justifiable vengeance in November.

This post was originally published at The Federalist.

Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

Day One of Obamacare’s Exchanges, By the Numbers

Obamacare’s exchanges have now been “open” (such as it is) for more than 24 hours. The results are in, and they’re not promising:

0—Enrollment navigators certified in Wisconsin in time for the start of enrollment.

0—Individuals one North Carolina insurer was able to sign up for subsidized insurance.

3—Months President Obama warned Americans could face glitches when trying to sign up.

4—Hours Maryland’s exchange opening was delayed.

7—Miles one Indiana resident drove to obtain enrollment assistance; after receiving little information and a four-page paper application, the potential applicant called the trip “a waste of time.”

22—Actual enrollees in Connecticut’s exchange out of more than 10,000 individuals who visited the website by mid-afternoon, a conversion rate of 0.22 percent.

34—Minutes one Politico reporter listened to “smooth jazz” before reaching an actual call-center representative.

35­—Minutes one MSNBC reporter spent attempting to enroll online, before finally giving up.

47—States whose exchange websites “turned up frequent error messages.”

1,289—Days between the signing of Obamacare and yesterday’s launch, a gap which prompted one insurance broker to comment, “You would just think that with all this time they’ve had to get it set up and ready to go there would have been a better premiere.”

2,400—Individuals who had their Social Security numbers and other personal data disclosed even before the exchanges opened for business.

Not only were the American people faced with major glitches surrounding the exchanges, but they also faced a wall of silence from bureaucrats when looking for explanations for the delays.

The latest in a long line of Obamacare implementation glitches and failures demonstrates how the law is inherently unworkable. It’s why Congress needs to stop Obamacare now.

This post was originally published at The Daily Signal.

A Fanciful, But Inaccurate, Premium Support Study

The Kaiser Family Foundation released a study today regarding premium support proposals, which Democrats have used to attack Medicare reform.  However, the study is an academic exercise that, by the authors’ own admission, bears little relation to reality.  First and foremost, the study assumes full implementation of premium support in 2010.  This assumption is particularly problematic, given the many changes that have taken place in Medicare Advantage since then:

In other words, by using a 2010 implementation date, the Kaiser study ignores entirely the impact of the biggest changes to both Medicare and Medicare Advantage since the programs were created.  Moreover, the study assumes a “Big Bang” model, whereby all the changes to Medicare would take place at once – even though it admits that most proposals being discussed “would gradually phase-in a premium support system in five to ten years,” allowing changes to be implemented in a way that prevents drastic adjustments.

Three other important things you need to know about the Kaiser study:

  1. The study does not do a good job delineating two separate and distinct phenomena: costs due to disparities between traditional Medicare and Medicare Advantage, and costs due to disparities within traditional Medicare itself.  To use one common example, traditional Medicare’s spending is far greater in metropolitan Miami than in many areas in the upper Midwest (for instance, Wisconsin).  Yet under current law, all enrollees in traditional Medicare pay the same Part B premium nationwide – meaning that right now, seniors in Wisconsin pay higher Part B premiums that subsidize higher levels of spending in Miami.  The premium support proposal modeled by Kaiser would eliminate this disparity – meaning that under the study, premiums in traditional Medicare would rise substantially in Miami, to reflect that area’s much higher spending.  Critics would argue these higher premiums demonstrate the flaws of the premium support model.  But in reality, that’s not an argument against premium support – that’s an argument against the status quo in traditional Medicare, under which high-cost areas have had their spending subsidized by low-cost regions for far too long.
  2. The study does not fully model the ability of plan switching to reduce costs.  The headline figure about the number of individuals who would pay more to maintain their current coverage presumes that beneficiaries would not switch plans at all – not a realistic assumption under most scenarios.  And the study also assumes that low-income individuals would not automatically be assigned to a low-cost plan – current practice in Medicare Part D.  In short, the Kaiser study under-estimates both the impact that beneficiary choices and structural design could be used to facilitate enrollment in lower-cost premium support plans.
  3. At no point does the study even attempt to quantify potential budgetary savings from premium support.  The study goes to great lengths to outline the higher costs, but doesn’t make any estimate about the savings to the federal government from such a reform – or how it would improve Medicare’s long-term solvency.  In other words, the study focuses solely on pain to beneficiaries – without examining the gains to Medicare’s sustainability.

