A Dull EDGE: The Administration Believes Obamacare’s Costs Went Down!

HealthcaredotgovThe Centers for Medicare & Medicaid Services (CMS) has just made the remarkable claim that medical costs paid by health insurers operating in Obamacare’s exchanges declined in 2015 from 2014:

Per-enrollee costs in the ACA individual market were essentially unchanged between 2014 and 2015. Specifically, after making comparability adjustments described below, per-member-per month (PMPM) paid claims in the ACA individual market fell by 0.1 percent from 2014 to 2015. For comparison, per-enrollee costs in the broader health insurance market grew by at least 3 percent.

The report compares apples to oranges. When discussing the change in costs in the exchange, it estimates medical claims. When discussing changes in employer-sponsored health insurance, it estimates premiums (which increased 3 percent). The average Obamacare premium increased 5.2 percent in 2015, more than employer-sponsored coverage. (See note below.)

If health insurers increased their premiums by 5.2 percent, but the claims they paid out decreased by 0.1 percent, they would be jumping for joy, having mastered Obamacare’s risks beyond their wildest dreams! They would have competed hotly for market share in 2016, likely cutting premiums.

Needless to say, that is not what happened. In 2016, the average premium increase was eight percent. And insurers still have not mastered Obamacare’s risk. Insurers are bailing out of the exchanges, and the prospective annual premium increase for 2017 will be 16 percent.

How did the Administration come to its remarkable conclusion?

This analysis draws on data collected by CMS to administer the ACA’s transitional reinsurance and risk adjustment programs. To operationalize these programs, CMS implemented a distributed data approach through External Data Gathering Environment or “EDGE” servers.

The folks at CMS need to have a serious talk with the contractor which operates the EDGE servers, because this analysis is exceedingly hard to accept.

Note: After 2015 open enrollment was completed, ASPE Office of Health Policy reported an average monthly premium of $364 in the 37 states using HealthCare.gov (Issue Brief, March 10, 2015, page 15). In 2014, it had been $346 (Issue Brief, June 18, 2014, page 6). That is an increase of 5.2 percent.

Comments (9)

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  1. John Fembup says:

    “The report compares apples to oranges.”

    You just can’t believe a thing this administration says.

    Not a damn thing.

  2. Ron Greiner says:

    Lies and propaganda is now legal in the USA from the Government.

    Just the Medicaid cost explosion will have our great grandchildren in debt for their entire lives. These politicians sure now how to steal from the future but these people are not born yet and seldom vote.

    The media and all of the non-taxed think tanks would never consider printing alternatives to Obamacare before the Presidential Election.

    The media is totally controlled. It has been stuffed into the Socialist mold. Non-taxed think tanks will do what they are told.

    John, you wrote, “employer-sponsored health insurance, it estimates premiums (which increased 3 percent).” Who are you jivin’ with this?

    We need to tax all of the non-taxed entities and foundations.

    • I am pretty sure all the others who read the entry will understand that it criticizes the Administration’s report, and does not attempt to “jive” with it.

  3. Bob Hertz says:

    I certainly agree that one does not need a whiz-bang server program to measure claims.

    CMS could just write a letter to the head actuary at each of the 40 or 50 carriers that are on the various exchanges.

    The actuary would know to the nickel how many claims were paid…..

    but then some government contractor would not get a sweet deal.

    Actually, it is possible for claims to be almost flat but still to see big premium increases. This year the reinsurance program terminates. This program covered 80 to 100 per cent of all claims, and in my reading this relieved the insurers of almost 25% of claims.

    Just ending this program would cause premiums to go up 25%.

    • John Fembup says:

      “Just ending [the reinsurance] program would cause premiums to go up 25%.”

      Bob, you arr correct – even if some might quibble about the exact amount. It’s a major reason for 2017 premium increases. Getting lost in analysis of premium changes obscures the underlying medical costs which have been there from the beginning.

      Obviously some insurers chose not to raise premiums , but to exit markets entirely,

      The reinsurance scheme was intended to induce insurers to participate in Obamacare despite the uncertainty of early pricing. Good plan. Didn’t work.

      After a couple of years, the uncertainties did not exactly disappear; meanwhile the insurers were able to calculate not only their initial losses, but the likelihood of future losses.

      The fact that an insurer could still make money overall, thus subsidizing it’s Obamacare business, is just another way of imposing additional cost (tax, if you prefer) on the insurers’ non-Obamacare members.

      Good plan? Didn’t work

      • There are three risk mitigation programs: Risk adjustment, risk corridors, and reinsurance.

        Both risk corridors and reinsurance end this year. However, the risk corridors were more problematic for insurers because they got a lot less than they expected. They got (or will get) exactly the amount they expected from reinsurance.

        • John Fembup says:

          “They got (or will get) exactly the amount they expected from reinsurance.”


          Yet even with all three risk mitigation programs in place thru the end of 2016, companies were losing money on their Obamacare business. That was not the plan. In response, some insurers are raising rates going forward; some are exiting markets; some are doing both.

          Anyway, Obamacare has been a dead man walking since March 23, 2010. Every fumble, stumble, and unexpected rumble since then has been inevitable.

          • The only reasonable conclusion is the insurers knew Obamacare would not work but expected they would always be able to go back to Congress for more money. That business plan is not working.

            The 2017 rate hikes show Congress strictly enforcing the law on risk corridors cannot be the problem because the risk corridors wind up in 2016 anyway, so that is all sunk cost for 2017.

            • John Fembup says:

              Either we’re saying the same thing – or I don’t understand what you’re saying. I hope it’s the former. 😎