Freedom Line Blog

How big is a “gap” in coverage when it affects 840,000 people?

The Los Angeles Times says that California is racing to pass a “bridge” program into law that helps individuals and families likely to be caught between qualifying for Medi-Cal (the state’s version of Medicaid), and ObamaCare’s new state-based health insurance exchange.

In California, residents earning up to 138% of the federal poverty level, or about $15,000 a year, will be eligible for Medi-Cal next year. Individuals earning up to 400% of the federal poverty level, or about $46,000, will be eligible for subsidies through the exchange, known as Covered California.

The Covered California board approved a plan in March to help patients expected to jump between the two. The “bridge plan” would enable patients now on Medi-Cal managed care whose incomes rise to continue to stay with their health plan once they move to the exchange.

The program, which still needs federal approval and state legislation to take effect, could serve as many as 840,000 people next year. The plan should streamline the process, keep out-of-pocket premiums low and make it easier for people to keep their providers, said David Panush, external affairs director with Covered California. “It is better for their quality of care, it is better for continuity of care,” he said.

While it’s refreshing to see California taking steps to protect people from being penalized for working more, what the article doesn’t mention is how related government policies are putting the squeeze on the state’s working poor.

California’s anti-business climate – coupled with ObamaCare’s perverse incentive structure that makes it more affordable for businesses to cut hours rather than pay hefty premium increases for employee’s health insurance – are underreported tax increases on the working poor.

By diminishing the number and quality of jobs available to people at the bottom of the employment ladder, certain public policies make it exceedingly difficult for people to work their up into a better standard of living.

Because of this, one way to think of the constant tinkering and enlargement of public benefits is as a way to compensate the working poor for taking away their access to an abundance of jobs where they can get the experience and skills needed to move upward an onward.

Under the current regime, a “bridge” program between Medi-Cal and Covered California is the least state policymakers can do. Still, those entangled in the state’s safety net deserve better.

Sally Pipes identifies an “escape hatch” for small businesses trying to avoid the costly employer mandates threatening employers with costly insurance premiums or fines:

A RAND analysis found that a fifth of firms with 50-200 workers had self-insured by 2010, the year Obamacare became law — up from 14 percent of such companies in 2006.

A survey by Munich Health North America found that 82 percent of health insurance executives report seeing growing interest in self-funded coverage among employers. A California-based benefits consulting firm that helps companies self-insure told Kaiser Health News that its business has doubled in the past six months. And Cigna says that it saw self-coverage for small businesses grow by a fifth last year.

Companies with younger, healthier workforces are leading the way. After all, with their population of low-risk employees, they have the most to gain. And that’s bad news for Obamacare’s exchanges.

The problem for ObamaCare is that the only way health insurance premiums will be (theoretically) affordable is if legions of young, healthy people join the exchanges’ insurance pools. That’s because they are needed to pay into the system so that older and sicker people can draw down the benefits.

But if small businesses opt to self-insure – especially if they are newer businesses more likely to employ younger and healthier workers – then that will drain the ObamaCare pools of the very people who will make them (barely) affordable.

With this in mind, don’t be surprised to see an IRS or HHS rule come down that prohibits self-insurance to prop up ObamaCare’s exchange pools.

As with the so-called “family glitch,” it’s a ploy the Obama administration will be ready to use if its slapdash law continues to produce embarrassing unintended consequences.

And the hits just keep on coming.

After news broke that the leadership in both the House and Senate were conspiring to exempt themselves from ObamaCare’s costly insurance exchanges, we’re told that the problem isn’t Congress shirking responsibility for a law it passed.

It’s worse.

The real issue, according to reporting by health policy expert Ezra Klein, is that Congress is too stupid to write a law clear enough to know what it does.