The Obama campaign’s response to the study – claiming that seniors “would have to give up their doctors or pay extra to maintain access to their choices” – is particularly rich.  Mind you, this claim comes from an Administration that will force millions of seniors out of their Medicare Advantage plans – not to save Medicare, but to fund Obamacare instead.  It’s yet another example of why Medicare needs real reform – and why this Administration is both unwilling and unable to deliver on it.

Scott Walker on Obamacare’s “Unhealthy Prescription”

Writing in this morning’s Washington Post, Wisconsin governor Scott Walker has a must-read op-ed outlining how Obamacare’s poor policy prescriptions will harm his state.  Among the bad side effects of the law:

  • 100,000 people will be dropped by their employer-sponsored health insurance;
  • 59 percent of people who buy their own health insurance will experience an average premium increase of 31 percent;
  • 150,000 people will stop buying health insurance in the private sector and will instead become dependent on the government and taxpayers; and
  • Between 2014 and 2019, Obamacare could cost Wisconsin taxpayers $1.12 billion; after all federal aid and tax credits are applied, the state’s portion of the bill will be $433 million.

These aren’t conclusions reached by Walker himself – they are among the conclusions of an actuarial analysis conducted in part by Jonathan Gruber, who served as a paid consultant to HHS in developing the Obamacare law.  And the fact that even supporters of Obamacare admit the law will raise both insurance premiums and dependence on government programs is as strong an argument as any for the measure’s repeal.

Ohio Study Confirms: Obamacare Will Raise Premiums, Kill Current Coverage

Last month, Wisconsin released a study showing how Obamacare will raise premiums and lead firms to drop coverage.  Yesterday, the state of Ohio released a report from independent actuaries at Milliman that came to much the same conclusions – nearly 700,000 individuals leaving employer-sponsored coverage in Ohio alone, along with premium increases for individual policies averaging 55-85%.  The report is over 150 pages long, but the key section is from pages 26-45, which highlights the major changes in both premiums and coverage scheduled to take place thanks to Obamacare:

Dropped Coverage

  • A total of 688,000 Ohio residents will move OUT of employer coverage; “population decreases in the [employer insurance] markets will be driven by low-income individuals opting out of these plans for Medicaid.”
  • While 503,000 previously uninsured residents will obtain Medicaid coverage, a greater number of individuals (569,000) who already have coverage will move into government-run Medicaid – suggesting Obamacare encourages both employers and employees to quit private coverage in order to join taxpayer-funded programs.  As the report notes, “The other half of new Medicaid enrollees will consist of individuals who currently have ESI [employer-sponsored insurance] or individual coverage.”
  • Likewise, while 289,000 previously uninsured residents will obtain new coverage in Exchanges, almost as many (204,000) will join Exchanges after having employer coverage – likely because Obamacare will encourage firms to “dump” their workers.
  • “The estimated prevalence of grandfathered plans is expected to diminish quickly and be almost non-existent by 2014” – meaning virtually everyone will lose their current plan within three short years of Obamacare’s passage.

Higher Premiums

  • Before subsidies, “the individual health insurance premiums are estimated to increase by 55% to 85% above current market average rates (excluding the impact of medical inflation).”  The report goes on to delineate the specific reasons for these skyrocketing premiums.
  • “Individual health insurance market premium rates are estimated to increase between 20% and 30% on average due to benefit expansion requirements” – i.e., Washington bureaucrats forcing individuals to buy more health coverage than they may want or need.
  • Premium rates on the individual market will increase between 35% and 40% because high-risk pools will close and the individuals purchasing insurance through Exchanges will be sicker than the population as a whole.  This conclusion is noteworthy because it contradicts the Congressional Budget Office, which predicted that individuals in Exchanges would be healthier than average.
  • Premiums will also increase by 2-3% due to the various taxes – on device manufacturers, drug companies, and insurers – included in Obamacare; “as with any tax on businesses, these fees will be passed along to the consumer to the extent possible.”
  • Requirements under [Obamacare] to cover preventive services at 0% cost-sharing have already caused premiums to increase.”
  • For small businesses, premiums could rise 150% for some firms with healthy populations – but the firms with the highest-risk (i.e., least healthy) populations would see their premiums fall by only 38%.
  • The cumulative effect of these rating changes may result in a majority of [small businesses] experiencing premium rate increases or decreases beyond the average estimated market change of 5% to 15%.  In many cases these changes could be greater than 25%, ignoring changes in medical inflation. Premium rate volatility may affect the stability of the ESI-small group market by creating greater financial incentives for employers to self-fund or terminate their plan.  Employers wanting to continue their plan may address the issue of substantial premium rate increases by changing plan designs to shift more cost to employees, as current benefit plans may become unaffordable.”

