The impact of ObamaCare on doctors and patients, companies inside and outside the health sector, and American workers and taxpayers
A nearly $150 million bill from the federal government has taxpayer-funded Obamacare plans angry, with some experts wondering if more co-ops could shut down in the coming months.
When the Obama administration last week announced payments under the risk adjustment program for the 2015 benefit year, the news wasn’t good for the 10 Obamacare consumer oriented and operated plans, or co-ops, that remain out of the 23 original plans, which owe more than $150 million to the government.
On Tuesday, the payments claimed one victim, as Connecticut’s insurance regulator shut down the HealthyCT co-op after it learned it owed $13.4 million in risk adjustment payments.
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Health insurance premiums have risen rapidly in the three years since the launch of ObamaCare’s exchanges, despite the law’s multibillion-dollar efforts to keep a lid on them. ObamaCare created three mechanisms for bailing out insurers if they lost too much money through the exchanges — the so-called risk corridor, risk adjustment and reinsurance programs. The hope was that the prospect of federal cash to cover potential losses would yield lower premiums.
Cash has indeed been flowing from the federal Treasury — but it hasn’t done much good. According to a new report from the Mercatus Center at George Mason University, the Obama administration has given health insurers 40% more in bailout funds under the reinsurance program than originally planned. Yet premiums still rose by as much as 50% in some parts of the country.
Things will only grow worse. Next year, the reinsurance program will end. Insurers will likely respond by hiking premiums even more or withdrawing from the exchanges. Many have already opted for the latter course because of significant losses.
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Last week, the Department of Health and Human Services (HHS) released the payment amounts that some insurers owe and some insurers will receive through the Affordable Care Act (ACA) risk adjustment program. As the law’s implementation moves forward, it is increasingly clear that the controversial risk adjustment program presents a fundamental trap, a sort of “damned if you do, damned if you don’t” scenario. To the degree that risk adjustment works, insurers individually lack the incentive to enroll the young and healthy people needed for the ACA’s complicated structure to survive. To the degree that risk adjustment doesn’t work, large arbitrary transfers between insurers occur that produce significant uncertainty in the market.
The risk adjustment program is budget neutral—within each state insurers with healthier enrollees pay the aggregate amount that insurers with less healthy enrollees receive—and is intended to make insurers more-or-less indifferent to the health status of their enrollees. The Obama administration appears to recognize the importance of risk adjustment for the ACA’s future as HHS recently convened a day-long conference and released a 130-page paper on the subject. This conference was partially motivated by the strong complaints, particularly by newer and smaller insurers, that the program unfairly benefits large, established insurers.
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Last year, healthcare leaders had their eyes trained on one big case – King v. Burwell – and they celebrated when the justices voted to uphold a key provision of the Affordable Care Act.
This year wasn’t nearly so straightforward for healthcare leaders watching the Supreme Court, which wrapped up its latest term last week. At least half a dozen notable cases fragmented healthcare wonks’ attention. The outcomes of those cases left some in the industry cheering and others wringing their hands.
Healthcare-related cases focused on abortion, the ACA’s contraception mandate, patents, unions, claims data and the False Claims Act, among other topics. And the mid-term death of Justice Antonin Scalia looks to have affected the outcomes of some of those cases.
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Last week, the GOP kept a promise to the American people by delivering a replacement plan for Obamacare.
The plan — part of the party’s “A Better Way” campaign — was unveiled by House Speaker Paul Ryan, R-Wisc. “What we are laying out today is a first-time-in-six-years consensus by the Republicans in the House on what we replace Obamacare with,” he said.
The plan is a good one. House Republicans have laid out several core reform proposals their party can rally around. As I note in my new book The Way Out of Obamacare, a plan like this one would be a vast improvement over the unmitigated disaster that is Obamacare.
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A while back, I explained how the ACA’s Medicare Shared Savings Program (MSSP) uses Accountable Care Organizations (ACOs) to encourage healthcare providers to deny healthcare to seniors and disabled Medicare beneficiaries. To summarize: ACOs are paid bonuses if they “reduce costs” in the fee-for-service system, which they can do only by providing fewer services. The system encourages hospitals, physicians and potentially other providers to merge, to make it easier to “make sure” that patients don’t get “extra” healthcare from unaffiliated providers.
This week, in a National Bureau of Economic Research working paper with the clever title, “Moneyball in Medicare,” authors Edward C. Norton, Jun Li, Anup Das and Lena M. Chen reveal yet another ACA Medicare provision which encourages providers to merge in order to reduce healthcare services provided to patients.
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When he was chairman of the Ways and Means Committee, Paul Ryan was frustrated when decisions about tax and other legislation under his committee’s jurisdiction emanated from the House leadership offices rather than from his committee. When he was elected Speaker last fall, he promised to change that, and, in the “Better Way” package of policy proposals, he has delivered.
House committee chairmen drove the process, and their staffers have been working intensely with their bosses and with members for months to put ideas to paper for each of the six task forces—poverty, health care, national security, the Constitution, the economy, and of course, tax reform. In the separate events releasing each of the reports, Ryan put the committee chairmen forward to give them credit for the work they had done in developing the proposals.
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The House Republican’s health plan represents a real milestone. It is the first proposal released since the enactment of the ACA in 2010 that legitimately can be called the Republican alternative. If Congress were to take up legislation in 2017 to roll back the ACA and replace it with something different, the starting point for drafting the legislation would be this plan. It builds on plans authored by Sen. Richard Burr, Sen. Orrin Hatch, and Rep. Fred Upton as well as the plan introduced by Rep. Tom Price. These precursors were built on the same set of common principles and objectives: repeal and replacement of the ACA; more choices, lower costs, and greater flexibility for consumers; protection of the most vulnerable Americans; incentives for innovation and high quality medical care; and preservation and protection of Medicare.
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Small, regional health insurers and upstart co-op plans again incurred large charges under the Affordable Care Act’s risk-adjustment program, according to new data the CMS released Thursday. Calendar year 2015 marks the second year of risk adjustment, and many smaller insurers have had to pay into the program both years.
The data also show payouts for the ACA’s reinsurance program. For ACA plans sold in 2015, the reinsurance payments total $7.8 billion. The temporary reinsurance program, which expires at the end of this year, protects health insurers against costly claims.
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Insurers helped cheerlead the creation of Obamacare, with plenty of encouragement – and pressure – from Democrats and the Obama administration. As long as the Affordable Care Act included an individual mandate that forced Americans to buy its product, insurers offered political cover for the government takeover of the individual-plan marketplaces. With the prospect of tens of millions of new customers forced into the market for comprehensive health-insurance plans, whether they needed that coverage or not, underwriters saw potential for a massive windfall of profits.
Six years later, those dreams have failed to materialize. Now some insurers want taxpayers to provide them the profits to which they feel entitled — not through superior products and services, but through lawsuits.
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