Articles on this Page
- 10/14/16--07:07: _1.4 million people ...
- 10/18/16--04:49: _UnitedHealth profit...
- 10/18/16--12:41: _UNITEDHEALTHCARE CF...
- 10/19/16--09:04: _The government expe...
- 10/19/16--13:01: _A head-scratching l...
- 10/20/16--05:57: _Quite possibly the ...
- 10/20/16--12:14: _OBAMA ON OBAMACARE:...
- 10/21/16--11:22: _Republicans respond...
- 10/24/16--14:10: _Obamacare premiums ...
- 10/25/16--04:00: _BBVA's $250 million...
- 10/25/16--09:12: _Obama says the Affo...
- 10/25/16--15:05: _Obamacare is perpet...
- 10/26/16--07:42: _Aetna's CEO laid ou...
- 10/26/16--08:48: _Here's how much Oba...
- 10/26/16--16:02: _Here's how the next...
- 10/27/16--04:59: _Health insurer Aetn...
- 10/27/16--07:45: _Seth Meyers: Donald...
- 10/30/16--03:00: _Donald Trump is goi...
- 10/30/16--04:04: _President Obama mad...
- 11/01/16--04:42: _It's do or die for ...
- Expand Medicaid in the 19 states where it has not been expanded. Obama said that since the funding to expand the program comes from the federal government, states are leaving free money on the table by not expanding it.
- Use savings from Obamacare to fund more tax credits for those who fall above the current threshold to qualify for subsidies, which is 400% of the poverty line.
- Start a government-sponsored public option, which he said would be a "fallback" if there are no private insurers in a given coverage area. This would be primarily for rural areas where not as many insurance companies are competing.
- 10/24/16--14:10: Obamacare premiums are going up by an average of 25% next year
- 10/25/16--15:05: Obamacare is perpetuating a death spiral
- 10/26/16--07:42: Aetna's CEO laid out just how Obamacare could collapse
- Expansion of Medicaid for low-income working poor, with mostly federal financing.
- Research on alternative ways to treat conditions to inform physician practice.
- Tests of innovative ways to organize and deliver health care for better value that can be quickly implemented across the system.
- The exchanges, for purchasing subsidized individual policies from private insurance companies.
- 11/01/16--04:42: It's do or die for Obamacare ($AET, $UNH)
The exodus of insurers from the Affordable Care Act (ACA) is going to lead to a massive shift in coverage next year.
According to an analysis by Bloomberg's Zachary Tracer, Tatiana Darie, and Katherine Doherty, roughly 1.4 million Americans will lose the coverage they have currently through the ACA, better known as Obamacare, exchanges and have to find a new plan.
Bloomberg estimated the number by calling the insurance regulator in each state and asking how many people would be impacted. A few states, such as Georgia and Texas, either didn't answer Bloomberg or did not have enough data.
Eleven states and Washington DC said they would be unaffected.
According to the Bloomberg report, the states with the most turnover are Florida, North Carolina Tennessee, Illinois, and Pennsylvania.
The shift is primarily due to insurers leaving the marketplaces where they operated. Large firms such as Aetna, UnitedHealthcare, and Humana have all announced rollbacks of their Obamacare coverage for 2017.
Some states, such as Minnesota, Tennessee, and South Carolina have seen so many insurers leave that it has pushed the exchanges to the brink, lead to large premium increases, and have state lawmakers worried.
These insurers are reducing coverage due to the unexpectedly high costs of the pool of people entering the exchanges. The people that have signed up so far have been sicker and older than expected, meaning they are net losses for the insurers. Younger people have not jumped onto the exchanges as anticipated, leaving the insurers without a counterbalancing group to pay into the pool.
The open enrollment period for 2016 opens November 1 and end at the end of January.
Read the full Bloomberg coverage here.
UnitedHealth Group, the largest US health insurer, reported better-than-expected quarterly profit and revenue, helped by strength in its Optum business.
The company also increased its forecast for 2016 adjusted net earnings to about $8.00 per share, from $7.80-$7.95.
UnitedHealth's net earnings attributable to shareholders rose to $1.97 billion, or $2.03 per share, in the third quarter ended Sept. 30, from $1.60 billion or $1.65 per share, a year earlier.
On an adjusted basis the health insurer earned $2.17 per share, beating average estimate of $2.08, this was a 23% increase for net earnings from the same quarter last year.
The company said its consolidated medical care ratio, or the amount it spends on medical claims compared with the insurance premiums that it brings in, decreased 60 basis points to 80.3 percent in the third quarter.
Total revenue rose to $46.29 billion from $41.49 billion, slightly above analysts' estimate of $46.09 billion.
The strong earnings comes two quarters after the firm announced it was rolling back most of its business in the Affordable Care Act, better known as Obamacare, exchanges starting next year.
Open enrollment for Obamacare's 2017 plan year begins November 1. UnitedHealth said it will remain in only "a handful of states" going forward. United was the first of three major insurers — including Aetna and Humana — to seriously roll back their Obamacare offerings this year.
The company said that the number of people it covers in the individual marketplace, which includes the Obamacare exchanges, decreased on a year-over-year basis.
Following the news, shares of UnitedHealth ticked up $1.87 a share to $136.00, a 1.36% increase.
The Affordable Care Act, better known as Obamacare, is still taking a serious chunk out of UnitedHealthcare's profits, according to its CFO, but at least it's not getting any worse.
In the company's earnings call on Tuesday, Dan Schumacher, CFO of the main UnitedHealthcare division, said the firm is still losing money on the ACA business but those losses have not accelerated.
In the second quarter, UnitedHealth increased its loss projections for 2016 by $200 million.
"When you look at the performance inside the quarter, I would tell you that, as you pointed out, nothing's really changed on the ACA front and that's a good thing," said Schumacher. "Our third quarter was very much in line with our revised expectations that we set coming out of the second quarter and we've continued to maintain our full-year view, to be more specific about it."
Schumacher said the firm lost around $200 million from its exchange business, but that was in line with its expectations for the quarter and the full year.
UnitedHealth — along with other large insurers like Aetna and Humana — have been losing more and more money through the exchanges. This is in part due to higher than expected costs for large insurers on the exchanges, but also because the pool of those getting insurance through the exchanges has been older, sicker, and more expensive than originally thought.
Besides providing the business update, UnitedHealth Group CEO Stephen Hemsley said that the company did not want to address the current state of Obamacare since a new administration will be taking over the White House soon.
"I think commenting beyond that, particularly as a new administration takes hold and so forth, our posture is to be very constructive about making the marketplace work most effectively and serving the most number of individuals and making that system simpler and more usable for everybody," said Hemsley.
"So I think beyond commenting on that level I don't think we are going to get into what's going to happen going forward, on either a state basis or federal."
He did, however, say that Medicaid expansion has been "a very significant success of the ACA" and states that accepted the expansion have seen their exchanges become "more stable and better performing."
Following stronger than expected earnings, UnitedHealth is trading higher on Tuesday at $143.49, just over a 7% jump.
The US Department of Health and Human Services expects 13.8 million Americans to sign up for health insurance in 2017 on the public marketplaces set up by the Affordable Care Act.
