Archive for category Health Care
The activities of the IRS are under the microscope that is Congressional oversight for targeting political groups that were politically opposed to the Obama administration and its policies. That’s nothing new. The Bush administration did the same thing. This is how our modern thugocracy works.
So while Congress “investigates” the political ramifications of targeted IRS attention, it ignores another IRS violation of law: rules for providing premium subsidies for individuals buying health insurance on a federally facilitated exchange. As the good folks at the HealthcareExchange.com blog describe the problem:
- The first problem – Lower-income individuals who would like some financial support may not be able to receive the federal subsidies despite the fact that purchasing insurance is now mandatory.
- This leads to a second issue – PPACA levies a tax/penalty on larger employers that do not offer insurance coverage to their employees as long as at least one employee receives a premium credit. Therefore, under current law, no employer in a state without a state Exchange could be issued a tax/penalty, effectively killing the Employer Mandate in those states.
- All this leads to a third challenge – Financing PPACA. Without the revenue collected by the federal government from non-complying employers, a major source of funding for PPACA is eliminated and the law is virtually unworkable. The Congressional Budget Office, for instance, estimates that penalties on employers nationwide would raise $28 billion dollars between 2014 and 2019 alone. With over half of states choosing not to operate a state Exchange, much of this revenue would not be collected.
The lawsuits have started, and shortly after the first penalty is imposed on a business in a state with a federally facilitated exchange, the lawsuits will flood the courts like the tsunami that hit Fukushima; laying bare the landscape, drowning the innocent, and resulting a nuclear meltdown of the law.
But wait, the unaffordability gets worse.
According to the Washington Times:
Internal cost estimates from 17 of the nation’s largest insurance companies indicate that health insurance premiums will grow an average of 100 percent under Obamacare, and that some will soar more than 400 percent, crushing the administration’s goal of affordability.
And there’s more.
The very people this brilliant piece of policy was meant to help may be in even more trouble when they cannot get enough work. From the Wall Street Journal:
Some restaurant operators are scaling back expansion plans because of uncertainty about the expense of insuring employees under the new federal health-care law.
The concerns are especially acute among smaller operators who are more likely to be on the cusp of the Affordable Care Act’s requirements for increased coverage of workers.
We’ll see how this all works out, but as I’ve said before, the only way Congress knows how to fix a problem (even one it created) is to create yet another government “solution.” They never realize that it was a government “solution” that created the mess in the first place.
It was about three years ago, I was having a conversation with a co-worker who is involved with advocacy work for our industry on the Affordable Care Act, aka Obamacare. In that conversation, I made a prediction about the future of medical insurance. Obamacare would result in choice, but that choice would be reduced to two or three insurance companies in any given market. And that by the time the law matured we may have fewer than a dozen medical insurance carriers.
The Obamacare meme in the news over the past few days has been the idea that the Health Exchanges mandated by Obamacare may not offer any real choice in a number of states.
Health economists predict that in states that already have robust competition among insurance companies—states such as Colorado, Minnesota and Oregon—the exchanges are likely to stimulate more. But according to Linda Blumberg of the Urban Institute, “There are still going to be states with virtual monopolies.” Currently Alabama, Hawaii, Michigan, Delaware, Alaska, North Dakota, South Carolina, Rhode Island, Wyoming and Nebraska all are dominated by a single insurance company. The advent of the exchanges is unlikely to change that, according to Blumberg. – SOURCE: Stateline
Despite the absurdly robust application process (over 900 applications) initially reported by Gary Cohen, Director of the CMS’ Center for Consumer Information (CCIIO), (he pleaded dyslexia for his mistake) the truth later came out that only about 140 carriers have applied to be on the various State Health Exchanges. The Department of Health and Human Services (HHS) knows it has a problem, too. Just last night it issued guidance to health insurers that included an extension to submit their applications from today to Friday, May 3rd. Application does not equal selection, so we’ll have to assume that, despite the extension, many of these applicants will not have products ready in time that are exchange qualified.
There is a long way to go between 140 and a dozen, but it won’t take much to get there. With the feds responsible for 27 states, the only insurance companies that will be able to compete in the long term are the very large insurers with a national scope. There is essentially no difference in the products each company can offer on the State Health Exchanges as the plan benefits are largely dictated by Obamacare, and the specifics not mentioned in the law itself, have been created in the rules already written or to be written by HHS. These rules will mean that no company will have an advantage based on product design. The only areas to compete will be on price and customer service. In other words, health insurance will become a commodity where the company that can offer the cheapest price will win.
The health insurance market will become like the small town that gets a WalMart. All the smaller carriers shut down as they can no longer compete on price, and the larger carriers suck up all the business.
So before long the health insurance market will be reduced to just a few large carriers competing on price.
Congress did a curious thing on its way to passing the Patient Protection and Affordable Care Act. In the midst of the debate, and in an effort to keep the CBO’s scoring of the law’s budget impact below $1 trillion, they created a tax on health insurance premiums. Congress creating a tax is nothing new, but the way they did it is.
In the height of the debate, the estimated costs of PPACA could have been a deal breaker for a couple of fence sitting Senate Democrats. (I know, Senators concerned about fiscal constraint is an oxymoron, much less Democrats.) Unlike other taxes Congress creates, where Congress picks a fixed dollar amount or percentage per entity paying the tax, they said this tax should collect $14 billion per year. The amount actually varies over several years. It starts next year with $8 billion, gradually rising over time. As with any tax Congress creates, there are exceptions. For this tax there are some very specific exemptions. As an example, one of them was written specifically for Blue Cross and Blue Shield of Michigan.
Back to the tax. I was tasked with estimating the tax impact, and came up with numbers ranging from 2.2% in 2014 on up to 3% or more by 2016. I’ve seen others estimate the tax impact from 1.7% to 3.7%. There is a catch with this tax: not all medical premiums are for health insurance as defined by the law. Some employers purchase a medical plan that is self insured, which are not subject to this tax. The employer assumes the risk in this case, but oftentimes, these self insured arrangements come with a stop loss policy as well. So the employer is accepting the risk…to a point. Self-insured policies are typically a good way to reduce health insurance costs for large employers, but because of the premium tax, smaller employers are also looking into self-insured health benefits. Even my employer of only 7 people opted for self insurance one year.
Currently about half of all employer-based health policies are self-insured. Without PPACA this segment of the market has been growing, largely because it helps employers contain their benefits costs, but now self-insured benefits have an additional feature compared to fully-insured policies, they aren’t taxed! So over time, as more and more employers opt for a self-insured solution, the number of fully-insured policies will shrink, but the total tax remains the same. The tax rate for these fully insured policies will increase faster and faster as fewer and fewer employers purchase them. This means that fully insured medical policies should be put on the endangered species list.
Only Congress can fix this inequality. Unfortunately, I think they will before too long. Problem is, whenever Congress fixes something, the American taxpayer will have to pay for it