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In Depth: Is the Affordable Care Act Unraveling?

Posted By Administration, Wednesday, September 7, 2016

The reinsurance payments from the federal government to health insurers participating in the Affordable Care Act exchanges ends this year. The money was put into the bill to help insurers with financial losses the first few years of ObamaCare.


BlueCross BlueShield wants Congress to extend the reinsurance. Some in Congress — mostly Republicans — say forget it and don’t even want this year’s payments to be distributed. In its statement BlueCross BlueShield — who insures 100 million people — said, Recently, some are proposing to stop the scheduled 2016 reinsurance payments to health plans, claiming these payments are a ‘bailout. This would result in higher premiums and less choice for consumers.”


Like other insurers participating in the ObamaCare experiment, BlueCross BlueShield has seen a huge influx of high risk, not very healthy people signing up. When the Affordable Care Act was put together, Congress factored that possibility into the law and established the reinsurance program and two other programs to help with losses and keep insurers in the program.


Last year there were 500 insurers participating in the reinsurance program. Each paid a fee into the account. Payments are then issued from that fund to the insurers losing the most money. The pool in 2015 hit $1.8 billion and almost every insurer received some of that money.


This is where critics are having trouble with the program. The law says the administration is supposed to give some of that money to the U.S. Treasury. Those payments have not been made. That has led Republicans in Congress to wonder why insurers have been placed in a higher priority than the people.


Critics — like the Americans for Tax Reform and Freedom Partners — call it a cash grab.


Another problem is the underestimation of the administration as to how much would be put into the pool from the three programs. It was supposed to be $10 billion the first year but ended up at just $8.7 billion.


Just 11.1 million people are enrolled now. The Congressional Budget Office (CBO) thought by now there would be 24 million. So with enrollment hitting about half of the original projection insurers are either pulling out all together or they’re pulling out of the less-populated markets.


The Kaiser Family Foundation is very concerned. It predicts only those areas with large risk pools will survive. You only have to look at the PIA Western Alliance state of Arizona to know how bad it is getting. One county in that state will have no insurance plans available at all.


And small cities and sparsely populated counties around the country may soon suffer the same fate. Most — however — are remembering what the president said when ObamaCare went into effect in 2013. He said the law creates what he called a one-stop shop and people could compare costs like they do when looking for airline tickets.


Just visit healthcare.gov, and there you can compare insurance plans, side by side, the same way you’d shop for a plane ticket on Kayak or a TV on Amazon. You enter some basic information, you’ll be presented with a list of quality, affordable plans that are available in your area, with clear descriptions of what each plan covers, and what it will cost.  You’ll find more choices, more competition, and in many cases, lower prices,” Obama said.


That just hasn’t happened.


Oklahoma Deputy Insurance Commissioner Mike Rhoads said in his state — and others — many counties have just one insurer to choose from and, With only a single carrier out there, there is no competition.”


The Oklahoma Insurance Department has been actively recruiting insurers with no success. “They declined, citing the financial losses they suffered before. There's a little bit of giggling in the background when we ask this question, and we understand that they've been there, they've done that, they've taken their lumps,” he said.


Tennessee Insurance Commissioner Julie Mix McPeak agrees with Rhoads and goes a step farther. She thinks the law is on the verge of collapse. Much of her state only has one insurer. And at this point I don’t feel like we have a successful exchange because, like I said, half of our counties have only one option on the exchange today and so having any change in the level of competition may not allow our exchange to survive.”


And by 2017 a lot of states will be struggling with the same issue. A report by Avalere looked at 500 regions in the U.S. and found by 2017:


  36% will have just one carrier

  19% will have just two


Avalere’s Elizabeth Carpenter said, Lower-than-expected enrollment in the exchange market and concerns related to both stability and the risk-mitigation programs have led carriers to reconsider their participation.”


This has led supporters of ObamaCare to insist that a government option or even a single payer system needs to be established. Both ideas have been received negatively by insurers. America’s Health Insurance Plans (AHIP) said, A government-run plan would underpay doctors and hospitals rather than driving real reforms that bring down costs and improve quality. It’s time we focus instead on broad-based reforms that will ensure the affordability and sustainability of our healthcare system.”


The predictions of ObamaCare’s collapse are nonsense according to the Department of Health and Human Services (HHS). Spokeswoman Marjorie Connolly said most shoppers will have multiple choices next year. All of this talk is just speculation and is premature and incomplete.”


Meanwhile the — what some call — failure of ObamaCare and its seeming collapses has put state insurance regulators under incredible pressure. McPeak said to keep insurers the Tennessee Department of Insurance has allowed premium rate hikes for three carriers of 44%, 46% and 62%.


I didn't feel like I had any choice but to approve those rates when it came back to be actuarially justified,” she said.


HHS officials pooh-pooh the notion this is a crisis. It says most consumers won’t feel the pinch because they get ObamaCare subsidies. Even if rates jumped 25% next year, 73% of those on the Medicaid supplements will be able to pick up a plan for under $75 a month.


However, about 15% of the 11.1 million enrolled now will have to bear the brunt of what will likely be very high price hikes.


President Obama also chimed in and said the reports of ObamaCare’s collapse are premature. In a visit to Tennessee last year Obama said, There were a lot [of] stories in the newspaper, just like there are this year, about, oh, premiums are skyrocketing and this is going to be terrible and all that. When all the dust settled and the commissioners who were empowered to review these rates forced insurance companies to justify what they were seeking, what you discovered was, is that the rates actually didn't go up as much as people thought.”


Source links: Three from The Hill — link 1, link 2, link 3, three from Insurance Business America — link 1, link 2, link 3, Employee Benefit Advisor


Tags:  Healthcare  HealthCare.gov  In Depth: Is the Affordable Care Act Unraveling?  Insurance Content  Insurance Industry  Insurance News  ObamaCare  The Affordable Care Act  Weekly Industry News 

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