....if I could predict all this two years ago, what does that tell you all?????
....included in the list of closed COOPs is one Health Republic Insurance of Oregon
Health Republic Insurance of Oregon (10,000 members; $50 million startup “loan”). By the way, Dawn Bonder, CEO of Health Republic, was quoted in The Oregonian just a month ago as follows: “We are strong and we are sticking to our plan, which has always been slow and steady growth. We’re very financially stable,” Bonder said. “We see a long,healthy life in front of us.”
......also folded
Tennessee Community Health Alliance (27,000 members; $73 million in federal startup loans). How had this coop captured market share? Apparently by charging premiums so low that, as reported by The Tennessean, it had to request a 32% increase for 2016 and was granted/directed — get this — to offer premiums at a 45% higher rate.
....not to be left out...........another failure after shut off of the taxpayer $$$ spigot........Kentucky the great success story of Obamacare.........NOT
Kentucky Health Cooperative (51,000 members; $146 million in federal loans, with a $65 million “emergency solvency loan” in 2014). Again, this coop managed to capture 75% of the Kentucky Exchange market by offering insurance at lower prices. Before shutting down, it had requested a 25% increase in premiums for 2016. By the way, anyone remember those stories about how Kentucky was the success poster child for the ACA? It looks like its success may have been built primarily by selling insurance at cut-rate prices hoping that most of the losses would be bankrolled by the federal government.
Choose your doctor? Not anymore in Obamacare’s Houston
October 26, 2015 1 Comment
The data is not fully out yet, but, if my home area of Houston, Texas (Harris County) is representative, PPO plans that offer the greatest choice of doctors and that provide low cost sharing are extinct, as are POS plans that also offer more choice of medical practitioners. Platinum plans of any sort are on their way to its extinction.
In 2015, there were 19 PPOs available in Harris County, 12 from Blue Cross Blue Shield and 7 from Cigna Healthcare. In 2016, according to the preliminary data available on healthcare.gov and released Sunday, there are none. Nor does the matter improve my considering POS plans, which also offer a greater degree of choice of doctor than does an HMO. In 2015 there were17 such plans in Harris County, 10 from Aetna and 7 from Humana. Those are gone too in 2016. So, basically, it is no longer true in Harris County that you have a choice of doctor if you purchase an Obamacare plan. You get what the HMO or EPO gives you.
Platinum plans are now almost extinct. In 2015, there were three platinum plans available in Harris County, an HMO and POS offered by Humana and and EPO offered by United Healthcare. According to the preliminary information released Sunday, only the Humana HMO survives. Thus, you can get a plan that has minimal cost sharing, but no longer one that offers great choice of medical practitioners. The Humana POS and the United EPO are gone.
Notice what’s missing from the list of plan types? And it’s going to cost you a lot to put yourself in a pool in which cost sharing is low. In 2015, the gross premium for the Humana Platinum HMO (32673TX0640030) was $448 for an individual age 40 (non-smoker). In 2016, the gross premium for the same Humana plan was $551, an increase in gross premiums of 23%.
Net premium increases — the thing the insured actually pays — are likely to rise a similar amount for the one remaining platinum plan. The second lowest silver plan — the baseline for computation of subsidies — has increased in price by $34, from $222 in 2015 to $256 in 2016. Consider an individual eligible for a $150 subsidy in 2015. If they purchased the Humana Platinum HMO in 2015, their net price would be $298. If they purchased the same policy in 2016, yes, their subsidy might grow by $34 but their net price would still be $367, an increase of 23%.
All of this is the very predictable consequence of a design flaw in the ACA. It heralds an unraveling of the Obamacare market. Who is willing to pay the extra cost of a PPO: generally people who value a long term relationship with their physician. And those people are disproportionately less healthy than others. Hence, the PPO pool tends to be populated by people who are expensive to treat. Although insurers could, in theory, compensate for this by raising premiums to very high levels, in fact that does not work for long because, with premiums yet higher, only the least healthy of the least healthy persist, and the pressure on premium grows. Insurers, seeing the handwriting on the wall, thus kill off these plans before they technically implode.
It is the same problem with platinum plans. The people who most want low cost sharing tend to be the people who most have high costs. These plans are thus difficult to sustain where plans with lower cost sharing are available. The complex ecology of health insurance does not permit them to survive.
When the Obama administration releases its data in a form that is more susceptible to in depth analysis, we’ll be able to see if Harris County is representative or an anomaly. Although the trend may be stronger or weaker in other areas, I predict it will not show there is much special about the Houston, Texas area in its vulnerability to a death spiral.
Winter is coming?
October 19, 2015
For the past year or so, ACA proponents have gloated over the fact that markets have not yet collapsed in a death spiral and that enrollment in Exchange plans has grown to 9 million. There are at least four recent developments, however, that suggest the ACA is in greater trouble than many realize.
Enrollments Way Lower Than Projected The first piece of troubling news comes from CMS itself: Notwithstanding the full implementation of the individual mandate, CMS is projecting anywhere from 9.4 million to 11.4 million people enrolled in the Exchanges, an increase of 3-25% over its figure for 2015. And, while ordinarily growth rates of this nature might please insurers, the projections on the basis of which Obamacare was enacted asserted that 21 million would be in the Exchanges by 2016. Thus, while the Exchanges were running at 70% of original projections in 2015, they are now projected to run at just 45 – 52% of projections for 2016. Moreover, between 0.9 million and 1.5 million of the enrollees for 2016 are projected to come not from the uninsured but from those already holding off-Exchange individual market policies.