This would be an increase of 1.1 million people from last year's 12.7 million enrollees. The 2017 open-enrollment period runs from November 1 through January. Introduced by the ACA, the healthcare law better known as Obamacare, the marketplaces are designed to provide affordable health-insurance options for people without an employer-based plan or a government plan like Medicare or Medicaid.
The HHS expects 9.2 million people to be repeat enrollees from last year, 3.5 million people to be formerly uninsured, and 1.1 million to be switching from individual plans purchased outside the marketplace.
HHS did say that, as in the past three years, the number of people who actually go on to activate or start using health insurance from the marketplaces will be lower than the number of those who select plans on them during open enrollment.
"Based on the experience of the Marketplaces' first three years, we expect that plan selections at the end of Open Enrollment will exceed Marketplace effectuated enrollment as the year progresses,"a release from the HHS said. "The number of individuals joining through Special Enrollment Periods (SEP) throughout the year does not fully offset those who leave for other forms of coverage or other reasons."
In 2016, for example, only 10 million of the 12.7 million people who enrolled in insurance on the marketplaces actually maintained it. This year, the HHS projects the number of people to use marketplace insurance to increase to 11.7 million.
There are a few reasons for this. Some people begin getting employer-based coverage after signing up for plans on the marketplace, while others switch over to Medicaid or Medicare. According to the release from the HHS, a case study in California showed that 85% of people who do not maintain insurance selected from the marketplace move to another form of coverage.
The HHS did warn that because of the young age of the exchanges there is a "high degree of uncertainty about any projection."
A large number of people receiving coverage — about 1.4 million Americans— will have to find new plans on the exchanges, according to a report from Bloomberg last week, because many large insurance companies including Aetna and UnitedHealthcare are shrinking their offerings for the 2017 plan year.
Over the past few weeks, the WikiLeaks organization has published the stolen emails of Hillary Clinton campaign manager John Podesta, revealing some of the inner workings of the Clinton campaign.
One email exchange released this week between Clinton and top campaign advisers appeared to show the Democratic nominee discussing the "unraveling of the ACA," also known as Affordable Care Act or Obamacare.
Campaign adviser Ann O'Leary asked Clinton about her support for the so-called Cadillac tax built into the ACA, suggesting that she come out for a partial repeal. The Cadillac tax would impose a surcharge on high-cost health insurance plans with expansive coverage that employers provide for their workers.
Since many unions had advocated for getting these high-quality plans for their workers, these traditionally Democratic-leaning groups were opposed to the tax, leading to bipartisan support for a delay or repeal of that aspect of the ACA.
In Clinton's response, the nominee appeared to support a Cadillac-tax repeal bill written by Republicans. Here's the email in its entirety. (The Clinton campaign has not confirmed the authenticity of the emails.)
"Given the politics now w bipartisan support including [Democratic New York Sen. Chuck] Schumer, I'll support repeal w[ith] 'sense of the Senate' that revenues would have to be found. I'd be open to a range of options to do that. But we have to be careful that the R version passes which begins the unraveling of the ACA."
Clinton's supporters, and critics, have found a few different ways to interpret her comments. Jeffrey Anderson, a Hudson Institute senior fellow and opponent of Obamacare, suggested that Clinton was advocating for the "unraveling" of the ACA altogether. The suggested reason: more support to pass a public option — in which the government would offer its own insurance to people to compete with private insurers — or a single-payer system, in which the government is the only insurance provider, similar to systems in the UK or Canada.
Clinton has advocated for a public option for years. Her plan during her husband Bill Clinton's presidential administration in the 1990s, colloquially called HillaryCare, was eventually defeated by Republicans but bears many resemblances to the ACA.
The second option is that Clinton simply misspoke. The email directly after hers in the chain, from foreign-policy adviser Jake Sullivan, read:
"Your point on R version is key. Our Bernie contrast rests on defending ACA, so crucial to cast this as a fix and to be on the lookout for R efforts to make this a Trojan Horse for broader dismantling of the ACA."
Sanders, during the primaries, was more critical of Obamacare and loudly called for a government-sponsored plan. Chelsea Clinton, the eventual nominee's daughter, memorably attacked him for this in the primary, saying Sanders wanted to "dismantle Medicare" and "empower Republican governors to take away Medicaid,"despite Sanders plan not really doing either.
Put another way, reading into the context that comes with Sullivan's email, Clinton fat-fingered an email and was trying to establish a middle-ground between Sanders and more progressive Democrats and the Republican position. This version also suggests she was perhaps warning about the Republican version of the Cadillac-tax repeal bill because it had the potential to unravel Obamacare.
Throughout the campaign, Clinton has repeatedly expressed her support for the ACA on the trail and called for improvements and strengthening of the law.
The Clinton campaign didn't immediately respond to a request for comment.
There hasn't been a lot of talk of healthcare policy during the 2016 presidential debates, but it was touched on Wednesday night.
And during that discussion, Donald Trump's immediate response topped out at what could be his cruelest comment of the debate.
"But Obamacare has to go. It's — the premiums are going up 60%, 70%, 80%. Next year they're going to go up over 100%," Trump said. "I'm really glad that the [Obamacare] premiums have started — at least the people see what's happening, because she wants to keep Obamacare, and she wants to make it even worse, and it can't get any worse. Bad healthcare at the most expensive price. We have to repeal and replace Obamacare."
In his natural, jerky fashion, Trump said he was glad that healthcare premiums are going up. The thing is, they're not just going up for Obamacare. They're going up for millions of Americans with private insurance too.
The data is out there
According to Kaiser Health's annual Employer Health Benefits Survey, premiums are going up across the board, and to curb that, people are getting even higher deductible healthcare plans.
This is all happening, in large part, because drug prices are on the rise, and employers and insurers are passing those costs on to patients. You see, this isn't just about Obamacare. It's about the whole country's system.
Business Insider's Bob Bryan covered the Kaiser report when it broke, and he put it succinctly:
One explanation for this is that increasing drug prices and costs from medical suppliers have gotten so bad that employers finally decided to share the price hikes with workers. Additionally, there is some evidence that people tend to be more cautious with their healthcare spending in general when they have a high-deductible plan, even for nondeductible costs, so employers are trying to slow the total spending.
"Notice the increased cost of drugs" is probably an understatement. Ever since the name Martin Shkreli — the former CEO of drug company Turing, which increased the price of a life-saving AIDS drug by around 5,000% — became familiar in households across the nation, Americans have been appalled at excessive price gauging in the drug industry.
And then of course there was the EpiPen scandal. Our collective national anger was palpable when we found out in August that Mylan, the company that makes the life-saving antiallergy drug, had increased the price of a two-pack to $608, up from about $100 when the company bought the drug in 2007.
These things are legal, but it's obvious the American people don't think they're right. And turning back to the debate, it's obvious Trump doesn't see the connection between what has become a nationwide outrage, and the prices Americans are paying at pharmacies, and the hospital bills that are emptying out their bank accounts.
This is ignorant and cruel.
Because knowing is half the battle
What's more, anyone running for president should know about this connection. Our country's upward drug cost trend isn't new to anyone who follows policy. In August, the Congressional Budget Office released figured showing that Medicare Part D Prescription Drug Program drug costs skyrocketed 17% from 2013 to 2014. This has been happening for a while; it's just taken some time to trickle down into Americans' pockets.
