The ObamaCare Carnival of Perverse Incentives
Opinion – WSJ – January 24, 2014
John C. Goodman

With fewer glitches to deter them, millions of Americans are now logging on to the ObamaCare health-insurance-exchange websites. When they get there, many are discovering some unpleasant surprises:

The deductibles are higher than what most people are used to, the networks of doctors and hospitals are skimpier (in some cases much skimpier), and lifesaving drugs are often not on the insurers’ formularies. Even after the government’s income-based subsidies are taken into account, the premiums are often higher than what people previously paid.

Why is this happening? Because the new law gives insurance buyers and sellers perverse incentives to behave in ways that create these problems. Things will only get more out of whack as more and more unhealthy people enter a system designed to be paid for by premiums from healthy people.

Under the Affordable Care Act, the benefits insurers must offer are strictly regulated. The law piles on benefits for which everyone must have coverage, whether they could ever use the benefits or not. At the same time, insurers set their own premiums and choose their own networks of doctors and hospitals.

To keep premiums as low as possible, the insurers are offering very narrow networks, often leaving out the best doctors and the best hospitals. In September, the Los Angeles Times reported that Blue Shield will have only about half the doctors in its exchange plan as it has in its traditional plan. One of the exchange plans in Colorado includes only a single Denver hospital, the one that usually treats Medicaid patients.

Narrow networks can be good or bad. Wal-Mart WMT -0.25% has selected a half-dozen centers of excellence around the country for its employees, places carefully chosen for their high quality and low costs. The exchange health plans, by contrast, appear to care only about cost. They are offering low fees—sometimes even lower than the rock-bottom fees Medicaid pays health-care providers—and accepting only those providers who will take them.

Under the Affordable Care Act, insurers are required to charge the same premium rate to anyone who wants to sign up, regardless of health status; and they are required to accept anyone who applies. This means that to make ends meet they must overcharge the healthy and undercharge the sick. It also means insurers have strong incentives to attract the healthy (on whom they make a profit) and avoid the sick (on whom they incur losses) by, in effect, making their plans less appealing to the sick.

Here’s how they seem to be doing it: In structuring the plans they offer on the ObamaCare exchanges, the insurers apparently assumed that the healthy will choose the plan they buy based on its price, while ignoring other features of the plan. It makes sense: If I am healthy why wouldn’t I shop for the lowest price? If I later develop cancer, I can move to a plan that has the best cancer care. By law, these plans will be prohibited from charging me more than the premium paid by a healthy enrollee.

Insurers also assume that people who already are ill or otherwise expect to use a lot of health care pay much closer attention to the cost of deductibles and which doctors and hospitals are in the insurer’s network. To have any hope of balancing their books, insurers must then attract the maximum number of customers who are likely to stay healthy and thus not use so much of the care they paid for, while unhealthy people in effect use more than they paid for. This is why most plans are apparently designed to attract people willing to overlook high deductibles and less access to health care in return for lower premiums.

Yet no matter how narrow the provider network, health plans are going to cost more if they enroll more people with above-average health-care costs. And that is what is about to happen. higher premiums charged to everyone enrolled in the plans.

To make matters worse, cities and towns with unfunded health-care commitments are getting ready to dump their retirees on the http://theessaymag.com/canada/ state exchanges. Since retirees are above-average age, they have above-average expected costs. The city of Detroit, for example, is planning to dump the costs of about 10,000 retirees on the Michigan exchange.

Then there are the job-lock employees—people who are working only to get health insurance because they are uninsurable in the individual market. Under ObamaCare, their incentive will be to quit their jobs and head to the exchanges.

In sum: A lot of high-cost patients are about to enroll through the exchanges. This will force up premiums further for all other buyers.

At some point, politicians of both parties will realize that we can do better than this. That will require a real market for health insurance with premiums that reflect real risks. There is a role for government in helping people with severe health problems. That is why risk pools exist. What we didn’t need was to destroy the market for the many in order to give aid to the few.

Mr. Goodman is president of the National Center for Policy Analysis and the author of “Priceless: Curing the Healthcare Crisis” (Independent Institute, 2012).

