Tuesday, July 09, 2013

ACA and the Script

What an idiot.  I am likely the last person in America to realize that the Obama administration never intended for actual private companies to write insurance for health care under ACA.

But it is now clear.  The strategy is breathtaking simple, and effective.  Lump on a bunch of requirements that make it impossible--not difficult, IMPOSSIBLE--for companies to break even writing insurance.  These include, but are not limited to, prohibiting rejection for pre-existing conditions, requiring companies to cover children who are middle-aged, and ending lifetime totals.  Far from making insurance cheaper, these things obviously make insurance much more expensive, because the companies have to pay out much more.  But they can't raise premiums.  The only alternative is for private insurers to give up.

Of course, when companies bail out, one after another, ObamaCo will blame the "greed" of private enterprise.

And then write new "NINJA" requirements, just like what was forced on banks during the explosion in mortgage "access" in the mid 00's.  No income, no job, no assets required.  All are welcome.  After all, it's not OUR money! 

It's rare that you see something so clearly scripted.  It's like one of these scenes in an Ayn Rand novel, where you say, "Naw.  Nothing could be that patently cynical.  It's just not realistic."


Simon Spero said...

What part of "45 CFR Part 154" don't you understand?

"§ 154.205 Unreasonable rate increases.
(a) When CMS reviews a rate increase subject to review under § 154.210(a), CMS will determine that the rate increase is an unreasonable rate increase if the increase is an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase.
(b) The rate increase is an excessive rate increase if the increase causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided under the coverage. In determining whether the rate increase causes the premium charged to be unreasonably high in relationship to the benefits provided, CMS will consider:
(1) Whether the rate increase results in a projected medical loss ratio below the Federal medical loss ratio standard in the applicable market to which the rate increase applies, after accounting for any adjustments allowable under Federal law;
(2) Whether one or more of the assumptions on which the rate increase
is based is not supported by substantial evidence; and
(3) Whether the choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.
(c) The rate increase is an unjustified rate increase if the health insurance issuer provides data or documentation to CMS in connection with the increase that is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.
(d) The rate increase is an unfairly discriminatory rate increase if the increase results in premium differences between insureds within similar risk categories that:
(1) Are not permissible under applicable State law; or
(2) In the absence of an applicable State law, do not reasonably correspond to differences in expected costs."

ought to be perfectly clear.

Are you acting like those wimps in the industry who wanted something clearer, or some sort of safe harbor? Having a nationally set percentage increase that triggers the review process that can be changed every year by the secretary could make updating any safe harbor provision troublesome to the department.

"Comment: Numerous industry commenters suggested that CMS establish safe harbors or expedited rate review procedures. For example, some commenters suggested that if a health insurance issuer’s proposed rate increases were expected to satisfy the Federal medical loss ratio standard, the increases should be exempt from review. Another commenter suggested that proposed rates in insurance markets that were determined to be competitive should either be exempt from review or subject to an expedited process. One commenter stated generally that the review process applied should vary based on the circumstances of the proposed increase.
Response: We have not modified the final rule to provide safe harbors or expedited rate review procedures given that many factors are relevant in determining whether a particular proposed rate increase is unreasonable, thus supporting the need for a more detailed review process."

The act does not give the federal government the ability to block rates it has declared unreasonable; that's a job for the states. A state would have to be crazy to do that. California has it on the ballot for Nov. 2014.
Large group plans are explicitly exempted. That would leave insurers free only to raise rates on Big Business, who, would certainly not respond by dropping coverage, reducing wages, or increasing prices.

[I am inclined towards a co(Hayekian) view: the knowledge of what people don't want, and how to not give it to them, is too widely dispersed for the legislation and implementation to be the project of a conscious design.

Anonymous said...

Mr Spero is not only condescending but clueless. Every aspect of Obamacare is designed to create a single payor system. Note the actions taken this week. Insurance companies will not be able to increase premiums fast enough to keep up with their loss-ratios. Insureds will move as fast as they can to the lowest cost provider, the government, and the party is over. Its called the death spiral Mr Spero.

Thomas W said...

The goal of single payer doesn't require reading the law, just listening to the political speeches. President Obama made a big deal about how much premiums "ought" to be.

Since a "fair" health premium is inevitably going to be lower than the actual cost of care, private insurers will be squeezed out of the market. If they increase premiums, they'll be accused of gouging consumers. If they don't, they'll lose money. Give it a few years and we'll be stuck with the government paying along with a complaints about greedy companies which won't provide insurance without excess profits.

Unfortunately, the whole push of the ACA is health insurance. Whether anybody gets medical care, or the cost of that care, isn't really an issue. Remember, if you don't pay anything out of pocket, it's FREE!

John Thacker said...

Another big deal is the prohibiting charging people more than three times as much based on age-- i.e., not charging people who are 25 less than one-third the price of those who are 55, even though that doesn't match reality. The options then are either to massively overcharge the young (and see them skip out, since it wouldn't be worth it even with the penalty), or massively lose money on the 55-64 crowd.