Obviously, Trump doesn't understand the problem, and it couldn't be more clear that in this case, that lack of understanding makes it impossible to find a solution. This problem goes deeper than just nuking Obamacare. We have to start rethinking the way we allow pricing to be structured in this entire system.
As for Trump's opponent, Clinton put out her drug cost plan on September 2. It involves creating a panel to monitor drug price increases and alternative treatments to expensive drugs. It will attempt to expand access and fine drug companies that jack up the prices of drugs that have been on the market for a long time (like EpiPen).
Wells Fargo analyst David Maris broke down more of the highlights in a report last month:
Clinton's plan would also cap monthly and annual out-of-pocket costs for patients with chronic or serious health conditions. It would prohibit manufacturers from paying generic drugmakers to delay launching cheaper products, and would eliminate corporate write-offs for direct-to-consumer pharmaceutical advertising.
Lastly, additional funding would be on tap for the FDA to help approve generic drug applications more quickly. While this menu of policy proposals certainly has manufacturers worried, most of these ideas would require Congressional approval, which we believe could be hard to come by if Republicans continue to control the House and/or Senate.
Talk to pharmacists, policy wonks, healthcare professionals and other actors in the industry, and they'll tell you that these are proposals they've thought about because the problems they intend to solve are playing out right before our eyes.
For example, drug companies have already been sued for "pay to delay." That's when one company pays off a another company to get them to delay the release of generic competition.
Another example: The Mylan scandal has had legislators on both sides of the aisle talking about how the government can help the FDA speed up generic-drug approval.
But we haven't done anything yet. And we won't do anything if Trump is elected. He's doesn't have the attention span or, more important, the compassion to understand the nuance of this policy.
And people are literally sick over it.
This is an editorial. The opinions and conclusions expressed above are those of the author.
President Barack Obama in a speech in Florida on Thursday defended his signature healthcare law, touting its benefits while attacking Republicans for opposing it.
Obama hit on the various benefits of the Affordable Care Act, more commonly known as Obamacare, such as allowing children to stay on their parents' health insurance until age 26 and preventing insurers from denying people with preexisting conditions.
These benefits, Obama said, are good for all Americans — even if they don't know it.
"You're getting better quality, even though you don't know that Obamacare is doing it," Obama said.
"Thanks, Obama," he added jokingly.
Obama also defended the ACA's health insurance exchanges. They have come under fire recently for the losses insurance companies have incurred by offering plans on the exchanges, the increasing cost of premiums for plans, and a lack of competition because of insurers leaving the marketplace.
Republicans, Obama said, have also been attacking the law and saying it is in a "death spiral" because of the person who passed it, not the actual realities of the law.
"So why is there still such a fuss?" Obama said. "Well, part of the problem is the fact that a Democratic president named Barack Obama passed the law."
Republicans have long called for repealing the law and held numerous symbolic votes to do just that. Obama said he was willing to work with Republicans on finding solutions to fix the law rather than simply repealing it.
"They can even change the name of the law to Reagancare, or they can call it Paul Ryan-care," Obama said. "I don't care about credit. I just want it to work."
Obama said the law needed some fixes to keep premiums down and help people afford plans. He suggested three:
In addition, Obama said misinformation surrounds the law, and that headlines focusing on the increased premiums on the exchanges or some of the struggles have led Americans to believe that any issue with their health insurance is because of the ACA.
"And everybody thinks, 'Wow, my insurance rates are going up. It must be Obama's fault,'" Obama said. He added that since about 80% of Americans get their insurance from their employers or government plans such as Medicare, the ACA premium increases have "nothing to do" with Obamacare.
UPDATE: Republican Speaker of the House Paul Ryan responded to Obama in a statement criticizing the law.
Here's the full statement:
"After listening to the president's speech, I'm not sure what health care law he's talking about.
"He wondered out loud why there's been such a fuss. It's no secret: It's because of Obamacare. That's why we've seen record premium hikes. That's why millions of people—including millennials—have lost their plans, or been forced to buy plans they don't like. That's why we've seen waste, fraud, and abuse. And at this point, one thing is clear: This law can't be fixed.
"That's why we need to repeal Obamacare and replace it with patient-centered reforms—and our plan does just that. It's a step-by-step approach that ensures every American has access to quality, affordable health care. We believe people should have more choice—and more control—over their health care needs, and not be under the thumb of Washington bureaucrats.
"Because if we want a stronger, healthier nation, we have to offer a better way for tomorrow's generation. America's young people know a bad deal when they see one—and Obamacare is a bad deal. It's time to give every generation of Americans the real hope and change they deserve."
Watch the full speech:
SEE ALSO: The future of Obamacare
NOW WATCH: Obama: Trump couldn’t get a job at 7-Eleven
Republicans roundly criticized a Thursday speech from President Barack Obama in which he defended the Affordable Care Act, his administration's signature healthcare law that is better known as Obamacare.
During the speech Obama said that the law was working but needed adjustments and that Republicans were criticizing the law only because he was the one who passed it.
"So why is there still such a fuss?" Obama said. "Well, part of the problem is the fact that a Democratic president named Barack Obama passed the law."
Obama also said Republicans could rename the law "Reagancare, or they can call it Paul Ryan-care," as long as they agreed to make changes and not repeal it.
Republicans were quick to respond to Obama, saying the law was not working as the president described but rather was failing Americans.
House Speaker Paul Ryan said in a statement that he was "not sure what healthcare law he's talking about."
"He wondered out loud why there's been such a fuss," Ryan said. "It's no secret: It's because of Obamacare. That's why we've seen record premium hikes. That's why millions of people — including millennials — have lost their plans or been forced to buy plans they don't like. That's why we've seen waste, fraud, and abuse. And at this point, one thing is clear: This law can't be fixed."
Sen. Ted Cruz was also not a fan of the speech, according to a statement from his spokesperson Phil Novack to Business Insider. The statement played on a joke Obama made comparing Obamacare to a new cell phone that has a few bugs.
"Obamacare is a disaster. Yesterday, President Obama compared his signature law to new smartphones with 'a few bugs' or worse yet — ones that catch fire," said the statement, referring to the recent Samsung Galaxy Note 7 exploding phone controversy. "There was some truth to his comparison — Obamacare truly is going down in flames. No updates or fixes can save its corrupt structure."
Republican Sen. Ben Sasse also criticized the speech and pointed to many of the same issues as Ryan: rising premiums and millions of Americans having lost their plans.
"There's a 'fuss' about Obamacare because it's a disastrous failure," Sasse said in a statement.
The Nebraska senator continued: "There’s a 'fuss' because millions of families have already lost their plans and millions more will this year. There's a 'fuss' because premiums have gone through the roof. There's a 'fuss' because more than half of the CO-OPs failed and now big insurance companies are scrambling for the exit. There's a 'fuss' because even Democrats know it's 'crazy.'"
Sasse was alluding to statements from Bill Clinton, who early this month referred to Obamacare in a speech as the "craziest thing" and said the current health-insurance system "doesn't make any sense." He later clarified his position that he supported Obamacare, but his comments have continued to be highlighted by Republicans.
Kevin Brady, the head of the House's Ways and Means Committee, told Business Insider in a statement that Republicans would continue to reduce regulation on healthcare and criticized the speech from Obama.