The new projection 
The premise on which the ACA was enacted The reduced enrollment in the Exchanges has several ramifications. First, it likely means the pool in the Exchanges is less healthy on average than expected. Second it means the significant overhead expended in establishing the Exchanges and running them is spread over a lot fewer people. And third it means that Obamacare was essentially passed on greatly exaggerated assertions of its benefits. Does the extraordinarily elaborate and expensive apparatus is establishes make sense when the a far lower than projected number of people gain health insurance of quality? One also must wonder how the dilution of the individual mandate through various “hardship exemptions” may have lowered the number of people enrolled on the Exchanges.
[[Added 10/20/2015]] For an excellent analysis of this issue, look also at Brian Blase’s recent article in Forbes. (http://www.forbes.com/sites/theapothecary/2015/10/19/examining-plummeting-obamacare-enrollment-part-i/)
Footnote 1: CMS is now “unable” to make projections for the SHOP Exchanges. Are we now prepared to call them a bust?
Footnote 2: It is not clear whether the CMS enrollment projections took into account the very substantial gross and net premium that appear to be coming (see below).
More Coops Closing The second piece of disturbing news is that at least four more coops insuring a significant number of people on the Exchanges are going out of business. They are as follows:
Health Republic Insurance of Oregon (10,000 members; $50 million startup “loan”). By the way, Dawn Bonder, CEO of Health Republic, was quoted in The Oregonian just a month ago as follows: “We are strong and we are sticking to our plan, which has always been slow and steady growth. We’re very financially stable,” Bonder said. “We see a long,healthy life in front of us.”
Colorado HealthOP (83,000 members; $72 million in startup “loans”). According to the Denver Post, this comes after the coop increased its enrollment seven-fold and captured 39% of the market in Colorado by cutting rates in 2015 (notwithstanding losses the year before).
Kentucky Health Cooperative (51,000 members; $146 million in federal loans, with a $65 million “emergency solvency loan” in 2014). Again, this coop managed to capture 75% of the Kentucky Exchange market by offering insurance at lower prices. Before shutting down, it had requested a 25% increase in premiums for 2016. By the way, anyone remember those stories about how Kentucky was the success poster child for the ACA? It looks like its success may have been built primarily by selling insurance at cut-rate prices hoping that most of the losses would be bankrolled by the federal government.
Tennessee Community Health Alliance (27,000 members; $73 million in federal startup loans). How had this coop captured market share? Apparently by charging premiums so low that, as reported by The Tennessean, it had to request a 32% increase for 2016 and was granted/directed — get this — to offer premiums at a 45% higher rate.
Many of the coops blame their failure on the Cromnibus law enacted in December of 2015 that prohibited use of non-appropriated funds to pay for the federal Risk Corridors program that, on paper, was supposed to have the federal government backstop up to 80% of losses. Given the magnitude of insurer losses thus far, the federal government is thus able to pay only 12.6% of the obligations created on paper by this program. If one assumes, however, that the coops are correct in blaming Risk Corridors rather than mismanagement for their failure, this would confirm the suspicions of many that insurers priced their policies deliberately low in order to bring in business, relying on the federal taxpayer to cover their losses. I would also not be surprised to see some sort of legal action relating to coops who, notwithstanding Cromnibus and the handwriting on the wall persisted in booking Risk Corridor receivables at full value until very recently.
There will surely be lots of finger pointing over the failure of these coops: Democrats pointing to the “evil” Cromnibus bill as the source (although many Democrats voted for the legislation) and Republicans pointing to the inherent flaws in the ACA as the root of the problem. In the meantime, however, in many states, one of the sources of lower-priced insurance has been eliminated, meaning that many will be seeing substantial increases in gross premiums.
The fall of the PPO? One of the promises of the ACA was that it would continue to offer choice to consumers and that they would be able to keep their doctor. Not so in many states. Plans that offer greater degrees of choice in selecting one’s provider appear to be in some trouble, closing in the shadow of an impending adverse selection death spiral. In Florida, for example, zero PPOs will now be available on the Exchanges in 2016. In Texas, the state’s largest insurer, Blue Cross and Blue Shield, has announced that it lost so much money on individual PPO plans that it will no longer sell any in 2016. This development means 367,000 people will have to find other types of plans. In Illinois, Blue Cross is continuing PPOs for now, but only with narrower networks than had been available under a plan that had served 173,000 individuals.
I suspect this is just the beginning of problems for PPOs sold on the individual market in an era when insurers can not medically underwrite. Between 2014 and 2015, PPO premiums went up at a far higher rate than other plan types. We will shortly have the data to see whether this trend continued in 2016.
Rates We don’t have all the information yet, but if ACA proponents like Charles Gaba are correct, we are looking at some substantial gross premium rate hikes in the United States, and extremely high rate hikes in some states. What Mr. Gaba has done is to go state by state through various filings and do what no one else has tried: correlate premium rates with actual enrollments. Although I do not always agree with Mr. Gaba, I must praise him for a very worthy and time consuming enterprise. The fact that some insurer is charging an astronomical premium for insurance doesn’t mean as much when few people are buying their product as it does when an insurer is getting a large share of the business. Unfortunately, the federal government does not publish in any place I can discover insurer-by-insurer breakdowns of enrollment.
The research suggests gross premiums will go up 12.45% nationwide once enrollment weighting is taken into account. Statewide figures range from a high of 41.4% in Minnesota, 39.0% in Alaska, and 30% in Hawaii to lows of 0.7% in Maine, 0.7% in Indiana and 3.5% in Connecticut. Among the bigger states, the estimates are 4% for California, 15.8% for Texas, 9.5% in Florida, and 7% in New York. As I have noted on this blog and in testimony before a Congressional committee, net premium increases — which is what really matters to purchasers — can often be considerably greater than these figures, particularly for poorer individuals, but also can be lower.
More to come We will, of course, see what plays out. But for those who thought the brilliant engineering of Obamacare had forever slain the adverse selection dragon, beware. Dragon eggs can hatch. |