The report also includes a separate study indicating that the Exchanges will likely cost at least $20 million dollars per year to maintain (exclusive of implementation costs) just in Ohio alone.  These administrative costs could raise premiums by more than 1% – over $50 per year – for individuals enrolling in Exchange plans.

Candidate Obama repeatedly promised to cut insurance premiums by an average of $2,500 per family, and also promised that “for those of you who have insurance now, nothing will change under the Obama plan – except that you will pay less.”  Today’s report once again illustrates how Democrats’ 2700-page health care law fails on both counts.

Wisconsin Survey a Microcosm of Obamacare’s Flaws

Late last week, the governor’s office in Wisconsin released a report analyzing the impact of Obamacare on the state and its insurance markets.  To those who predicted that the law would result in higher premiums and individuals losing their current coverage, the results are not surprising:

Losing Coverage:  According to the report, “very few” Wisconsin residents will keep their current individual market coverage thanks to Obamacare’s restrictions.  Instead, 150,000 individuals will give up their current coverage to move to the government-regulated Exchanges.  An additional 100,000 individuals will lose access to employer-sponsored coverage, because the firms they work for will decide to drop coverage instead.

Mandates Raising Price of Insurance:  Nearly two in five (38%) participants in Wisconsin’s individual market will be forced to buy richer coverage than they have now, due to the new mandates and insurance restrictions included in Obamacare.

Higher Premiums:  Government mandates will raise individual market premiums for more than four in five participants – more than 41% of participants face premium increases of more than 50% before federal insurance subsidies are applied.

Winners and Losers:  Even AFTER federal insurance subsidies are applied, 59% of individual market participants will pay more – an average of nearly 31% more – for their coverage, so that a smaller minority can pay less.  To take one example, costs in the individual market for Wisconsin residents aged 19-29 will go up by a whopping 34%, so that costs for residents aged 55-64 can go down by $31, or a mere 1%.  And Wisconsin’s more than 5.5 million residents will pay higher federal taxes – on their drugs, income, and insurance premiums, to name but a few examples – so that only about 220,000 newly insured will receive taxpayer-financed insurance under Obamacare.

Government-Forced Insurance:  340,000 individuals in Wisconsin will obtain coverage under Obamacare, but that if the individual mandate were repealed (or struck down as unconstitutional), coverage would only increase by 60,000.  In other words, nearly 300,000 Wisconsin residents will obtain health coverage not because they want to purchase it, but because the federal government is forcing them to do so.

What IS surprising however is the fact that the report was commissioned last year by the Democrat then-Governor, and completed by Jonathan Gruber, who was a paid – though undisclosed – consultant on Obamacare itself.  If even an Obamacare supporter reaches conclusions this ominous about the impact of the statute on one state, how can Democrats continue to defend their flawed, 2700-page law?

$2.6 Trillion to Cover…18,000 Sick Enrollees?

Testifying before the House Education and the Workforce Committee this morning, Secretary Sebelius indicated the Department would be releasing a report with updated enrollment figures for its high-risk pool program tomorrow.  She testified that the report would show that the $5 billion program has now enrolled a total of 18,000 participants with pre-existing conditions.

While the Administration is trumpeting the increase in enrollment over the last several months, it’s worth putting these figures in context.  First, according to the most recent estimates from the National Association of State Comprehensive Health Insurance Plans, two existing state high-risk pools (Texas and Minnesota) each have more enrollees than the entire new federal program; several other states (including Illinois, Wisconsin, and Maryland) have nearly as many enrollees as the 18,000 participants in the federal plan.

Second, keep in mind that the health care law spent $2.6 trillion in its first full decade of implementation, largely to ensure that all individuals would have access to coverage.  But the Administration has enrolled only 18,000 individuals with pre-existing conditions into the high-risk pool.  At this rate and based on these metrics – $2.6 trillion in spending, and 18,000 participants – the federal government will spend $14.4 million per year for every person with pre-existing conditions newly enrolled in coverage.  That’s not just enough money to buy each person with pre-existing conditions a platinum-plated insurance policy – that’s practically enough to buy each one a small hospital.

To be sure, Republicans support high-risk pools as a way to ensure individuals with pre-existing conditions have access to coverage.  Unfortunately, the Democrat plan that was enacted contained crucial design flaws that may serve to limit enrollment.  However, the HHS update on this program shows that – no matter how it’s structured – America did not need to spend $2.6 trillion to cover individuals with pre-existing conditions who need access to care.