"President Obama's answer to his law's clear failures is to double down on the same misguided approach that led to higher health-insurance premiums and fewer choices," Brady said. "That's hardly the antidote workers and families are looking for as they struggle to find quality insurance options, pay for care, or visit the doctor of their choice."
Republican Sen. Cory Gardner of Colorado used Twitter to express his disagreement with Obama's speech:
Obamacare is anything but affordable for tens of thousands of Coloradans facing average premium increases of 20.4% on the individual market— Cory Gardner (@SenCoryGardner) October 20, 2016
Instead of having access to "affordable health care," Coloradans have seen their plans cancelled, premiums increased, and choices restricted https://t.co/mzilTKvoFB— Cory Gardner (@SenCoryGardner) October 20, 2016
While it is true that many people have been forced to shift to different plans because of insurers leaving the marketplaces set up under Obamacare, the law has resulted in a net addition of 20 million insured people. The uninsured rate is also at its lowest level ever.
Premiums, however, have skyrocketed for those on the exchanges, with some states seeing rises as high as 60%. About three out of four Americans receive coverage from their employer or a government program such as Medicare or Medicaid, however, so these hikes would not directly affect their premiums.
The Obama administration says that Obamacare health-insurance premiums will go up by an average of 25% in 2017.
This, it argues in a new report, is because prices are slowly getting in line with costs.
Notably, Marketplace rates through 2016 remained 12 to 20 percent below initial projections from the independent Congressional Budget Office. In addition, Urban Institute researchers recently found that 2016 Marketplace premiums were well below premiums for comparable employer coverage. Even with this year’s increases, Marketplace premiums in 2017 will still be roughly in line with the projections by the Congressional Budget Office.
The news comes as another blow to the Affordable Care Act (ACA), which critics have argued it simply doesn't work. And over the past year, many companies large and small have agreed. The country's largest insurer, UnitedHealth, has said that it would roll back some of its Obamacare offerings.
Oscar, a startup created specifically to facilitate the ACA, is pulling out of markets in Dallas and New Jersey.
Additionally, while 15 insurers will be joining the ACA exchanges, 83 are leaving, according to the administration.
But President Barack Obama remains optimistic that the plan will get through these growing pains.
"You're getting better quality, even though you don't know that Obamacare is doing it," Obama said before a crowd in Florida last week.
"Thanks, Obama," he added.
Propel Ventures has led a $14.1 million investment into US "InsurTech" startup Hixme.
Propel, the $250 million fintech venture capital company set up by Spanish bank BBVA, is set to announce the investment at Money2020 in Las Vegas on Tuesday.
It's Propel's second investment into an "InsurTech" company — the name given to companies trying to bring technology to insurance in much the same way as FinTech has tried to with finance. It's first was Hippo, which does home insurance.
Jay Reinemann, managing partner at Proper Ventures, says: "Insurance has been one of the latest hot areas, it's been that way for at least a year.
"There's a tremendous amount of investment going on at the moment in everything you can think of. We've got one in our portfolio called Hippo that does home insurance but we've seen everything. Pet insurance, baggage insurance, home warranty, life, auto."
Propel was spun out of Spanish bank BBVA in February of this year, with a remit to invest in next-generation finance companies. The VC firm's sole backer is BBVA and it has $250 million funding, with $150 million devoted solely to the US. It makes it one of the biggest fintech-focused funds in the world. (You can read BI's interview with BBVA CEO Carlos Torres Vila on the bank's digital strategy here.)
Reinemann says health insurance is one of the biggest areas that could benefit from investment because it's "a major problem for a lot of people in the US" and "for employers it's a very large cost of doing their business and the cost of that is going up dramatically every year."
Hixme, set up in 2013 according to founder Dan Peate's LinkedIn page, helps employers in the US offer more personalised health insurance to staff. Reinemann says: "What they're doing is sort of a cafeteria style menu with the 5,000 health care options on there.
"They try to match someone to the best record possible, versus what most American employers do which is take two or three generic plans and offer them to all employees regardless of individual needs.
"Because they have to accommodate such a broad range of people and conditions often the pricing is expensive because the health insurance providers have to plan in the risk of some very unhealthy people. The healthy person, you're unfortunately paying for your colleague who doesn't have the same health as you do."
He adds: "By you picking a plan more tailored to you, you often times find that it's more affordable at the same time. You're paying for your own risk and you're not paying for the risk of all the others."
The investment takes the total raised by Hixme to $24.6 million, according to Crunchbase. Existing investors Kleiner, Perkins, Caufield and Byers (KPCB) also took part in the "Series B" funding round, as did Transamerica Ventures and Rosemark Capital.
Reinemann says: "Hixme is a really interesting and really complicated business — it's not your usual Silicon Valley, venture capital-backed company."
President Obama is defending the upcoming 25% premium increase in health insurance plans under the Affordable Care Act, while Republicans such as presidential candidate Donald Trump say the double-digit increase is proof the system is not working.
Follow BI Video: On Twitter
Barack Obama will stop being president on January 20. He will leave behind the signature accomplishment of his eight years in office: Obamacare. Some see it is a disaster, and others see it as a triumph. But I think everybody agrees that there needs to be changes.
Yes, millions more people now have access to health insurance. That’s a very good thing—but access to health insurance is not the same as access to healthcare. And access to healthcare is not the same as access to affordable healthcare.
The recipients of Obamacare
The whole point of insurance is to spread the risk of unpredictable, expensive events. Everyone pays a little to avoid being the one who must pay a lot. It works well for things like fires and earthquakes.
Health insurance starts off flawed because everyone will get sick, given enough time. Assorted patches, like the Affordable Care Act (ACA), have papered over the problems and made the business model work for a while. Now the ACA may be reaching its expiration date.
The ACA covers only a very small portion of the population, about 20 million out of 300+ million Americans. Most people who have health coverage get it in other ways. We have Medicare for the 65+ and disabled, Medicaid for the poor, and employer-sponsored coverage for many working people.
So the fact that most people can’t afford Obamacare obscures the fact that most people don’t use or need Obamacare.
This is the core problem. Obamacare is a kludged-together catchall program designed for people who can’t get health insurance any other way. They are not a random sample of the population. And as a group, they are sicker than average. That translates into higher-than-average claims once they have insurance.
That wouldn’t matter if enough younger and healthier people were in the risk pool. But they aren’t buying into the ACA, except for those poor enough to receive tax credits that can make the program inexpensive or even free. And middle-class people can’t afford it.
Here’s who pays for Obamacare
We have offloaded a great deal of the cost onto the wrong group of people. These are less well-off individuals who don’t make all that much money. And here’s the problem: they make too much to get any of the subsidies yet have to buy their own insurance rather than getting it through a company.
Consider this example from a Health Affairs study:
[A] family of four living in Roanoke, Virginia with an income of $60,000 in 2016 would have a premium payment of $4,980 for the year for the second-lowest-cost silver plan. That plan has a $5,000 deductible. That means the family could spend almost one-sixth of their pre-tax income on health costs before they received any insurance payment.
In contrast, the tax for going uninsured would be about $725. Of course, an uninsured household would face the risk of paying entirely for major medical expenses out of pocket. But that risk is limited. The ACA allows individuals to purchase insurance at least once a year without paying a premium penalty—even if they have incurred very expensive medical bills and regardless of whether they had previous coverage.
