I reported earlier this week that the Obamacare Marketplace is slowly failing. Three days later the largest health insurer in America, UnitedHealth Group, announced it expects to lose $500 million on exchange plans next year and may exit the market in 2017.
The Center for Medicare & Medicaid Services (CMS) has started to publish its weekly reports on Obamacare enrollment via the federally facilitated exchanges.
A little over half a million people have selected a plan for the third open season. What is interesting is the exchanges’ overinvestment in Spanish capabilities. We first noted this last January.
The Snapshot reports that the average wait on the phone for a Spanish-speaking customer-service representative is 11 seconds, versus four minutes and 38 seconds for an English speaker. That’s 25 times longer. 52,023 of the 741,112 calls (seven percent) were in Spanish.
The administration has released a report estimating that enrolment in Obamacare will reach only 9.4 million to 11.4 million at the end of 2016. Back in 2010, when the law was passed, the Congressional Budget Office estimated exchange coverage would be 21 million next year (Table 4).
Why the come down? Obamacare has a miserable take-up rate: Few who do not get significant subsidies sign up. Even worse, many of those who sign up at open enrolment cannot afford the premiums and drop out. Indeed, 15 percent of Obamacare beneficiaries who signed in 2015’s open season (which ended in February) were gone by the end of June. (The New York Times has just published interviews with some struggling to pay their premiums and maintain coverage.)
One year ago, I coined the term “Peak Obamacare” to describe this phenomenon. Although the administration’s cheerleaders have twice celebrated very high Obamacare enrolment during open season, the administration has finally decided to accept reality: We are on the verge of Peak Obamacare.
Congressional Republicans are using a procedural tool called “reconciliation” to repeal a miniscule number of Obamacare provisions, according to Chris Jacobs of the Conservative Review:
Lost in the noise amidst Speaker Boehner’s resignation last week was the House of Representatives’ decision to begin moving its budget reconciliation bill. Earlier this spring, conservatives voted for the budget blueprint in both the hope and expectation that the reconciliation bill coming from that budget would be used to put full repeal of Obamacare on President Obama’s desk. But based on the newly released legislative proposals, those expectations have been disappointed.
Just as important, however, the Obamacare legislative proposals are limited to the following provisions:
- Repeal of the law’s auto-enrollment mandate for employers;
- Repeal of the Prevention and Public Health “slush fund;”
- Repeal of the individual mandate;
- Repeal of the employer mandate;
- Repeal of the tax on medical devices;
- Repeal of the “Cadillac tax” on high-cost employer health plans; and
- Repeal of the Independent Payment Advisory Board (IPAB).
That’s it. Under the proposed reconciliation instructions, a grand total of seven out of Obamacare’s 419 legislative sections—just over one percent of the law—would actually be repealed.
Obamacare’s second enrollment season closed around the end of February, with 11.7 million signed up. By March 31, that had dropped to 10.2 million who actually paid their first month’s premium. New data from the administration report that number dropped further to 9.9 million by June 30.
What is also notable is that the entire drop of paid enrollees occurred in states using the federal exchange, not state-based exchanges (for which enrolment stayed at 2.7 million). There is no word on whether the drop-outs got employer-based coverage, descended into Medicaid, or stayed uninsured. 423,000 were dropped by the administration because of lack of documentation of citizenship or immigration status.
A stable market? Not quite, I guess.
A controversial part of Obamacare imposes an excise tax on high cost health plans. Beginning in 2018, the so-called Cadillac Tax will impose a penalty of 40 percent of all costs in excess of $10,200 for employee-only coverage and $27,500 for family coverage. The threshold increases annually with inflation; that is regular inflation, not medical care inflation which rises at more than double the rate of general inflation.
Employers have a few options to avoid the tax. But all are things workers dislike, such as increasing cost-sharing, eliminating covered services, eliminating tax-free dollars for HSAs, HRAs and FSAs and adopting narrow networks.
The Kaiser Family Foundation looked at the proportion of firms offering health benefits plans that are expected to reach the threshold.
If you only look at large firms employing 200 workers or more, nearly half (46%) will have health plans subject to the tax in 2018. More than two-thirds (68%) will have health plans subject to the tax by 2028.
The tax exclusion for employee health insurance is worth approximately 40% to 45% (25% marginal tax rate, 15.3% payroll tax and maybe 5% state and local tax). What the Cadillac Tax does is impose a 40% tax on the excess costs over the threshold. What that basically means is the open-ended tax exclusion for employer sponsored health plans has been limited to $10,200 per individual and $27,500 per family.
Pro: Limiting the tax exclusion may encourage health plans to look for ways to reduce medical spending.
Con: Over time more and more people will be subject to the tax.
Should the Cadillac Tax be repealed? Let me know what you think!
By Lawrence N. Pivnick MD JD
A Texas Medical Liability Trust poll found that most of the patients interviewed said they wanted a physician who made them comfortable, to whom they could talk, one who actually listened to them. And they valued those attributes in their physician even more highly than his clinical acumen.
One of this blog’s consistent themes is that Obamacare encourages insurers to seek to enroll health people in exchanges, and shun sick people. A new study from the Commonwealth Fund insists that is not the case, concluding that “insurers aren’t seeking lower-risk customers outside the ACA exchanges as some feared,” and “the ACA’s insurance reforms are working in the individual market.”
I will share the study’s conclusion, then explain the red-herring hypothesis it is meant to test:
I did not bother to discuss Gallup’s July update on the drop in uninsured Americans, because it was substantively the same as the teaser released in March, which showed most of the increase in health insurance was actually Medicaid, which is welfare dependency.
Gallup has just released a state-by-state report, concluding Medicaid expansion and establishing a state exchange almost doubled the reduction in uninsured. Of the two, I cannot imagine setting up a state exchange is a big factor, because beneficiaries get the same tax credits in state or federal Obamacare exchanges. Obamacare mostly increased Medicaid dependency.
Remember Ronald Reagan’s principle for negotiating arms deals with the Soviet Union? “Trust, but verify.”
Well, Obamacare customers have trusted and verified the insurance policies they can buy on Obamacare’s exchanges, but they don’t like what they get. This according to a survey conducted by the Deloitte Center for Health Solutions:
