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By the way, if anyone thinks this isn't stock or fund related, think again. The outcome of all this healthcare squabbling has had and will continue to have a dramatic effect on healthcare stocks and funds. When McCain rejected the latest version of the healthcare law, hospital and other healthcare stocks like HCA and Tenet Healthcare jumped:Florida said Tuesday that most of its 45 percent average increase in premiums stems from the risk that the Trump administration will skip cost-sharing payments that reimburse insurers for lowering rates
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Under the current law, insurers are required to provide silver plans with reduced deductibles, copays, and coinsurance (cost share reductions) to lower income people regardless of whether the federal government pays for them. If they have to absorb these costs themselves, the insurers must charge more in premiums to cover the costs. Simply and rationally, that's what they're doing.
If it turns out that the government does cover these costs, then because the insurers have boosted their top lines (revenue), they've correspondingly boosted their bottom lines (profits). ACA requires insurers to return premiums to the extent they spend less than 80% (the so called medical loss ratio) on medical care. But that's still going to boost their profits above current levels, thus making insurers a "buy".
Note: The insurance industry finally turned in profits under ACA last year, so this profit boost doesn't appear needed for the insurers' viability.
Obamacare marketplaces just had their most profitable first quarter ever (WP, July 10)
Also from the Bloomberg article: Reinsurance tends to help most when an insurer is not confident about its actuarial figures (e.g. because it doesn't have much experience in the individual health insurance market). That's why the ACA provided reinsurance (on of the "three Rs") for the first three years (2014-2016), and part of why premiums jumped in 2017.
The learning curve was a bit longer than expected, so an extension of a couple of years from a functional Congress could have helped significantly. It's also why the Republicans in Minn implemented a statewide reinsurance program.
The next time you hear that the ACA needs to be repealed to enable states to implement their own solutions, take a closer look. "Section 1332 of the Affordable Care Act permits a state to apply for a State Innovation Waiver to pursue innovative strategies to provide its residents with access to high-quality, affordable health insurance."
https://mn.gov/commerce/industries/insurance/reinsurance/
Paul Waldman WaPo:
... asked ... about its decision to abruptly pull out of all outreach events in the South, [HHS] issued a statement that read in part:
'The American people know a bad deal when they see one and many won’t be convinced to sign up for "Washington-knows-best" health coverage that they can’t afford. For the upcoming enrollment period, Americans are being hit with another round of double-digit premium hikes and nearly half of our nation’s counties are facing Obamacare monopolies. As Obamacare continues to collapse, HHS is carefully evaluating how we can best serve the American people who continue to be harmed by Obamacare’s failures.'
I have truly never seen anything like that in all my years of observing politics. This is the agency that is mandated by law to implement the Affordable Care Act, which includes taking all the steps it can to maximize enrollment, proclaiming that it has no intention of doing so.
https://www.vox.com/policy-and-politics/2017/9/27/16374158/obamacare-mississippi-hhs-events
This is pretty astonishing, in an astonishing month (not-US Haiti relief in 2010 massive and instant, Puerto Rico the opposite, and all the rest).
(I never used to be buy the 'it's all racism' line. )
https://www.axios.com/by-2018-obamacare-could-unaffordable-for-the-average-family-2490959155.html
That's okay, soon it will get a lot worse; and then when federalism finally triumphs it will get really really bad.
https://pbs.twimg.com/media/DK6cD13XkAAfOvp.jpg:large
In other words, it seems that smart & well-intentioned state governments can find a way to mostly compensate for the Trump admin's sabotage, but of course for the many states whose goal is make Obamacare fail, Trump has opened the door further.
Aside from Minn., NY is the only state to provide a Basic Health Program (PHP). This is a heavily subsidized, virtually zero cost (to patient) plan allowed by ACA in lieu of individual insurance for lower income people. As a result, most New Yorkers who would normally be eligible for CSRs aren't insured through exchange silver plans but through BHP. So CSRs aren't a big deal to NY insurers. That's not something new (and I posted about this before).