For some years, the federal government and some states have operated and subsidized risk pools. These allowed the chronically ill and other high-cost people who were “uninsurable” to purchase insurance for the same premium healthy people pay. Under ObamaCare, however,

the pools are due to shut down and send their enrollees

to the exchanges, where the above-average cost of their care will be implicitly borne by

March 15, 2013 Major insurers surveyed about potential premium increases in six major markets expect premiums to increase by an average of 169 percent in 2014 for younger and healthier individuals. American Action Forum asked insurers about the impact of the

Affordable Care Act (ACA) in the Chicago, Phoenix, Atlanta, Austin, Milwaukee and Albany markets. Despite variation by geography, the overall trend showed that younger and healthier male individual policyholders are expected to see the highest premium insurance, 189 percent, in 2014. The survey (PDF) does note that since individual premiums can be as low as $50 a month for young and healthy individuals, an increase can appear very large when measured on a percentage basis. The trends for young and healthier individuals also

applied for small employers with http://www.siedc.org/wp/ a predominantly younger and healthier work force. For older and less healthy individuals, premiums are predicted to decline by an average of 22 percent while small group premiums for employers with older less healthy workers will decline an average of 26 percent. The decline is attributed to the spread of risk across a larger base broadened by expanded coverage for younger individuals and workers under ACA reforms. (The American Action Forum is a forward-looking

policy institute dedicated to keeping America strong, free and prosperous. It seeks to promote common-sense, innovative, and solutions-based policies that will reform government, challenge out-dated assumptions, and create a smaller, smarter government that will serve its citizens better.)

Politico by Natalie Villacorta –

April 7, 2014:

Obama administration officials hoping to exhale after the viagra online cheap big finish to Obamacare’s first enrollment season may need to hold their breath a while longer.

All the confusion and mixed messages out there are bound to combust if people decide they were misled — an echo of the “you can keep your plan if you like it” fiasco.

“If there’s been a failing with the Obama administration [communication], it’s the failure to adequately plan for that kind of extensive, repeated interaction with people at the community level,” said Larry Jacobs, an expert on health politics at the University of Minnesota. Successful outreach doesn’t depend on just one jingle, he stressed. “It’s repeated and unceasing outreach at multiple levels.”

Some of the missed points and mixed-up details could bite the administration almost immediately as people start using their new plans and blame surprises on the White House. Other lingering public misconceptions could feed Republican attacks through the November midterm elections.

Here are six big danger points.

1. I’m sick! Why can’t I get covered?

Coverage of pre-existing conditions was a big selling point of the law, but not everyone realizes that they can’t just sign up the minute a condition is diagnosed. The regular dates and deadlines for enrolling still apply, no matter when you get appendicitis.

Yet 6 in 10 uninsured Americans didn’t know March 31 was the cutoff for getting 2014 coverage, according to a Kaiser Family Foundation poll last month. They didn’t know that missing the deadline meant they’d be locked out until November (unless they’re eligible for Medicaid, which has no such restriction.)

“Since they don’t even know that there’s a deadline, I don’t think that they could know the next step, which is that they can’t enroll for the rest of the year,” said Mollyann Brodie, executive director of public opinion and survey research at Kaiser.

“It’s going to be a shock, and we are going to be fielding a lot of calls,” said Michael Mahoney, a senior vice president with the online insurance broker GoHealth. “But there’s not much you can do to help.”

One reason for the confusion might have been all those delays and extensions. Just before March 31, the administration granted people with special circumstances or sign-up difficulties a bit more time.

“There’s almost an assumption that there’s never a real deadline on anything,” said Tom Miller, a fellow at the American Enterprise Institute and a critic of the law.

The risk: Anyone who gets sick and thinks they can just waltz in and get insurance is in for a shock. They just might blame it on Obamacare — or President Barack Obama. And then when they get hit with a penalty for not having insurance, they’ll be even angrier.

2. The $95

mandate myth

Most people know there’s a penalty for being uncovered. But they are wrong about the amount.

“You have to pause and say, ‘It’s not one Ben Franklin, it’s probably closer to three,’” said Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service Inc. Customers constantly walked in and declared that they were going to forgo coverage and cough up the $95 penalty, he said. Then they’d learn that it was actually $95 or 1 percent of income, whichever is greater. In 2016, the amount increases to $695 or 2.5 percent of income.

“They say, ‘Well, that’s a lot more than what my congressman told me, or what I read in the newspaper or heard on television,’” Haile said. “They’re sort of flummoxed.”

The government didn’t stress the penalty during much of the outreach. “I have a strong feeling that the kind of vagueness about the mandate and penalty was deliberate,” said Jacobs, the political scientist. “It’s better to attract people with the benefit than threaten them the IRS is going after them.”

Ceci Connolly, managing director of the Health Research Institute at PricewaterhouseCoopers, said she’s not sure that was a smart strategy. Her research found that Massachusetts’s emphasis on a penalty when its own health reform

law took effect motivated people to sign up.

