Standing In The Gap Of The Real And Perceived
The Washington Examiner just reported that the federal government is balking on its payments to insurance carriers of Obamacare-compliant healthcare plans, payments built into the Affordable Care Act through, and ending after, 2016 to reimburse carriers for losses for the anticipated high claims resulting from the that law’s elimination of screening for pre-existing conditions. When you build your business on a $2,900,000,000 promise, and you get only $362,000,000, or 12.5% of expectations, where do you go?
Carriers are swimming in red under the implementation of the Affordable Care Act already, and they only did so with the expectation of being somewhat compensated for their losses by the federal government through reinsurance, risk corridor, and risk adjustment programs. The risk corridor program was originally designed to be funded out of profits from the carriers themselves, but also provided for taxpayer dollars to cover any carrier losses exceeding carrier contributions to the program. Republicans, though, included a provision championed by Senator Mark Rubio in the “Cromnibus” bill that got passed in December 2014 that eliminated the taxpayer failsafe mechanism, leaving the insurance carriers themselves to balance their own books without additional taxpayer monies.
This is exactly the same scenario, in a different industry, that created the collapse of the housing market nearly ten years ago, when the federal government forced banks to issue mortgages to high risk applicants with the assurance that Fannie Mae and Freddie Mac, two government created mortgage reinsurers, would buy those mortgages after issuance, which they did, until the mortgages started to fail en masse… and then they didn’t, leaving banks to absorb impossibly large losses that they would have never had were it not for the federal government’s tinkering with a business’s right to assess its own risk tolerance in the first place.
Highmark, an ACA-compliant healthcare plan carrier in Pennsylvania which lost $78 million in the first half of 2014, just reported in September that it has lost $318 million dollars in just the first half of 2015. Three hundred and eighteen million dollars, people! Highmark’s 2016 rates are going up an average of 25%… and that’s all before the announcement cited at the top of this post.
Blue Cross Blue Shield of Tennessee lost a whopping $141 million on individual Obamacare policies in 2014. The State of Tennessee has approved BCBS Tennessee’s average rate hike request of 36% for 2016.
Blue Cross Blue Shield of North Carolina lost $123 million in 2014, and is asking for a 35% increase for 2016. Its competitors’ requests range between 20%-25%.
One of the reasons the current model of health insurance, which the Affordable Care Act has metastasized into the fabric of our economy, is becoming less and less workable, is because the public’s expectations of it are becoming higher and higher over time. We used to expect health insurance to cover extraordinary risks for relatively healthy individuals. Then we expected it to cover preventive care, which, if covered, is not a risk, but a certainty. Joe Graves, an insurance broker out of Nashville, Tennessee, explains the problem clearly in a comparison with auto insurance.
“‘If you could use your car insurance to pay for oil changes, tire rotations and a once a year tune up, wax job, and detail, and all were subject to a deductible, auto premiums would skyrocket,’ he says. ‘(Can you) imagine getting new tire(s) with a $25 co-pay? The difference between auto insurance and health insurance is that the former really is insurance, and the latter is not.'”
“‘Auto insurance is still just that, ‘insurance against the catastrophic,’ he adds. ‘It’s not designed for everyday “maintenance.” Now that health insurance has so many “has to cover” rules, the premiums will continue to skyrocket.'”
So here we are, now, at the point where we demand that health insurance companies cover infinite amounts of risk with finite amounts of money. But if the federal government can’t meet its obligations to the insurance companies, how can it expect the insurance companies to meet their obligations to healthcare consumers?