See ACAsignups for details on the numbers on BHP and the impact on rates.
http://acasignups.net/17/08/24/new-york-approved-rate-hikes-knocked-down-couple-points-nominal-csr-factor-outlier.
Regarding the 5% subsidized reduction in premiums, one needs to understand how subsidies work. Note that the unsubsidized premiums are going up a weighted average of about 13% (per ACAsignups calculation). Subsidies bring this down, but in a not so clear way that's got virtually nothing to do with NY actions.
If your income level is 300%-400% of federal poverty level (FPL), then if you were to purchase the second lowest cost silver plan on the market, you'd pay no more than about 9.7% of your income. The dollar amount of the subsidy you're eligible for is the excess premium. You can apply those subsidy dollars not only to the second lowest cost silver plan, but to any plan sold on the exchange that you want.
Suppose the cost of the second lowest silver plan this year is $100 more than the second lowest silver plan last year. (Doesn't have to be the same plan, just whatever has the second lowest cost). Let's say that it had been $400/mo, and is now $500/mo. That's a 25% increase. If your income didn't go up, then your subsidy goes up $100 to hold your cost to the same 9.7% of income.
Since one plan went up 25%, the other, higher priced plans must have risen less, to average out to 13%. For the sake of argument, let's say that all the others rose by $50, from $500 to $550/mo in 2018. A 10% rise; after weighting all the plans, the average rise could be 13%.
Since you're getting $100 more in subsidies for the plans, and the premiums (on the higher priced plans) are rising only $50, your net (subsidized) cost this year is dropping $50. So the subsidized premiums on the higher priced plans is dropping 10% ($50/$500), and holding steady on the second lowest plan.
Take the weighted average of these subsidized premium changes and you get a decrease of somewhere between 0% and 10%. This is not brilliance by NY. It just shows that the cheaper plans are going up faster than the more expensive plans. Just what you'd expect if some of the plans had been underpriced.
Edit: Figures also don't seem to include Empire BC/BS, which has 16% of the NY market, but decided to overhaul its plans so there are no comparable "before" and "after" numbers.
Edit: Though Empire says its plans are new for 2018, it appears to have just eliminated its "nonstandard" plans, and its 2018 standard plans seem basically the same as 2017's. For individual, old/new (bronze, silver, gold, plat) rates are: $520.96/$729.59 (40% increase), $650.19/$882.73 (36% increase), $770.16/$1057.86 (37% increase), and $897.12/1313.60 (46%!). Even with a larger subsidy this year, I think these figures throw a monkey wrench into NYS's claim that subsidized rates went down an average of 5%.
Lies, darn lies, and statistics. Always try to understand what the numbers really mean.
And yes, thank you again @msf ,for being so gracious with your time and efforts to the great benefit of MFO members.
Supplement health plan rate changes:
2012 to 2013 = 9%
2013 to 2014 = 3.2%
2014 to 2015 = 4.3%
2015 to 2016 = 4.1%
2016 to 2017 = 2.1%
2017 to new rate beginning Jan. 2018 = 5.75%
Total change for the 6 period time frame = 28.45%, with average annual at 4.74%.
However, this is not the compounded rate for the time frame.
One inflation calculator indicates an inflation change of +6.9% beginning 2012 to present.
An inflation graphic 1913 to present: (the link info indicates 2008, but graphic is current)
http://www.coinnews.net/tools/cpi-inflation-calculator/consumer-price-index-cpi-and-annual-percent-changes-from-1913-to-2008/
http://nymag.com/daily/intelligencer/2017/10/obamacare-premiums-set-to-skyrocket-in-2018.html
Perhaps I've become too jaded, but I really doubt that the folks impacted by this increase will be able (or willing) to determine the primary culprit and hold them accountable.
