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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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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The health care law President Obama signed six years ago was supposed to fix the individual insurance market with enlightened rules and regulations. Instead, ObamaCare is destroying this market. Just look at what’s happening to Blue Cross Blue Shield.
If any insurer could cope with ObamaCare, it should have been Blue Cross Blue Shield.
Blue Cross companies came into the ObamaCare exchanges with decades of experience writing individual policies. Most of them are non-profits, which gives them an automatic leg up on the competition. And their plans captured the largest share of the exchange markets across the country.
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The Affordable Care Act (ACA) placed numerous requirements on insurance offered in both the individual and small group markets. This study presents data from the 174 insurers that offered qualified health plans (QHPs)—plans that satisfy the ACA requirements and are certified to be sold on exchanges—in both the individual and small group markets in 2014. QHPs in both markets are essentially the same and are governed by nearly identical regulations, making possible a better-controlled analysis of the performance of insurers participating in the two markets. Average medical claims for individual QHP enrollees were 24 percent higher than average medical claims for group QHP enrollees. Moreover, average medical claims for individual QHP enrollees were 93 percent higher than average medical claims for individual non-QHP enrollees. As a result, insurers made large losses on individual QHPs despite receiving premium income that was 45 percent higher for individual QHP enrollees than for individual non-QHP enrollees. These higher medical claims resulted in loss ratios for individual QHPs nearly 30 percentage points higher than loss ratios in other markets. Given that insurer performance selling individual QHPs worsened in 2015, these findings suggest that the ACA rules and regulations governing QHPs may be incompatible with a well-functioning insurance market even with subsidies to insurers and incentives for individuals to enroll in QHPs.
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Rather than stabilizing in 2016 as many experts predicted, the Affordable Care Act (ACA) is leading to large premium hikes and less choice and competition in the individual insurance market as plans prove unattractive to relatively young, healthy, and middle-class people. In order to achieve a better understanding of the ACA’s impact, a new Mercatus Center working paper compared insurers’ performance selling individual Qualified Health Plans (QHPs) with three other markets: the individual non-QHP market, the small group QHP market, and the small group non-QHP market.
My co-authors, Doug Badger of the Galen Institute, Ed Haislmaier of the Heritage Foundation, Seth Chandler of the University of Houston, and I make two key empirical findings. First, individual market QHP enrollees had average medical claims nearly double the average claims for individual non-QHP market enrollees in 2014. Second, individual market QHP enrollees were about 25% more expensive than enrollees in small group QHPs.
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Today, after years of hearings and speeches and debates, the Paul Ryan-led House of Representatives has done something it has not done before: it has released a comprehensive, 37-page proposal to reform nearly every federal health care program, including Medicare, Medicaid, and Obamacare. No proposal is perfect—and we’ll get to the Ryan plan’s imperfections—but, all in all, we would have a far better health care system with the Ryan plan than we do today.
The first thing to know about the Ryan-led plan — part of a group of proposals called “A Better Way” — is that it’s not a bill written in legislative language. Nor is it a plan that has been endorsed by every House Republican.
Instead, it’s a 37-page white paper which describes, in a fair amount of detail, a kind of “conversation starter” that House GOP leadership hopes to have with its rank-and-file members, and with the public, in order to consolidate support around a more market-based approach to health reform.
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House Speaker Paul Ryan’s policy plan for health care, as expected, leans heavily on market forces, more so than the current system created by Obamacare. The proposal contains a host of previously proposed Republican ideas on health care, many of which are designed to drive people to private insurance markets.
Importantly for conservatives, as part of a full repeal of the Affordable Care Act, the current law’s mandates for individuals and insurers would disappear under the GOP plan. It would overhaul Medicare by transitioning to a premium support system under which beneficiaries would receive a set amount to pay for coverage. The plan also would alter Medicaid by implementing either per capita caps or block grants, based on a state’s preference.
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The number of part-time workers in jobs for economic reasons shot up by 468,000, apart from the 458,000 that left the workforce altogether. Slack work or business conditions accounted for 181,000 of these jobs, while another 77,000 could only find part-time work.
Analysts at Goldman Sachs have noticed this trend for some time, and put the blame on Obamacare.
“The evidence suggests that the [Affordable Care Act] has at least modestly elevated involuntary part-time employment,” Goldman Sachs economist Alec Philips wrote in a research note published on Wednesday. Obamacare had the greatest impact on industries that traditionally do not offer strong health insurance coverage, such as retail stores and the hospitality industry. Phillips noted that these have the highest levels of involuntary part-time workers, and believes that the ACA has forced “a few hundred thousand” to take cuts in hours or accept part-time work as a result.
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The Affordable Care Act’s employer mandate has at least modestly led to a rise in involuntary part-time employment, according to a Goldman Sachs study released Wednesday.
“We would estimate that a few hundred thousand workers might be working part-time involuntarily as a result of the Affordable Care Act,” said Alec Phillips, an economist at the investment bank, in a research note.
This is only a fraction of the 6.4 million workers employed part-time for economic reasons, he said, but would be a significant share of the “underemployment gap.”
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The Congressional Budget Office and the Joint Committee on Taxation estimate that the total net subsidy provided by the federal government for people under the age of 65 will amount to approximately $660 billion in 2016. The CBO and JCT project that this subsidy will rise annually at a rate of 5.4 percent. The forecasted net subsidy for the 2017-2026 period discussed in the report is $8.9 trillion.
Most of the costs of these subsidies can be attributed to Medicaid and to employer-sponsored health insurance coverage for those under age 65. The latter cost arises primarily because health insurance premiums paid by employers are exempt from federal income and payroll taxes. These employment-based coverage subsidies are expected to increase to $460 billion in a decade and will total around $3.6 trillion during the 2017-2026 period.
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