This is nuts. The premiums alone are 8.3% of the family’s income. Then they have to spend another $5,000 on coinsurance before the insurance company pays anything. So for them, Obamacare is effectively a 17% income tax with no deductions. (Yes, they get a few benefits like wellness checks, vaccinations, etc. That helps, but the value of the benefits is a fraction of the premiums paid.)
Healthcare costs keep rising
The rise in healthcare costs is not a recent phenomenon. Costs have risen dramatically since 1999 and are up roughly three times since then. This is true for both worker and employer contributions to insurance premiums.
The chart below (from the Kaiser Family Foundation via Mike Roizen) shows that the average family paid $5,791 for coverage in 1999. Using the Internet inflation calculator, you’ll see that today’s cost for that coverage would be $8,372 (if cost increases equaled inflation). That is less than half of what the average family paid in 2015, or roughly 45% of 2016’s likely final cost.
Dr. Roizen then calculated the actual cost for a worker making $40,000 a year ($19.83 an hour). He used actual medical costs and assumed 2% inflation and a 2.5% annual raise since 1999.
What he found was that the worker’s take-home income minus his medical costs and adjusted for inflation was equal to only 94% of what he made in 1999. In terms of his ability to spend money on things besides medical expenses, if the wage earner wants healthcare for their family, they are walking backwards.
Rising costs hurt the economy
Let’s take a look at some basic necessities. In 1999, gas was $1.14 a gallon; now it’s roughly a dollar higher per gallon. And using the St. Louis Federal Reserve FRED database, we find that home purchase or rental costs are roughly double what they were in 1999. If housing costs had risen only by the headline rate of the Consumer Price Index, they would now be $1039/month. They are in fact 40% higher.
Is it any wonder, then, that retail sales are in the doldrums? The consumer is simply running out of available cash.
The chart below from Jeff Snyder at Alhambra Partners (hat tip, John Vogel) shows that the year-over-year growth in retail sales is lower now than it was before we entered the last two recessions. Some of my technical chartist friends would draw a line showing lower lows and lower highs and call this an “ugly chart.” The trend since 2011 is indeed ugly and disconcerting.
What else happened about 2011? The real cost of Obamacare began to trickle through the system and started reducing the effective disposable incomes of those who Bill Clinton recently called “the people who were busting it.” The very real impact of the cost increases for healthcare and other necessities is overwhelming.
And healthcare costs are projected to rise about another 9% in 2017. And in Connecticut, health insurance will go up by 25%, and in Tennessee BlueCross BlueShield coverage will go up 62%. (In fairness, I should note that in some locations in Indiana, costs are expected to go down 12%!)
Is it any wonder that 47% of Americans have less than $400 saved up for an emergency?
Insurers are pulling out
One factor seems to correlate with healthcare cost increases: fewer choices. We were told that one of the positives of the ACA was that there would be lots of competition, which would hold the price down. This is not the reality in many counties and states.
Alaska and Alabama are expected to have only one insurance carrier each in the ACA marketplace next year. More than 650 counties in the US will have only one insurance provider on their ACA exchanges in 2017, up from 225 in 2016 (To see how many providers there are in a certain state, go to this handy table from The Kaiser Family Foundation.)
Obamacare’s price controls make the problem worse. Insurers can charge older customers up to three times more than younger ones. But older people generate more than enough claims to overwhelm those higher premium costs.
This is why insurers are pulling out of the program. They can’t make it work when the customer profile is skewing toward older and sicker and regulations prevent insurers from charging any more. But raising premiums wouldn’t work, either, because then people couldn’t afford to buy insurance.
This is what a death spiral looks like. I see no way to pull out of it unless something miraculous happens to reduce healthcare costs.
FREE Report: How the High Priests of Economics Are Leading Us to Monetary Hell
Contrary to common belief, it’s not greedy Wall Street brokers that are wrecking the US economy—but academic policymakers like the ones employed by the Federal Reserve. And they all have the best intentions… Read financial-bestseller author John Mauldin’s riveting special report, How the High Priests of Economics Are Leading Us to Monetary Hell. Click here to get your free copy now.
Mark Bertolini, the CEO of health insurer Aetna, laid out just how Obamacare could fall apart during an interview with Bloomberg's David Gura on Tuesday.
Bertolini said that the 25% average increase in premiums for Obamacare exchange plans announced by the Department of Health and Human Services on Monday could be just the beginning of the Affordable Care Act's problems.
Aetna announced in August that it was leaving over 70% of the counties where it offered plans through the Affordable Care Act (ACA) exchanges, citing an older and sicker than expected pool of patients signing up through the exchanges. This pool is then more expensive to cover and led to serious losses for the firm.
Bertolini then laid out how the issues Aetna is facing today could lead to an ever-worsening set of issues that would plague the exchanges. Here's Bertolini's breakdown (emphasis added):
"What happens is, the rates rise and the healthier people pull out because the out of pocket costs aren't worth it. I mean young people can do the math: gas for the car, beer on Friday and Saturday, then health insurance. You know everybody is immortal at that age and so it's very difficult to get people into the exchanges. The higher the prices go — even if they're not out of pocket — it's still too high for people to join. So what happens is the population gets sicker and sicker and sicker and sicker, the rates get higher to try and catch it, it's a fruitless chase, and ultimately you end up with a very bad pool of risk."
Put another way, there are too many sick people on the exchanges, so prices go up to compensate. Healthy people ditch the exchanges because prices are too high. The pool then gets even sicker and prices have to go up yet again, and so on until the system collapses.
Bertolini said that the Obama administration has pushed its abilities to solve these issues to the limit, such as tax discounts for many of those getting their care through the exchanges. Now, it will take Congress to readjust how insurers are compensated for risk in order to make it sustainable.
If those changes were to happen, said Bertolini, there is a chance Aetna could come back to exchanges it left as soon as 2019. In order for that to happen, however, Bertolini said the next president would need to make changes within 90 days of taking office.
SEE ALSO: Obamacare premiums to increase by 25%
The Department of Health and Human Services announced Monday that the cost for a health-insurance plan obtained through the exchanges set up by the Affordable Care Act, the healthcare law better known as Obamacare, would increase by 25% on average for the 2017 coverage year.
The report also broke down the expected changes in cost by state. To create its estimates, the agency looked specifically at data in each state for a 27-year-old nonsmoker buying the second-lowest-cost silver plan (the middle tier of the gold, silver, and bronze exchange options).
The increases vary heavily by state, with Indiana and Massachusetts seeing an average 3% decline in costs while Arizona tops out with a 116% average increase.
Many of the states seeing serious increases share similar traits: They have not expanded Medicaid, they have a low number of insurers active in the state, and they have larger rural populations, which are more expensive to cover.
The price changes have gained a lot of attention as some major insurers have pulled out of the exchanges because of large losses. Critics of Obamacare say the price increases show the law is in a "death spiral." Supporters, however, contend that 77% of those on the exchanges can get tax credits that would keep monthly payments under $100 and that the recent increases bring premium payments only up to levels projected before the law passed.
The first question is what exactly do they want to repeal or fix. The ACA seems to have evolved into a great political Rorschach test somewhat devoid of real content but relying on projection of underlying beliefs.
For Republicans, it is evidence of governmental overreach and excess expenditures, while Dems seem to think of it as the essence of collective action and shared responsibility for those less fortunate. As such, neither informs the specific directions we might take from here.
