Tag Archives: adverse selection

Obamacare on a roll in Florida despite sharp opposition

Obamacare on a roll in Florida despite sharp opposition | Bradenton Herald Editorials | Bradenton Herald.

Floridians are now flocking to Affordable Care Act plans with almost 300,000 residents enrolled through the federal exchange. The figure surged by 88 percent in one month as website obstacles were cleared.

In another dramatic development, Florida joins 11 other states in meeting or exceeding the Obama administration’s enrollment objectives by Feb. 1. The Sunshine State hit the 100 percent target of a little more than 295,000.

This success comes despite fierce political opposition out of Tallahassee and elsewhere, resistance that included a fruitless and expensive federal court challenge to the constitutionality of the law.

Like it or not, the Affordable Care Act is the law of the land. Despite the rocky rollout of the federal insurance exchange marketplace, online registration is working.

A comment and a question. Law of the land? Which version? Which law and how many changes to come? In regards to enrollment, yes it is good that many are signing up but I wonder if the enthusiasm to sign up is related to Florida’s demographics?  The editorial goes on to mention…

The number of young enrollees — between the ages of 18 and 34 — is rising but remains below the administration’s hopes before March 31. Higher enrollment would help keep premiums from rising by balancing the risk insurers will be carrying.

But gives no numbers. I’m guessing it doesn’t fit the narrative?

Read more here: http://www.bradenton.com/2014/02/18/4999228/obamacare-on-a-roll-in-florida.html#storylink=cpy
Read more here: http://www.bradenton.com/2014/02/18/4999228/obamacare-on-a-roll-in-florida.html#storylink=cpy

5 Reasons to Not Freak Out About an Obamacare Death Spiral

5 Reasons to Not Freak Out About an Obamacare Death Spiral – Yahoo Finance.

Here’s what is going to happen: Sign-ups are going to accelerate before the deadline. There will be some bumps. People might not initially get the coverage they think they’ve signed up for. Or they might be upset about narrow doctor networks. Or, in some cases, they might have to pay more for the same coverage they had before. These are all problems—some of them by design—but they aren’t existential problems. There just isn’t a lot of evidence that Obamacare is already doomed.

That said, here are five more reasons not to freak out if the administration doesn’t hit its target for sign-ups or young invincibles.

Follow the link!


What Happens if Young People Don’t Sign Up for ObamaCare?

What Happens if Young People Don’t Sign Up for ObamaCare? | Fox Business.

Herrick says insurers wanted to have the average age of enrollees around 40-41 years old, but in states like Kentucky, the average age is trending a decade higher, the WSJ reports.

“If the average age of enrollees is a decade older, and the health status is worse than expected, that will cause premiums to skyrocket,” he says.

Can Obama inspire the young invincibles? Color me doubtful.


Creative Destruction | The Weekly Standard

Substandard catastrophic plans will be cancelled: Creative Destruction | The Weekly Standard.

But don’t worry, everyone will be covered, right? As the College Art Association notes in a “Brief message” to its members on its website, “Here’s the good news: PPACA includes comprehensive reform that is designed to provide affordable health coverage for all individuals. The average premium for individuals who purchase coverage directly today (i.e., they do not receive coverage through their employer) is expected to decline significantly.”

But the membership of these organizations should worry. Unless they are older or suffer from some preexisting condition that made coverage hard to obtain, freelance artists, designers, and musicians forced to enter the state-run exchanges are far more likely to see their rates go up—or to face the individual mandate penalties. This will be especially true, as alert observers of Obamacare implementation have noted, for those under the age of 30.

The youner applicants, better known as the “young invincibles”, can certainly look forward to increased rates, although coverage will be better. Most likely they will find the tradeoff unsatisfactory but I’m just speculating. Soon they will get to vote with their wallets.


Delta Airlines letter to the Obama Adminstration: Obamacare NOT Business as Usual

Delta Air Lines letter to the Obama administration

June 13, 2013

I want to thank you for the opportunity to meet with you at Grady Hospital in Atlanta recently to discuss the impact of the Affordable Care Act (ACA) on Delta Air Lines. The small group setting allowed for a good exchange of ideas that I found very valuable. As you know, I and the other large employer representatives in attendance did not agree with your initial assessment that the ACA means “business as usual” for large employers. Since you committed to share our concerns with Secretary Sebelius and the President, I thought it might be helpful to summarize the major points for you here.