Of course, Obamacare won’t hit anyone with a fine until Americans start to do their 2014 taxes next year. That means it comes due in 2015 — after the November midterms but in time for the 2016 presidential campaign.

The risk: a delayed but nasty surprise at tax time.

3. I can’t afford Obamacare

Four in 10 uninsured Americans still don’t know that the Affordable Care Act offers financial assistance to low- and moderate-income individuals, according to that Kaiser poll. Plus, many of the GOP attacks on the law that people hear are about its cost.

Enroll America found that perception of high costs was the single biggest barrier to enrollment in this first season. Over the course of the enrollment period, the group fine-tuned its messaging to stress the availability of financial help and interest soared. “Once the connection is made, the likelihood of those people enrolling goes through the roof,” Enroll’s field director John Gilbert said.

But sometimes people who knew generally about the assistance didn’t realize that they themselves might qualify, said Christine Barber, a senior policy analyst at Community Catalyst. “People are really surprised that they can get financial help and that the law can benefit them,” she said.

And subsidies don’t prevent sticker shock for everyone; the aid gets “thinner” as people move up the sliding income scale. “That will be off-putting for some,” said Karen Pollitz, a senior fellow at Kaiser.

It’s impossible to know how many people never applied for coverage — or sidestepped an exchange and bought a policy elsewhere at full cost — because they didn’t understand how much help was available.

The risk: People who learn that they missed out on a good (or a better) deal will want to blame someone — and it probably won’t be themselves.

4. “Sort of a bait and switch”

People who end up making more than they anticipated during the year, and don’t realize that they should report it, may have to pay back some of their tax credit when they file their taxes. But for many people, matching up what they got versus what they should

have gotten is going to be “highly problematic,” said Jackson Hewitt’s Haile.

Folks who suddenly find their tax refunds reduced may feel like the government has “raided their piggy bank” — forgetting, of course, that the piggy bank was bigger in the first place because of the financial help in purchasing health insurance. “You run the risk of it creating very negative perceptions of the marketplace. Sort of a bait and switch, if you will,” he said.

The risk: What do you mean I don’t get a tax refund? I want my piggy bank!
5. It’s not free?

Many people who signed up for Obamacare are insured for the first time — or the first time in a long time — and they are now confronting an array of befuddling terms. They don’t necessarily understand that a monthly premium isn’t the only bill they have to pay. The co-pays, deductibles and other costs they’ll encounter when they go see a provider could be a real shock.

“Messages get very simplified, and it sounds like, ‘enroll in the Affordable Care Act and your worries are over for medical bills,’” AEI’s Miller said.

Groups and programs that helped consumers choose a plan say they tried hard to explain it all. For instance, Jodi Ray, who oversees the navigator programs at the University of South Florida, said they were “careful about explaining deductibles, co-pays and premiums and when they’re used, when they’re needed, when they’re going to kick in, when they’re expected to pay them.” And they tried to connect people to an in-network physician. But it’s all still complicated.

The risk: EOB-alarm. Unhappy people who get one of those Explanation-of-Benefits statements for the first time.

6. The reality of costs

Remember that “save $2,500 on your insurance” promise that presidential candidate Obama made in 2008? It took a few different forms and was couched with different time frames. Sometimes it was promised by the end of Obama’s first term. But all the nuances of economic modeling and different cost-growth curves never made it into the sound bites. People with insurance heard promises of big savings and — except for some on the exchanges — they haven’t experienced that.

The overall rate of growth in national health spending including Medicare has slowed, Connolly noted. But for individuals? Neither premiums nor out-of-pocket spending has dropped — most certainly not by the $2,500 that people thought they were promised.

It’s little comfort that their costs might have been even higher without the health care law, if they even understand that.

And premiums could go up sharply next year in some or most states depending on who did get covered this year and how young, old, sick or healthy they are.

“That’s another possible premium shock,” Miller predicted. “I don’t think it will happen in all 50 states, but I think it’ll happen enough to be noticeable.”