In reality, the ACA consists of four major parts:
Of course, it is mainly the exchanges that get public attention and, unfortunately, much of that is misinformed. And even if the candidates were to change or eliminate the exchanges, the other three parts, which may well be the most important and lasting legacy of the legislation, would most likely stand.
The easiest part of the ACA was thought to be the expansion of Medicaid to the working poor, but it became a political battle. Medicaid expansion cuts states’ health care costs while providing coverage to millions more people.
The expansion required no expenditure of state money for the first three years, only an acceptance of federal dollars. Thus, many considered expansion a done deal and a crucial part of the law. Then the U.S. Supreme Court ruled that states could refuse to expand Medicaid.
Many – 26, to be precise – did just that in 2014, as Republican governors and lawmakers in red states voted to not accept the federal money. Some later changed their minds, but as of now, 19 states still have not expanded Medicaid.
Even some red state governors who resisted the extra funds from the Feds to expand Medicaid coverage are reconsidering, albeit with some conditions that provide political cover. Only states’ rights advocates, for philosophical reasons, and budget hawks, who fear that the Feds will renege on their funding, are holding out for a repeal of this one.
Beyond the exchanges
While the double-digit premium increases have led to calls for repeal, it’s important to look at the law more broadly and what can be done to fix it.
Two parts of the ACA may have dramatic impact even though they totally avoid public scrutiny. They seek to change the way that health care is delivered at a very fundamental level. Research called for by the ACA is being done by health care systems, insurers, and provider at every level, focusing on alternative ways to treat problems – something that most would assume we already do. Under the law, reimbursements to providers is tied to their doing this.
But that’s not really the case. For example, the FDA is charged with assuring that a drug or device is effective (efficacious) and safe (not toxic or carcinogenic), not whether it is actually better than the alternative. So we have alternative drugs, devices, surgeries and so forth that all address a problem with little guidance as to which one actually is better.
The idea is that scientific findings will guide both physician practice and coverage decisions toward better value and blunt that drive toward more marginal treatment at ever higher cost with limited outcomes.
The alternative approach to this kind of cost control is just to cut payments, while allowing volume to expand. It is unlikely that those who support cost control and those who do not will want to proceed down that path. It will lead to bankruptcy and ever declining marginal value – although those who stand to lose money may resist.
In a similar way, the Innovation Center called for in the ACA is designed to try new organizational and payment models to see what works better and encourage adoption widely. The goal here is “value,” where that is defined as something that meets at least threshold quality metrics (e.g., hospital readmission rates) while meeting or beating actuarial estimates of cost.
The only ones who are arguing against these two little known parts of the act are those whose vested interests would be challenged. Drug companies are not wild about the additional standards of value for their products; hospitals argue the quality metrics are faulty, and physicians don’t like being forced into new organizations that may limit their autonomy.
Big bets have been made on the future of health care, and these cannot be recalled easily. But there are places here that will likely be part of Hillary’s “fixing” of the ACA.
And then there are marketplaces
So that leaves us with the “disaster” of the individual insurance markets decried by Trump, who has said he would eliminate the marketplaces in favor of open competition across state lines. Allowing insurance companies to offer insurance in different states, the thinking goes, will increase competition of plans and lower rates for consumers.
Unfortunately, the companies don’t seem interested since they already can do this to some extent but don’t. One reason is that premiums are based, in part, on negotiated rates with providers. It is hard to build provider networks in another state, from another state.
The level of competition insurers face is secondary and may be a detriment in driving provider rates lower.
In any event, cross-border competition hardly is a panacea for rising costs. It is, however, an unspoken attack on the insurers as a way to break their often solid capture of the regulation process which now resides at the state level. Thus, expect industry resistance to this traditional Republican proposal.
The problems of the individual insurance exchanges come from many directions. Besides insurance company pricing errors compounded by their natural risk avoidance, the government changed the rules midstream and limited the range of premiums insurers can charge, which forced the young to pay too much or the old too little.
This was compounded by a huge failure of Congress to hold up their end of the bargain in supporting the transitional support promised by the law to companies willing to take the plunge into the unknown of the exchanges, as I wrote about in The Conversation in August. When only 12 percent of the support promised to companies with higher than expected costs was paid, the higher risk and big losses drove many out of the markets. Thus, many of the problems of the exchanges lie directly at the feet of Congress.
A Democratic Congress would rectify this as part of the fix. Hillary also would allow people in the 55-64-year-old age group to buy into Medicare early. This is a form of the “public option” that would be popular and probably would enliven the areas where there is no competition on the exchanges.
The irony of the Republican opposition to the use of a competitive market with subsidies to make health insurance “affordable” – essentially their long time alternative – might become apparent, allowing them to engage in fixing the ACA if Congress goes blue.
Interestingly, Clinton has a number of other positions that one could argue would move us toward lower cost and higher quality as promised by the ACA. One of the most interesting concerns drugs, where she would allow Medicare to bargain for lower prices, permit importation of price-controlled prescription pharmaceuticals from other countries and limit direct-to-consumer advertising.
Given that this is the most inflationary of any sector of health care and that many firms seem to have engaged in exploitative pricing, these are likely to get attention from both sides of the aisle although Republicans have said little about their approach.
So overall, it is unlikely that we would actually see a full “repeal and replace” from the GOP. There are some signs that Congress is open to fixing the ACA, as evidenced by a few Republicans, such as Rep. Dennis Ross of Florida. Realistically, in their weakened position should Trump lose, compromise is more likely than in any time during the last eight years.
The fact that the ACA actually has reduced the deficit, although estimates vary by how much, and extended Medicare solvency by many years may mean that wholesale changes would not be good. It would be important to keep those parts that have saved money. And both sides have pledged their allegiance to both of these politically popular objectives.
Going forward, the most likely path is the same difficult one that the U.S. system as a whole must take toward improving access and value. There will be no quick fix.
US health insurer Aetna Inc reported a higher-than-expected quarterly profit as memberships grew in its government business, which sells Medicaid and Medicare plans.
The company, which is fighting a US government lawsuit aimed at blocking its $34 billion Humana Inc deal, said its net income rose to $603.9 million, or $1.70 per share, in the quarter, from $560.1 million, or $1.59 per share, a year earlier.
Excluding items, Aetna earned $2.07 per share, in the third quarter ended Sept. 30, ahead of analysts' average estimate of $2.03 per share, according to Thomson Reuters I/B/E/S.
In a release accompanying earnings, Aetna CFO Shawn Guertin said that the strong earnings came despite a continued drag from the insurers Affordable Carte Act (ACA), better known as Obamacare, plans.
"Solid performance among our core businesses and a focus on managing general and administrative expenses have once again offset pressure from our ACA-compliant products, resulting in a strong third quarter for the company and our shareholders," said Guertin.
The company said in August that it would sell individual insurance on the government-run online marketplaces in only four states next year, down from the current 15 states, due to persistent financial losses.
While Aetna did not break out how much the losses were this quarter, they announced in August that the company had lost more than $200 million on ACA business during the second quarter.
Aetna's decision follows similar moves from UnitedHealth Group Inc and Humana Inc, which have cited concerns about financial losses on these exchanges created under President Obama's national healthcare reform law.