As you heard from many of us, the ACA will result in increasing costs, for both our companies and our employees, and will also reduce the benefits provided. Here are some of the major drivers of these effects:

  • The Reinsurance Fee — The ACA requires large employers to pay an annual fee of $63 per covered participant in 2014. For Delta’s roughly 160,000 enrolled active and retired employees and their family members, this represents more than $10 million added to the cost of providing health care next year. As we discussed, this fee, which is meant to help stabilize the state exchanges as they get started, provides absolutely zero direct benefit to our participants. It is, essentially, a direct subsidy form us and our employees to those who participate in the exchanges.
  • Covering Children Until Age 26 – There is no doubt that this has been a popular provision nationwide and at Delta we have seen more than 8,000 children added to our rolls resulting in a permanent increase in our overall costs of about $14 million per year. We are required to charge the same for these children as we do for any other children covered by our plan. However, our experience shows that, on average, these children are consuming considerably more health care than other children we cover. In essence, we are experiencing adverse selection in this population and that is having an impact on the costs that we and our employees pay for coverage.
  • The Individual Mandate – As you know, in 2014, the individual mandate under the ACA kicks in and those not currently covered under any plan must enroll or pay a penalty to the Federal government. Our actuaries have estimated how many of those who currently opt out of our coverage will now opt in. Their estimates are that this requirement will add another $14 Million in costs to our plan each year, net of the premiums paid by these individuals.
  • Thirty Hour Rule – As you heard at the meeting, many employers are planning to reduce employees’ hours to less than thirty per week in order to avoid the requirements to either provide health coverage or pay fees for those employees. Delta is not one of those employers, and we do not plan to force employees to work fewer hours as a result of the ACA. For others, however, this represents one of the negative unintended consequences of the ACA and we support efforts to raise the limit to 40 hours per week rather than thirty.
  • Pay or Play Penalties – The group health coverage Delta provides to its full time employees more than meets the definition of “affordable coverage” as defined by the ACA. However, the proposed regulations that implement this provision of the law are very complex and, when finalized, may unnecessarily impose HR information systems changes that will be costly to build and maintain. In addition, there are many unsettled principles surrounding this provision of ACA and based on the fact that it is already June, employers will not have time to react should final regulations be issued this year. This puts employers at risk of being assessed these penalties in innocent situations (such as when employees take voluntary leaves of absences) and imposes additional costs, even in those situations where the vast majority of employees are offered affordable, comprehensive coverage.
  • Cadillac Tax – Recent data released is evidence of what you heard in the meeting–employers are reducing or eliminating rich plan designs in order to ensure they do not pay the tax, since doing so would represent a significant waste of money. At Delta, we did that last year as we eliminated one of the plan designs available to our pilot group specifically because it would have risked being subject to the Cadillac tax. However, keep in mind that, eventually, it is not just the “rich” plan designs that will be affected. Essentially, the Cadillac tax level represents a “ceiling” on the value of benefits provided in health plans. However, that ceiling rises each year only at the rate of the consumer price index (CPI). On the other hand, medical inflation is rising at a higher rate than CPI. The way the math works, given enough years, all plans will eventually risk being subject to the Cadillac Tax and as they do, the natural reaction will be to continually reduce benefits provided in order to avoid the tax.

At Delta we are doing a lot of positive things to provide a platform for our employees to live healthier, more productive lives. We offer free preventive coverage, we offer telemedicine services, a concierge nurse line and great tools that provide vital data (such as it exists) on quality and cost among the provider community. We provide incentives that reward employees for doing the things that help lead to better long-term health. But make no mistake—the costs imposed on Delta and our employees are very real and they are escalating. The costs mentioned above, when combined with normal medical inflation and the end of the [Early Retiree Reinsurance] program mean that the cost of providing health care to our employees will increase by nearly $100,000,000 next year. Delta will have to absorb the vast majority of that increase in costs so that we continue providing a high value, high quality health plan, but some of it will have to be shared with our employees as well. And of course, the balance that the company pays simply means less left over for other investments that make our business stronger.

In closing, the ACA is anything but business as usual for large employers like Delta. It represents real and significant changes that provide real challenges for both our company and our employees. Thank you for the opportunity to provide this input. If I can be of assistance in any other way, please do not hesitate to contact me.


Robert L. Kight

Vice President, Global HR Services & Labor Relations

Delta Air Lines


PPACA leaves ailing uninsured underwhelmed | LifeHealthPro

Yes, that’s underwhelmed. PPACA leaves ailing uninsured underwhelmed | LifeHealthPro.

Laura Adams, a senior analyst at the quote service, said she was surprised to see how few people with pre-existing conditions are planning to buy health coverage, giving that helping people is key goal of PPACA.

Some PPACA watchers have wondered whether the exchanges will sign up enough healthy new customers to keep the ratio of claims to revenue at a reasonable level.