On April 1, 2014, President Obama signed the Protecting Access to Medicare Act of 2014 (Act) into law. The Act’s main provisions preserve the pay rate for physicians treating Medicare patients and delay the compliance deadline for converting to the updated International Classification of Diseases codes for at least one year.
The Act also eliminates the Affordable Care Act’s (ACA) annual deductible limit that applied to health plans in the small group market. This change is retroactively

effective to when the ACA was enacted in March 2010.
The Act does NOT eliminate the ACA’s out-of-pocket maximum, which applies to all non-grandfathered health plans for plan years beginning on or after Jan. 1, 2014.
Cost-sharing Limits
Effective for 2014 plan years, the ACA requires non-grandfathered health plans to comply with cost-sharing limits with respect to their coverage of essential health benefits.
Annual Deductible Limit
As originally enacted, the ACA included an annual deductible limit that applied to health plans offered in the small group market. This limit became effective for plan years beginning on or after Jan. 1, 2014. Effective for 2014 plan years, the ACA provided that the annual deductible may not exceed:
• $2,000 for self-only coverage; and
• $4,000 for family coverage.
The ACA required the deductible limit to be adjusted annually. For 2015, the Department of Health and Human Services (HHS) announced that the annual deductible limit would increase to $2,050 for self-only coverage and $4,100 for family coverage.
HHS viagra online discount created an exception that allowed a small health plan’s deductible to exceed the ACA limit if a plan could not reasonably reach the actuarial value of a given level of coverage (that is, a metal tier—bronze, silver, gold or platinum) without exceeding the limit. This exception was available to all metal-level plans, but it was particularly useful for bronze-level plans.
Out-of-pocket Maximum
The ACA places an annual limit on total enrollee cost-sharing for essential health benefits, effective for plan years beginning on or after Jan. 1, 2014. This annual limit, or out-of-pocket maximum, applies to all non-grandfathered health plans. This includes, for example, self-insured health plans and insured health plans of any size.
Effective for 2014 plan years, a non-grandfathered health plan’s out-of-pocket maximum may not exceed:
• $6,350 for

self-only coverage; and
• $12,700 for family coverage.
The ACA requires the out-of-pocket maximum to be adjusted annually. For 2015, HHS announced that the out-of-pocket maximum will increase to $6,600 for self-only coverage and $13,200 for family coverage.
In addition, HHS provided transition relief for 2014 plan years for plans that utilize more than one service provider to administer benefits.
Repeal of Annual Deductible Limit
The Act eliminates the ACA’s annual deductible limit for health plans in the small group market. This change is effective as of the date of the ACA’s enactment in March 2010.
The repeal of the annual deductible limit will provide small employers with more flexibility to control premium costs by selecting a health plan with a higher deductible. However, the out-of-pocket maximum, which includes the deductible amount, and the ACA’s actuarial requirements for small health plans will continue to limit enrollee cost-sharing in small employer plans.
Small employer health plans that have started their 2014 plan years (for example, calendar year plans) were already required to incorporate the ACA’s annual deductible limit, unless a higher limit applied due to the actuarial value exception. It is not likely that these plans will be affected by the

repeal of the ACA’s deductible limit until their 2015 plan years.
However, small employer health plans that have not started their 2014 plan years (for example, health plans with a Nov. 1 to Oct. 31 plan year) may be able to avoid the ACA’s deductible limit altogether.
Delay for ICD-10 Codes
The Act delays the deadline for HIPAA-covered entities to comply with the updated set of diagnosis and procedure codes known as the International Classification of Diseases, 10th Edition (ICD-10). The deadline is delayed from Oct. 1, 2014, until at least Oct. 1, 2015. This delay will give covered entities and their business associates more time to fully transition to the ICD-10 codes for their HIPAA standard transactions.

Kaiser Health News by Julie Appleby, Mary Agnes Carey and Phil Galewitz –

March 31, 2014:

Just because open enrollment for people who buy their own health insurance formally closes March 31 doesn’t mean debate over the health law will take a hiatus. After more than four years of strident rhetoric, evidence about how the law is actually working is starting to trickle in. Here are seven things to watch before the next enrollment period begins in November:

1) How many enrolled, really?

Rightly or wrongly, this figure has become a yardstick by which some are measuring the law’s success. But no one can give an accurate accounting yet.

President Barack Obama announced Thursday that the administration had hit the 6 million enrollment mark — the revised projection of the nonpartisan Congressional Budget Office (which had initially forecast 7 million before the disastrous rollout of the online marketplaces last October).

As of March 1, another 4.4 million consumers had been deemed eligible for Medicaid, the state-federal insurance program for low-income Americans.

Final tallies of enrollees may come in mid-April, but those figures won’t be the last word either. That’s because not everyone who signs up for a private plan will pay their first premium, and they aren’t covered unless they do. In addition, consumers who signed up through insurers or on nongovernment sites are not yet included in the count. And finally, the administration on March 26 relaxed the deadline for some people, including those who encountered computer glitches while trying to enroll.

2) Who has signed up?