Per Klein:

“Here’s how it happened: Back during the Affordable Care Act negotiations, Sen. Chuck Grassley (R-Iowa) proposed an amendment forcing all members of Congress and all of their staffs to enter the exchanges. The purpose of the amendment was to embarrass the Democrats. But in a bit of jujitsu of which they were inordinately proud, Democrats instead embraced the amendment and added it to the law.
…
“So Grassley’s amendment means that the largest employer in the country is required to put some of its employees — the ones working for Congress — on the exchanges. But the exchanges don’t have any procedures for handling premium contributions for large employers.

“That’s where the problem comes in. This was an offhand amendment that was supposed to be rejected. It’s not clear that the federal government has the authority to pay for congressional staffers on the exchanges, the way it pays for them now in the federal benefits program. That could lead to a lot of staffers quitting Congress because they can’t afford to shoulder 100 percent of their premiums.”

Got that?

Rather than think through how an amendment would alter the structure of a law that, as one of its architects put it recently, “is probably the most complex piece of legislation ever passed by the United States Congress,” Democrats opted to play games. No wonder the lead author of the law sees “a huge train wreck coming down.”

Whether it’s a fine that’s really a tax, a “family glitch,” or now an ambiguous gap in coverage, ObamaCare’s so-called drafting errors are making it one of the worst written laws ever.

Fox News is reporting that the implementation of one of the two state-based, federally-regulated health insurance exchanges is being delayed for an entire year (2015 instead of 2014).

The decision applies to the exchange that will be created to let small businesses shop for affordable insurance policies, not the similar and more well-known exchange for individuals and families looking for insurance.

While it would be easy to blame poor planning and bad execution on the part of the federal government, another explanation seems just as likely.

As originally written, ObamaCare contained a so-called “public option” that would have been offered by the federal government on the exchange as competition with private alternatives.  Conservatives opposed the public option because it threatened to undercut private competitors with an artificially low price since the government, unlike a private business, doesn’t have to make a profit.

After a few years of running private businesses out of the market with artificially low prices, conservatives reasoned, the public option would become the only option as more and more consumers opted for a deal that would be too-good-to-be-true.  When that happened, government could claim the market failed, paving the way for a government-run, single-payer health system.

Of course, the public option was stripped out of the final version of ObamaCare.  But the intent to move America toward government-run health care did not.  Since there’s no requirement under the law for small businesses to provide health insurance, many may now stop bothering if the small business exchange is delayed.  That puts their employees on the individual and family exchange, which as estimates are showing, will cost people much more than originally advertised, even including the government subsidy.

With private insurance unable to deliver a product that covers the heightened floor created in ObamaCare that is also affordable for the people required to buy it thanks to the individual mandate, don’t be surprised if activists and policymakers start clamoring for government to declare a market failure and nationalize the system.

Such a scenario may sound far-fetched, but can anyone seriously say that with the Obama Administration in charge that it’s not at least possible?

The Indianapolis Star reports that Indiana Republican Governor Mike Pence, a possible 2016 presidential candidate, cleared an important hurdle today when the state’s House Public Health Committee approved a bill to expand Medicaid eligibility without relying on ObamaCare’s open-ended spending incentives.

Pence’s plan would increase Indiana’s Medicaid enrollment by an estimated 400,000, but within the state’s Healthy Indiana initiative begun in 2007.  As a health savings account, Healthy Indiana allots a certain amount of money to qualifying Hoosiers who then shop for doctors and treatment options within their budget.  In effect, it transfers the decision making process for health care away from government bureaucrats to private citizens.  By capping the amount, Healthy Indiana also gives state budget writers more certainty about the cost of Medicaid expansion in future years.

Contrast this with the unlimited spending commitment envisioned by the Medicaid expansion system under ObamaCare, and conservatives will see why Pence’s proposal should be watched closely.  Under ObamaCare, states would pay no cost for expanding their eligibility pool up to 138 percent of the federal poverty line.  But starting in 2017, those that expanded enrollment would pay for 10 percent of the increase.  Though seemingly a small percentage, the costs will run into the billions, with even more likely if the federal government decides to reduce its 90 percent subsidy, as President Barack Obama has already hinted at doing.