Washington’s Latest “Power Grab”

The New York Times has an article this morning on the Administration’s proposed new Medicaid regulations.  The regulations, which were released Friday, will according to the article “make it much more difficult for states to cut Medicaid payments” and “could also put pressure on some states to increase Medicaid payments” – both of which will further exacerbate states’ already difficult fiscal situations.

The article also includes a sampling of reactions from state Medicaid directors to the proposed rule, which shows the bipartisan opposition to yet another attempt by the federal government to micro-manage state programs:

Dennis Smith, secretary of Wisconsin’s Department of Health Services:  “A federal power grab….Putting states in jeopardy, by inventing a new meaning for a longstanding statutory provision, is another example of how distant and disconnected the administration is from what is happening across the country.”

Douglas Porter, Washington state’s Medicaid director:  “The Administration has gone overboard, creating a system of access review that is far too complex, elaborate and burdensome.”  (As a reminder, Washington state’s governor is a Democrat.)

Bruce Greenstein, secretary of Louisiana’s Department of Health and Hospitals:  “The proposal leaves too much discretion with the federal government. It does not clearly enunciate the criteria to be used in measuring access to care.”

Unfortunately, the article notes that Washington could impose even more new mandates on Medicaid programs in the months to come: “The new rule does not apply to managed care.  But the Obama administration said it was ‘considering future proposals’ to guarantee access to care for Medicaid recipients in such private health plans.”

States are already suffering from record budget deficits, due in large part to the continued sluggish economy.  Having failed to deliver the lower unemployment and economic growth that could help alleviate state budgetary shortfalls, the Obama Administration instead is working to exacerbate them, by imposing new mandates that could force states to raise taxes or cut other essential government spending.

Higher Premiums — And the Reasons for Them

The Wall Street Journal has a front-page article this morning outlining insurers’ plans to raise premiums as a specific consequence of the health law’s passage.  While Democrats have trumpeted the various consumer benefits taking effect on September 23, the article notes that insurance companies have informed state regulators “it is those very provisions that are forcing them to increase rates.”  For instance, Aetna attributed increases of 5-7% in California and Nevada to the extra benefits, and “in Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.”

A detailed look at last week’s Kaiser Family Foundation study of employer-provided health insurance offered in 2010 gives some indication as to why the law would raise premiums.  Compiled data on employer plans shows that many firms will not meet all of the health law’s new requirements, and could be forced to offer richer benefits at a higher cost:

  • Eight percent of covered workers face a waiting period of four or more months (Exhibit 3.8, p. 53), but employers must shorten waiting periods to no more than 90 days (i.e. three months);
  • More than four in five firms (88%) do not cover all dependents through age 26, but all firms will be required to do so under the new law (Exhibit 3.11, p. 56);
  • One in ten (10%) covered workers – and one in five (20%) covered workers in small firms – have single deductibles of $2,000 or more, which will be prohibited under the law (Exhibit 7.6, p. 109; while family plan deductibles are capped at $4,000 in the law, there were no comparable data in the Kaiser study indicating how many family policies currently exceed the new cap);
  • Depending on plan type, between 4-13% of covered workers must first meet a deductible before their preventive services are covered, while under the health law, all cost-sharing for preventive services will be prohibited (Exhibit 7.16, p. 119); and
  • More than one in ten (12%) covered workers are subject to an annual limit on benefits, which will be prohibited under the law (Exhibit 13.11, p. 222).

The above data from the Kaiser study are just some of the examples of the new benefit mandates included in the law, and their impact on insurance coverage.  There are more mandates in the law for which the Kaiser study didn’t have data, and the Kaiser study refers only to employer-provided insurance.  The impact on individual insurance will likely be even greater, as individuals generally select less comprehensive coverage when they aren’t getting a significant subsidy from their employers – and a tax break from the federal government – to purchase their plan.

To be sure, the benefits above, and the other mandates included in the law, may be helpful or desirable to some individuals.  But the idea that employers and insurers can offer more than a dozen new mandated benefits at the same or lower premium prices is inconsistent with basic economic principles.  And unsurprisingly, some insurers are concluding that the many new mandates included in the health care law will raise premiums by more than the 1-2% the Administration alleges the mandated benefits will cost.

During his presidential campaign, candidate Obama promised to reduce family premiums by up to $2,500 “by the end of my first term as President.”  But, as millions of Americans may soon find out, you can’t promise lower premiums at the same time you’re raising benefits – because, in health care as in life, there’s no such thing as a free lunch.