Prior enrollment reports have shown the vast majority to be 35 and older with more women than men. Much attention will be focused on the coveted demographic, ages 18 to 34, who have accounted for just over a quarter of enrollees. While insurers hope for young enrollees, they can also benefit if older ones are in good health.

Despite all the attention on national numbers, state and local enrollment figures are more important in any case because insurance markets are state-based, and big numbers or youthful enrollment in some places won’t make up for shortfalls in others. State markets are expected to vary significantly, with some seeing bigger premium increases next year because they have older and sicker enrollees, while others with a more robust mix are more likely to see rates hold steady.

3) Has the law put a dent in the number of uninsured?

This is a key question for a law designed to reduce the nation’s 48 million uninsured. It will take a while, though,

to track changes. For one thing, no information has been released about how many of those who signed up

were previously uninsured. Also, data so far includes those who signed up through the state and federal online markets, but not those who purchased coverage elsewhere, or who enrolled in job-based plans they had previously turned down.

A McKinsey consulting firm telephone survey in February found that 27 percent of those purchasing coverage were previously uninsured, while a Gallup poll in March found the uninsurance rate falling. Both studies have limits, however, and cannot be considered the final http://best1cleaning.com/discount/ word. Right now, “we have a pretty good sense the number

of uninsured has gone down, but not a clue as to by how much,” said Larry Levitt of the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

4) Will insurance plans, prices and rules be the same in the next enrollment period which begins Nov. 15?

No. Right now, insurers are assessing their new enrollment and associated health care costs for the first three months of the year, which will help them set rates for next year. Most of them must submit those rates for review by state regulators by spring or early summer. But don’t expect to see the new rates until next fall, just before open enrollment begins. Analysts say much will depend on who enrolled this year and how healthy they turn out viagra online overnight to be.
Some predict big premium increases in some areas, while others say insurers are protected from the impact of large claims by provisions of the law that insulate them from unexpectedly high medical costs. Rule changes for next year will also factor into rate decisions. Insurers warn they may have to raise prices if they’re forced to offer greater selection of doctors, hospitals and drugs in their networks.

5) Will Medicaid participation grow?

As of March 1, 4.4 million people had been deemed eligible for Medicaid, but it’s unclear how many are newly eligible for the program or actually enrolled. That number doesn’t count people who have enrolled through their state Medicaid agency. Because there is no deadline for enrolling in Medicaid, final tallies for 2014 won’t be available until next year.

The program for the poor continues to be a political battleground. Democratic architects of the health law envisioned Medicaid as a key tool for insuring more Americans, expanding eligibility to adults with incomes up to 138 percent of the federal poverty level, or $15,800 a year for an individual. Then, the U.S. Supreme Court made state participation effectively optional. While the District of Columbia and 26 states, most of them under Democratic control, moved forward, two dozen others declined to participate.

A handful of states, including Pennsylvania, Virginia and Utah, are considering expansion next year. But lobbying by hospital groups and others have run into ideological headwinds and fears that state taxpayers would bear additional costs despite generous federal funding.

6) How will insurance change for those of us who get it through our employers?
The answer depends on what your employer is doing now. If you work for a large company and have job-based insurance, your employer will probably keep offering it, according to most surveys.

It’s trickier to say what will happen for workers at firms that don’t offer coverage. That’s because all employers were given a pass this year on rules that say if they don’t offer health coverage to full-time workers, they could face fines.

The Obama administration then extended that exemption until 2016 for firms with 50 to 99 workers. (Those with fewer than 50 workers were never included and don’t face fines.) But starting next year, employers with 100 or more workers must offer insurance to at least 70 percent of workers — rather than the 95 percent originally called for under the law — or face fines.

For those with job-based coverage, the health law is also expected to accelerate existing trends, including rising deductibles and copayments for employees. Employers are making those moves to slow rising premium costs and to shift more expenses to workers. Analysts also expect to see an increase in workplace wellness programs, which often give workers incentives to participate. The health law allows employers to offer larger incentives, or up to 30 percent of the cost of coverage. That means workers who choose not to participate or, in some cases, to meet certain generic viagra 100mg health goals, will pay more toward their coverage.

7) What impact will the rollout have on congressional elections?

Look for lots of advertising in vulnerable Democratic districts heading into the fall. If Republicans win control of the Senate (the GOP is expected to keep control of the House, if not increase its majority) that could mean health law defunding bills passed by the House will get a Senate floor vote. While Obama would surely veto them — and neither chamber is expected to have a veto-proof majority — the bills would keep anti-health law legislation front and center as both parties battle for the White House in 2016.