The future of health insurance reform looks like it will include some mix of government-regulated exchanges, subsidies, and cost controls.  The question dividing conservatives like Mike Pence and Paul Ryan on one hand from liberals like Obama on the other, is who gets to make the lion’s share of the decisions on how health insurance dollars are spent.  Conservatives value individual choice, while liberals favor centrally planned mandates.

Ironically, if the President wants ObamaCare to be fiscally sustainable, he’ll have to accept that the only way to do it is allowing conservatives like Pence and Ryan to inject into it as much personal freedom as possible.

Kudos to Sarah Kliff at Wonkblog for tracking down a draft copy of an ObamaCare application. It’s the one a person would use to get access to a state-based health insurance exchange, and the subsidies to buy coverage that go along with it.

At 21 pages and asking for lots of sensitive information, the document is likely to be much more cumbersome than most people bargained for. That’s one of the biggest hurdles facing implementation, according to Kliff:

The administration is caught in a bit of a bind here. On the one hand, Obamacare is tricky business. In order to figure out how much Americans will pay, the federal government needs to collect lots of information, everything from the size of the family to its income to whether any family members are Alaska Natives (which would make them eligible for additional services through the Indian Health Service). It’s hard to collect all that data in a way that isn’t a bit complex.

At the same time, the whole goal of the Affordable Care Act is to maximize health insurance enrollment. That puts a premium on making the applications simple and easy to use—not the kind of documents that you’d get half way through and give up on.

To find a space between the two of these, there are likely a lot of support services that will start springing up over the next few months. This could include traditional agents and brokers, whose whole line of business is understanding applications like this one.  The Affordable Care Act also envisions a group of navigators, financed by state exchanges, who will—as the name implies—help navigate the insurance system.

Meet the new middle men, the same as the old middle men.

True, cost-efficient health insurance reform would reduce reliance on “navigators” in order to eliminate the transactions costs they generate. If a product is so hard to buy that it requires help to do so, you can bet that the cost of said product will go up. And up, up, up…

The bright side? At least there will be thousands of health insurance broker jobs that the Obama Administration can claim credit for creating or saving.

According to America’s Health Insurance Plans (AHIP), ObamaCare’s health insurance tax needs to be repealed as soon as possible:

• Starting next year the ACA imposes a new $100 billion tax on health insurance.  The tax will start at $8 billion in 2014, increasing to $14.3 billion in 2018, and will continue to increase each year.

• The health insurance tax is larger than the device tax and the prescription drug tax combined.

• The health insurance tax will increase costs for individuals and families purchasing coverage on their own, small businesses, seniors and people with disabilities enrolled in a Medicare Advantage plan, and state Medicaid managed care plans.

• The health insurance tax is far greater than the minimum penalty for those who choose not to buy health insurance – further incentivizing young, healthy people to forgo purchasing insurance until they need medical care.

The health insurance tax is just one of twenty-one new taxes imposed by ObamaCare on the health industry and its consumers.  Thankfully, there is already bipartisan legislation filed in the House of Representatives to repeal this monstrosity, but unless there is a major breakthrough to convince liberals how bad ObamaCare will hamper health care, it looks unlikely to become law.

Unless the Department of Health and Human Services (HHS) decides to once again bump back the deadline that passed yesterday, as of right now 24 states have told the Obama Administration they will not create a state-based health insurance exchange.

Under the terms of ObamaCare, this means that HHS will now take over the process in these states, adding hundreds of millions in new costs to federal taxpayers.  Moreover, the short time horizon between now and October when the plans must be available on the exchanges (they’ll be effective next January), means that there is likely to be an enormous push to hire more HHS bureaucrats to get the job done.

It’s been said that when it comes to something being fast, accurate, and cheap, you can have any two but not all three.  If history is any guide, the feds will go oh-for-three.