Over the next few weeks, I will need to see what my ACA plan costs will be. Currently, it's $15K out of pocket. Hopefully it can stay below 20.
https://nytimes.com/interactive/2017/07/19/us/what-trump-can-do-to-let-obamacare-fail.html
But yeah, I"m doubtful he'll pay the price. His supporters will blame moderate Republicans for blocking his healthcare "plan."
@msf- I do, I do, but without someone like yourself to show the way it's sometimes pretty hopeless. You remind me of Gandalf. Thanks so much for your ongoing contribution to MFO.
Best regards-
OJ
https://washingtonpost.com/politics/as-aca-enrollment-nears-administration-keeps-cutting-federal-support-of-the-law/2017/10/05/cc5995a2-a50e-11e7-b14f-f41773cd5a14_story.html?utm_term=.9613859f8b0c
nydailynews.com/news/politics/trump-directed-hhs-deny-iowa-proposal-fix-healthcare-article-1.3544329
https://nytimes.com/2017/10/03/health/aca-insurance-rate-increases.html
Thank you, MSF, for all your tireless research and insight. What everyone else has said about your helpfulness bears repeating.
ACA Signups, 10/5/17, A Brief, Snarky History of the CSR Mess and why Congressional action is needed NOW
Aside from all the politics and efforts to inflict damage on the existing system, there's still the fundamental problem that health care simply costs too much in the US - about double anywhere else, and rising.
Without digging up cites now but from memory: 18% of GDP and rising; provider costs over the next couple of years rising around 6-7%/yr (from various studies and insurer filings); pharma accounting for much of that with increases around 9-12% and other costs rising around 3-5%/yr.
There's a huge amount of waste (10-30%) due to excessive, unnecessary care. Consumer Reports and other organizations have started a program called Choosing Wisely to educate people in how they can help contain costs (and get better care) by watching out for excessive testing, prescriptions, treatments, etc. Disclaimer and ad: I'm involved with this program as a volunteer "patient champion". I can provide more info, but that should be via email.
The flip side (too little care as opposed to too much wrong care) is that there are many people just now beginning to get halfway decent care, e.g. via Medicaid expansion and insuring those who had been denied coverage due to preexisting conditions. Increased utilization is another reason why health costs are increasing. That doesn't mean the system is broken. It's doing what it's supposed to, and this cause of increased usage should subside as health improves for those less healthy people who have been brought into the system.
There's a lot Congress could do to fix things, starting with (as the ACASignups column mentioned) simply funding CSRs. I was aware of the Section 1332 waiver actions (WaPo link); ironic since the Republicans have advocated block grants to give states the flexibility which Trump is now obstructing.
Start at the 1:15 mark. If your income as an individual is $3832/mo, you'll get a subsidy. But if your income is $3833/mo, you won't.
Skip to 2:13. It gives the example of a $400 bronze plan. Quite possibly all the bronze plans here cost over $365, which happens to be 9.5% of your monthly income. (We know that from the first part where the video calculates your subsidy.)
So if you're just over the limit, you'd have to pay more than 9.5% of your income for any plan. Doesn't sound too affordable to me. It doesn't sound too affordable to the government either. If the lowest price plan costs more than roughly 8% of your income (after subsidies) then you're exempt from the mandate under the unaffordability exemption.
As rates continue to be pushed higher, insurance will become unaffordable for more people above the 400% FPL. By the ACA's definition.
https://twitter.com/ASlavitt/status/916069859066286081
'... the healthcare bill was about hidden tax cuts. Now the tax bill is about hidden healthcare cuts.'
and:
http://nymag.com/daily/intelligencer/2017/10/trump-personally-tried-to-sabotage-obamacare-in-iowa.html
https://www.washingtonpost.com/politics/as-aca-enrollment-nears-administration-keeps-cutting-federal-support-of-the-law/2017/10/05/cc5995a2-a50e-11e7-b14f-f41773cd5a14_story.html
https://www.yahoo.com/lifestyle/trump-administration-rolls-back-acas-birth-control-coverage-mandate-160019252.html