The health insurer said on Thursday its medical benefit ratio - the percent of premiums spent on claims - was 80.1 percent for the quarter in its government business compared with 81.6 percent, a year earlier.
The decrease was primarily due to improved performance in Aetna's Medicare products, the company added.
Aetna narrowed its full-year 2016 operating earnings to $7.95-$8.05 per share from $7.90 to $8.10 per share.
Revenue rose 5.5 percent to $15.78 billion, ahead of the average analyst estimate of $15.71 billion.
Seth Meyers thinks he knows why Donald Trump and his campaign failed to fully capitalize on the news of upcoming price increases for Obamacare.
On Wednesday's episode of NBC's "Late Night," Meyers took a look at what Trump was doing instead of coming down on Obamacare in a new edition of "A Closer Look."
In the past, Trump has been very critical of the healthcare policy, even saying that Obamacare is "killing" businesses and individuals.
"There are lots of different ideas for improving healthcare in this country that we should have a serious debate about, like letting more people enroll in Medicare or strengthening the individual mandate," the host said. "But unfortunately, one of our two presidential candidates seems much less interested in having that discussion than he is in plugging his own businesses."
Meyers is referring to Trump's decision to promote his Miami resort on Tuesday. He did speak about Obamacare briefly and generated headlines when he said that his "employees are having a tremendous problem with Obamacare."
That's strange because his employees overwhelmingly receive their insurance through Trump's company. "Over 95%" get their insurance through the company, the general manager for Trump's Florida resort said.
With one day squandered by Trump, Meyers wondered, "You might think Trump would change his approach. Surely, he wouldn't spend a second day plugging one of his businesses in a non-swing state less than two weeks away from the election, right?"
But he did. Trump spent Wednesday at the grand opening of his new hotel in Washington state.
"The reason why Republicans haven't presented any real plans to fix or replace Obamacare is because they don't have any," Meyers said. "And the guy they nominated for president doesn't even seem to know what it is. Unfortunately for the Republican Party, it's too late to repeal and replace him."
Watch the segment below:
Donald Trump has homed in on a target issue for the final days of the presidential campaign: Obamacare.
On Monday, the Department of Health and Human Services announced that the average increase for a monthly premium on the Affordable Care Act, better known as Obamacare, exchanges would be 25% in 2017. It was the largest jump for average premiums on the Obamacare exchanges in their three-year history.
And the Republican nominee has been hammering away at it ever since — mostly during the first few minutes of his raucous rallies.
"Real change begins with immediately repealing and replacing Obamacare," Trump said during a Thursday rally in Toledo, Ohio. "What a mess. It never worked from day one. It was never destined to work. There was no way it was going to work. And I said before, before they voted, that's never going to work."
"And it's just been announced that Americans are going to experience a massive double-digit hike in Obamacare premiums, including a 116% premium hike in the great state of Arizona," he continued. "Think of that. Don't worry, you're not going to be so far behind. Don't worry. It's a mess. It's a mess. It's going up at numbers you won't believe."
Trump went on to say Democratic nominee Hillary Clinton wants to "double-down and double-up" on Obamacare, which he said will destroy healthcare and businesses "forever."
Additionally, Trump has emphasized the connection between the healthcare law and Clinton. In the Toledo speech, Trump seized on former president Bill Clinton's recent remarks that the design of the ACA "makes no sense."
"Even Bill Clinton admitted Obamacare is the craziest thing in the world," Trump said. "'The craziest thing in the world.' People wind up with their premiums doubled and their premiums cut in half. Job-killing Obamacare is just one more way the system is rigged."
Bill Clinton has since clarified those comments and said that he fully supports the law.
The controversy that Trump has focused on the marketplaces, or exchanges, on which people without insurance through the government — such as Medicaid or Medicare — or their employer can get coverage. However, this represents only one part of the law with only around 5% of Americans receive their insurance through the exchanges and thus subject to the increases.
Much of the attention around the ACA has focused on the exchanges and their troubles such as increasing premiums and large insurance companies such as Aetna and UnitedHealthcare shuttering a majority of their exchange business.
This issue is also divisive politically. According to the Kaiser Family Foundation, a nonpartisan health policy researcher, 45% of American adults have an unfavorable view of the ACA, while 45% have a favorable view. Looking politically, this line of attack from Trump appeals to his base: 83% of Republicans view the law unfavorably.
But it could also could make a difference among independents or swing voters. Among those identifying as independents in the Kaiser survey, 52% view the ACA unfavorably while just 38% view it favorably. Democrats are split 76% to 14% in favor.
Many of the most important states in the election are facing down the biggest Obamacare increases. Arizona, a key state for Trump to hold onto, saw the highest average premium increase of any state in the country, which Trump made sure to note in the Toledo speech as well as in others.
North Carolina, another pivotal state, also saw the average premium increase by 40%, well over the national average.
The recent bad news for Obamacare is headline grabbing, it's palatable for independents that Trump needs to swing, and hits key swings states hard.
And he seems to know it.
Said Trump: "Repealing Obamacare is one of the single biggest reasons we must win on November 8."
President Obama inherited an economic disaster. And since then the US economy has made a huge rebound. Yeah, it has been a bit underwhelming as growth has been somewhat sluggish, but we’ve been growing and we’ve recovered all of the jobs we lost during the crisis.
The stock market has more than tripled and Americans are better off than they’ve ever been.
A lot of great things have happened in the last 8 years, but it still feels like we’re not doing well enough. And that’s because we’re not.
Longtime readers will remember that I was very vocal about the “balance sheet recession” back in the early post-crisis years.
Basically, consumers had gone through a balance sheet implosion where the housing bubble (really a consumer debt bubble) turned their balance sheets upside down. With weak balance sheets consumers were de-leveraging which led to deflation and low inflation for years. To this day, households are borrowing at a rate that is consistent with past recessionary periods.
The only reason this weak household borrowing has been offset is thanks to a huge debt binge by corporations and the US government.¹ But the US government could have and should have done more.
Back in 2009 the primary argument against more fiscal policy was that it would cause high inflation, crash the dollar or bankrupt the USA. I looked at all of these arguments from an operational perspective and concluded that they were all wrong.
I debunked all of them over the years. But there was a bigger blunder in here. While the government did a lot to bolster the private sector I would argue that we actually didn’t do enough. Over the years I’ve shown how much larger the budget deficit could have been. But we never got that extra stimulus and one of the main reasons we never got the stimulus we needed was because of the Affordable Care Act.
President Obama could have passed a much larger stimulus plan in the early days of the crisis (or a subsequent one in 2010), but instead chose to pursue the ACA. I said, in real-time, that this was no time to be thinking about universal healthcare. We needed jobs! And the government could help bolster the economy by running the deficit that would offset and help households deleverage their balance sheets.
It’s unfortunate really. I think President Obama has been a very good President. The USA has come a long way from the depths of 2009. But it’s the ACA that President Obama will be remembered for.
And if we’d diagnosed the balance sheet recession accurately and gotten better economic advice back in the early days of the crisis I suspect we would have focused a lot less on monetary policy and much more on fiscal policy.
But we’re worse off than we should be because we misdiagnosed the disease and made a huge bet on monetary policy and passed a flawed healthcare plan. Both of these focuses have directly contributed to the weak state of the economy and much of the angst that we’re now experiencing.