H/T: Washington Times

The Wall Street Journal shows us that the price of “affordable” health care is a reduced standard of living:

The Affordable Care Act requires large employers to offer a minimum level of health insurance to employees who work 30 hours a week or more starting in 2014, or face a penalty. The mandate is a particular challenge for colleges and universities, which increasingly rely on adjuncts to help keep costs down as states have scaled back funding for higher education.

A handful of schools, including Community College of Allegheny County in Pennsylvania and Youngstown State University in Ohio, have curbed the number of classes that adjuncts can teach in the current spring semester to limit the schools’ exposure to the health-insurance requirement.

The scaled back hours and pay for adjunct professors is part of a larger trend in a wide variety of industries.  Faced with lower thresholds that require new benefits, employers from universities to fast food restaurants face three options: pay-up, pay-out, or tap-out.  In other words, they can increase their health care spending, be fined for not increasing such spending, or cap the hours and pay of otherwise eligible workers to avoid the spending and the fines.

Unfortunately for workers, capping hours and pay reduces their standard of living.  But don’t worry.  In 2014, Obamacare mandates that every state will have a fully functioning health insurance exchange where newly impoverished workers can get “affordable” health care – some even with government (i.e. taxpayer) subsidies – so it’s a safe bet that all will be well when the feds are in charge of at least 25 separate state programs.  Right…

God bless residents of the Pacific Northwest for casting rightful suspicion on ObamaCare’s state-based, federally-directed, health insurance exchanges:

Focus groups in Oregon expressed emotions about buying coverage that included “skepticism” and “frustration,” and some individuals and small businesses used “black hole” and other less-kind terms to refer to insurance, brand design firm Sandstrom Partners told the Oregon Health Insurance Exchange in a presentation made available by the exchange.

The word exchange “raises some suspicions of loopholes and fine print” and “implies current coverage may needed to be traded for something else,” wrote communications company GMMB in a presentation to the Washington State Health Benefit Exchange. Part of the problem, GMMB said, was that the word was “perceived as a verb and unfamiliar as a noun” and reminded people of the New York Stock Exchange or military exchange stores.

…

Washington state is leaning toward calling its program Washington HealthLink, as long as it doesn’t conflict with existing trademarks, and plans to use green and blue in its logo design because the colors are considered to be reassuring, said Michael Marchand, the state’s exchange director. The exchange’s board of directors will make the final decision on the name, he said.

Focus group participants had also been asked to consider HealthChoice but it “makes some wonder if Washington State is making the choice for them,” consultants and the exchange board concluded.

The Wall Street Journal article from which these excerpts are culled goes on to detail other stories of states trying to brand government-created “marketplaces” as something other than a first big step to government-run health care, but you get the point.

No matter what you call an ObamaCare exchange, it’s still an entry point for socialized medicine.

If the Supreme Court’s ObamaCare decision hasn’t made you so despondent as to write off the topic of health care altogether, then you owe yourself a stop by the American Enterprise Institute’s online magazine, The American, where Cliff Asness has managed the near-impossible: writing a comprehensive overview of the defects of the American system that is breezy, informative, and, at times, laugh-out-loud funny.

Asness has as his goal debunking four common myths about American health care:

1. Health care prices have soared in the recent past
2. The pre-ObamaCare system was ‘insurance’
3. Stopping insurance companies from charging based on pre-existing conditions is the one good part of ObamaCare
4. Healthcare costs are very high in the United States compared to socialist countries

Asness’ deconstruction of every point is thorough, illuminating, and crystal clear. In fact, it’s safe to say that — if you haven’t been introduced to these arguments before — you’ll never think about health care the same way again. Here’s one example, hailing from section two, on ‘insurance’:

Due primarily to the tax subsidy given to employer-provided healthcare (a bipartisan, so-far-untouchable disaster), catastrophic health insurance is not Americans’ norm. Rather, employers provide essentially all healthcare from basic health maintenance and symptom relief to the most expensive life-saving procedures, and they do it because the government massively subsidizes this approach.

This is odd. You don’t go to your car insurer to fill your car with gas or to your homeowner’s insurance company to change a light bulb. Why do you go to your health insurance company for everyday medical services? That is not insurance, it is tax-subsidized provision of all your healthcare needs, and it causes two of our system’s biggest problems. 1) Health coverage is not portable, as it’s employer-provided, and 2) consumers are insulated from the cost of basic healthcare because they don’t pay directly for services. Educated consumers spending their own money would be far better shoppers for healthcare. Also, I wish I wasn’t asked for a $5 co-pay after a doctor’s appointment. Ask me to pay at least $200 or nothing. Paying $5 for a prostate exam is demeaning to both parties.

The conservative/libertarian intelligentsia has plenty of deeply-schooled policy wonks and plenty of engaging writers. But very rarely to both skill sets belong to the same author. Cliff Asness is the rare exception. Read it and grow wise.

There’s a lot to say about Chief Justice John Roberts’ opinion rewriting ObamaCare’s individual mandate as a tax in order to save the law from being ruled unconstitutional.  One of the best – and most succinct – analyses comes from the CATO Institute’s Michael F. Cannon:

The Supreme Court ruled that ObamaCare’s individual mandate is not constitutional under the Commerce Power, which was how Congress framed the mandate to avoid a political backlash from calling it a tax. Congress and the president swore up and down that the mandate was not a tax. Yet the Court upheld the mandate as a valid use of that disavowed taxing power. What Congress said the individual mandate is, the Court said is not constitutional. What Congress said the mandate is not, the Court ruled is constitutional. Everybody got that?

Where does that leave us?

The Supreme Court just enacted a law that Congress never would have passed.

The Court just told Congress it is okay to lie to the people to avoid political accountability.

Remember when Obama  solemnly and repeatedly promised that “if you like your insurance plan, your doctor, or both, you will be able to keep them?”

If not, don’t beat yourself up.  He has broken so many promises that no reasonable person can keep tally.

But score another casualty to ObamaCare specifically.  According to The Wall Street Journal, college students should expect their plans to become more expensive or disappear altogether:

“Some colleges are dropping student-health plans for the coming academic year and others are telling students to expect sharp premium increases because of a provision in the federal health law requiring plans to beef up coverage.  The demise of low-cost, low-benefit health plans for students is a consequence of the 2010 health care overhaul.  The law is intended to expand coverage to tens of millions of uninsured Americans, but it is also eliminating some insurance options.”

Moreover, that consequence will likely be widespread:

“The new rules are likely to affect a broad swath of American colleges.  Some 60% of schools’ plans had coverage of $50,000 or less for specific conditions, and almost all of the rest have some sort of payout caps that they will have to do away with by 2014, the GAO study found.”

And the Obama Administration’s response?  They apparently couldn’t care a whole lot less.  “The Obama Administration,” the report notes, “argues that the most limited benefit plans colleges previously offered hardly counted as coverage at all.”

Yeah, that should motivate the youth vote for Obama just like those vapid, naive days of 2008.

Avik Roy, a health policy expert at the Manhattan Institute, posits an interesting option for fiscal conservatives looking for something to replace Obamacare with, if Republicans capture Congress and the White House this November: Bushcare.

The Bush plan was formulated by the White House’s National Economic Council, under the leadership of Allan B. Hubbard. The core goal of the plan was to equalize the tax treatment of employer-sponsored and individually-purchased health insurance, without increasing the deficit. (As regular readers know, the fact that employers can purchase health insurance for their workers tax-free, whereas individuals can’t, is the original sin of the U.S. health-care system.)