¹ – An interesting sidenote here is that corporations have binged on debt in large part because the government did a good deal to directly stimulate US corporations during the crisis. So, in a sense, you could argue that the government laid the foundation for the next debt crisis in corporate debt as well intentioned policies trickled to the wrong parts of the economy.
The Affordable Care Act is facing a huge test.
Tuesday marks the start of open enrollment for the 2017 plan year of the ACA's public exchanges. That's the part of the law, better known as Obamacare, that is designed to give people access to health insurance if they can't access it through their employers or the government.
After news of rising premiums, the withdrawal of several insurance companies, and the US campaign season, we'll finally get a chance to see how healthy the public exchanges — the most talked-about part of the law — really are.
After all the negative headlines, it appears that this open-enrollment period is especially important for the future of one of President Barack Obama's signature achievements.
How we got here
The ACA doesn't exclusively pertain to the exchanges. There are other elements of the law that affect all Americans, such as a child's ability to stay on his or her parent's insurance until they're 26 years old and the removal of lifetime limits on insurance payouts.
For better or for worse, the sustainability of the exchanges is probably the most often used benchmark for people judging its success or failure, despite the fact that only roughly 5% of Americans get their insurance through the exchanges.
The problems with the Obamacare exchanges are now well documented. Fewer healthy people have signed up for the plans, and that has caused the pool of people in the exchanges to be older, sicker, and more expensive to cover. That's led to losses for many insurers.
Some of the biggest and most high profile of these insurers — such as Aetna and UnitedHealthcare and startup Oscar— have pulled back their offerings in these markets. And the exchanges have become political fodder for everyone from Republican Speaker of the House Paul Ryan to presidential nominee Donald Trump. Even former President Bill Clinton has talked about flaws in the marketplace, though he later clarified he supports the ACA.
The law's supporters say these are growing pains.
"This is one of the most complex social programs in the country's history,"Kevin Counihan, the CEO of the Marketplace at the Centers for Medicare and Medicaid Services (CMS), said in an interview with Business Insider. Counihan oversees the exchanges.
"We only have three years of operation," he added. "Big programs like Social Security and Medicare also had problems in their first three years."
Counihan said that many insurance companies are not used to these types of markets, which are more like "Medicaid-plus" than the employer-based market, so a "learning curve" isn't surprising.
Make or break year
The Department of Health and Human Services (HHS), which is responsible for administering the law, projects that 13.8 million Americans will sign up or continue to get coverage through the exchanges in 2017, up from 12.7 million last year.
The 2017 enrollment also features massive jump in the average premium cost from last year — the HHS projects it to be 25% for the baseline silver-level plan for the country. These jumps are even more severe in certain states, with Arizona leading the way with a 116% increase over the average premium in 2016.
According to Cynthia Cox, associate director for the Program for the Study of Health Reform and Private Insurance at the nonpartisan research group Kaiser Family Foundation, these price increases and market shifts have been coming for some time.
"The premium increases were something we were expecting," Cox told Business Insider. "They're a bit higher than we thought they would be, but insurers have been signaling for months that this year they needed to dramatically increase premiums to make up for losses on the exchanges."
Counihan said that these increases came about in part because many insurers did not have experience with the type of coverage needed for Obamacare, so they underpriced their plans to attract patients without properly rating the costs.
Additionally, the jump now brings premiums roughly in line with the nonpartisan Congressional Budget Office's original 2010 projection for premiums on the exchanges for 2017.
This year is also more important because this is the first time the exchanges will be without their "training wheels." Insurers previously had three different ways, provided by the government, to mitigate losses from the exchanges: reinsurance, risk corridors, and risk adjustment. Now that is being shaved down to only the risk-adjustment program.
Additionally, 2017 will be the first year that the full penalty for not having insurance will go into effect, but the fee will not show up on tax bills until after the open-enrollment period.
Counihan downplayed the idea that this is a pivotal year for the exchanges, saying that it is a "retooling year." Additionally, Counihan said the HHS and CMS have plans to make sure they meet their targets and grow the exchanges, including outreach targeted at young people who would help stabilize the risk pools.
"We have a lot of data and good outreach plans for this year to get all kinds of people to sign up," said Counihan. "I mean, we know what we're doing — we're not just throwing darts and hoping it hits."
The figure of success, Cox said, will be if the exchanges can sustain the number they have.
"If we start to see sign-ups decrease, that would raise a lot of questions about the long-term sustainability of the exchanges," Cox said. "If people are deciding to leave the exchanges, that could lead to more insurer exits and be a real problem."
That may be a low bar to clear, but given the negativity surrounding the exchanges for much of the past six months, perhaps no bad news is good news.
The future is uncertain
The real proof of the success or failure of the law likely won't come from the sign-up numbers alone, according to Cox. Instead, the real tell will be the proposals for 2018 premiums that the health-insurance companies have to submit to individual state regulators in the spring of 2017.
"That's really when we'll know whether this was just a one-year change or something larger and longer-lasting," Cox added. "If premiums rise significantly again and you start to see more providers leaving the exchanges, that will raise a lot of long-term questions."
As Aetna CEO Mark Bertolini put it in an interview with Bloomberg, this could lead to a constant chase of healthy people opting out of the exchanges because of high costs, which in turn leads to higher premiums to cover the ever-sicker pool in the exchanges.
"So what happens is the population gets sicker and sicker and sicker and sicker, the rates get higher to try and catch it — it's a fruitless chase, and ultimately you end up with a very bad pool of risk," said Bertolini. With a very bad pool of risk, more insurers dump their exchange business until it becomes unsustainable.
Given these issues, most people agree that the law could use some tweaks. Obama himself said the law was like a new phone that rolls out with "a few bugs" and needs to be updated to stabilize it.
There have been several proposals, mostly split along ideological lines. Mostly conservative detractors of the law have suggested repealing the ACA altogether, while on the other end of the spectrum observers have used the shortcomings to call for a nationalized health system.
In the middle, proposals include adjusting a rule that only allows insurers to charge older people three times what they charge young people, strengthening the tax on people without insurance, and more variety instead of sticking with the four-tiered system in place now.
According to Cox, pretty much any of these adjustments would help fix the issues the Obamacare exchanges are facing.
"Any or all of these changes could have the effect of stabilizing the marketplace," Cold told us. "Also, they don't have to be done in isolation — any number of them could be used in combination to address the challenges facing the market."
The problem is that all these changes can be enacted only if Congress passes a law amending the ACA. "The HHS and CMS are really limited in what they can do now to address these issues," said Cox.
In the end, most of the changes come down to a political vote, and given the current make-up of Washington, it is unlikely anything comes to fruition. Counihan called it a "less-than-helpful political environment."
Cox agreed much of the law's long-term survival has little to do with its impact on healthcare, but rather the political appetite for the law. Regardless of possible changes, Counihan said the law has earned a permanent place in the healthcare system of America (though he is admittedly biased). Cox said the ACA and its exchanges have made an impact, but whether or not they survive remains to be seen.
"It depends on politics and market stability," he added. "It's equally, if not more, important how Americans perceive the law, and right now they're pretty split."Based on Kaiser's polling, 45% of Americans have a favorable view of the ACA and 45% have an unfavorable view.
Open enrollment closes January 31.