…

Bush’s proposal sought to eliminate the unlimited tax break for employer-sponsored insurance, replacing it with a standard deduction for everyone. Under the plan, anyone—employed or not—who bought at least catastrophic insurance would not pay income or payroll taxes on the first $7,500 of their income, or the first $15,000 for a family plan.

…

The Bush plan’s numbers were designed with 2009 insurance prices in mind, and the tax-deduction thresholds would grow with CPI inflation. The Treasury Department estimated that the plan would lower taxes for 80 percent of those with employer-sponsored insurance, and increase taxes for the remaining 20 percent. It would have especially benefited the 18 million people who then bought insurance on their own, along with many of the uninsured, who would suddenly find health insurance to be significantly less expensive.

…

In contrast to Obamacare, however, the Bush plan would have turbocharged the market for consumer-driven health plans, tied to health savings accounts, because the most economically efficient use of the deduction would be to purchase a sufficiently generous consumer-driven plan that allowed individuals to put a maximal amount of money into HSAs. Obamacare significantly constrains the use of HSAs in its regulated insurance markets.

Among the criticisms of Bush’s health care proposal is that it “only” expanded health insurance coverage to an additional 11 million people.  Obamacare’s supporters claim – perhaps erroneously – that it would cover 33 million.  But even if we take the estimates at face value, there’s another number that’s arguably more important.

The cost of Obamacare’s 33 million newly covered citizens is agreed by all sides to be in the trillions of (new) dollars.  Bush covered 11 million for zero dollars in increased federal spending commitments.

Food for thought if the Republicans run and win on a platform to repeal and replace Obamacare.

Christine Erickson at Free Enterprise Nation has a chilling analysis of Judge Henry Hudson’s ruling that Obamacare’s individual mandate is unconstitutional:

The idea behind the individual mandate is that it is a way to achieve universal coverage through the private market, rather than through a government-sponsored plan. When considering the regulations placed on insurance companies by the reform law, the individual mandate is necessary because it brings healthy individuals into the insurance pool. Under a major provision within the law, insurers can no longer deny policies to people with preexisting conditions. If this regulation is put in place without the individual mandate, a healthy individual can go without insurance, knowing that he or she can purchase coverage after having been diagnosed with a serious medical problem. For insurance companies that sell to the individual market, this would shift the makeup of their policy holders to the point where they would spend much more on claims than they make in premiums, leaving them with the decision to drastically raise premiums (15% to 20% by CBO estimations) or exit the individual market altogether. Once private insurers are forced out of the individual market, it is almost guaranteed that the government would step in and create a government-run plan.

With Judge Hudson’s ruling, as well as two other recent rulings that the mandate falls within Congressional limits, healthcare reform supporters now see two likely outcomes to a Supreme Court challenge: the law will be upheld in its entirety, or the individual mandate alone will be overturned. If the Supreme Court decides the latter, the country could be immediately set on a path towards a government-run, single payer system.

Oh, dear…

In Friday’s Liberty Update commentary “The ObamaCare Fit Hits the Shan,” we noted how quickly the negative consequences of ObamaCare are arriving in the form of higher health care spending and insurance rates.

Well, Kathleen Sebelius, President Obama’s Health and Human Services Secretary, seems to believe that she can terrify the economic laws of supply and demand into deference.  Attacking private health insurers for doing nothing more than adjusting their bottom lines to meet business realities imposed by ObamaCare mandates, Sebelius ordained:

There will be zero tolerance for this type of misinformation and unjustified rate increases.  We will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.”

Karen Ignagni, who leads America’s Health Insurance Plans, provided an Economics 101 primer that Sebelius should have received in college by saying, “It’s a basic law of economics that additional benefits incur additional costs, and the impact on premiums depends on the type and amount coverage policyholders had before.”

Simple economics aside, who does Sebelius think she is?  A Soviet-era commissar who can cow American citizens and businesses by thundering such threats?  Ms. Sebelius, you’re about to receive a true lesson in “zero tolerance” when Americans head to the ballots in November.