The new research “suggests that we should also be worried about unhealthy Americans failing to enroll,” Adams said.



Will young invincibles help Obamacare avoid ‘death spiral’?

Will Young People Jeopardize the Success of Obamacare? | Wall St. Cheat Sheet.

Of the 7 million people the Obama administration expects to enroll for coverage in 2014, officials say 2.7 million need to be young adults. (emphasis added)

The danger is the goal isn’t met? From the New Republic’s Jonathan Cohn?

“Health insurance needs lots of healthy people to sign up for coverage. Their premiums cover the big bills for the relatively small number of sick people. So if the exchanges don’t enroll enough young, healthy people, insurers will have to raise everyone’s premiums. In the worst case, this could create what actuaries call a ‘death spiral’: Rising premiums prompt people to drop out, causing premiums to increase even more.”

Obamacare needs young people that receive either no subsidy or a very small one for them to actually serve the purpose of providing a healthy rate base. It’s certainly an open question how enthusiastically these young invincibles will be to sign up for relatively high priced plans. I suspect most of them believe they are going to receive “free” coverage. Won’t they be surprised?


Young invincibles have the power to “kill” Obamacare

How to kill Obamacare without even trying | The Daily Caller.

A young invincible speaks…

In a refreshingly honest appraisal, Emanuel admits that Obamacare will virtually self-destruct if my demographic doesn’t come to its senses. The program depends on the full participation of the American citizenry. Every testosterone-soaked Young Invincible who doesn’t sign up for Obamacare will cause prices to increase. The increased prices will drive other citizens away. In the end, Obamacare will serve only the very poor (who pay subsidized rates), the very sick (who are expensive to care for) and the very old. (adverse selection – Ed)

The apparent solution is to put the young invincibles on a guilt trip Continue reading Young invincibles have the power to “kill” Obamacare


Obamacare is on the horizon, but will enough people sign up?

Obamacare is on the horizon, but will enough people sign up? – Yahoo! News.

“Why in late April can’t they show us any of what they’ve got planned? The rollout plan should already be in existence,” an exasperated Democratic Senate aide said separately.

Well, an important part of a roll out is knowing how much plans are going to cost. In most states I suspect that’s a big unknown. Here are states that have rollout plans:

Among states taking the lead, Vermont has launched radio advertising to raise public awareness. Colorado begins its public outreach this month, while California, Maryland and the District of Columbia will hold off until later in the year.

Seeing Vermont and Colorado in the loop is no surprise as they swore their allegience to Obamacare very early in the process.

Of course, the worse case is all the sick people sign up and the healthy people pay a penalty (this is called adverse selection in insurance-speak). It seems a high certainty event that the sick people will be amont the first to sign up. The issue is “the rest of us” that access the individual insurance marketplace. The most likely adverse selection scenario IS more healthy young people refusing to sign and and electing to pay the penalty which will have the effect of increasingthe cost of Obamacare.

Oh, and if the above occurs, did the insurance companies price their plans correctly? Not that many readers will have sympathy for the carriers, exactly how DO they make good predictions of the proper rates when they can’t predict the risk pool?

This could lead is to financial troubles similar to what the federal high risk pools are currently experiencing. Read about these issues here and here.

Added 5/6@11:27am:

The Denver Post picks up the story: With health care reforms 5 months away, it’s unclear how many people will sign up



Fewer Insurance carriers to offer plans on Illinois health exchange

Fewer health applicants than expected in Illinois – Health Care News – Crain’s Chicago Business.

Only six insurance carriers have told the state of Illinois they want to sell a combined 165 health policies on the state’s online insurance marketplace under the nation’s new health care law — numbers far lower than expected, raising concerns the trend will hold true across the country.


Fewer health plans could mean less competition and possibly higher premium prices. Officials in President Barack Obama’s home state had anticipated some 260 health plans would be offered by 16 different insurance carriers, based on a survey the Illinois Department of Insurance conducted last fall.

Here’s a good reason why…

Insurers are concerned, in part, that people who have expensive medical conditions will sign up immediately for coverage through the exchanges, while healthier customers will wait. That could leave an insurer, at least initially, without enough premium revenue to handle the medical bills it receives. They’re also concerned about how fees and coverage restrictions mandated by the law will affect the profitability of their plans.

Wow, adverse selection comes into play, who could have imagined? To prevent adverse selection a substantial penalty (err… tax?)  is required to “force” everyone to sign up. With a $95 first year penalty there will be a lot of people who will “pay the penalty”.

And this line of reasoning is truly getting stale…

Fewer health plans on the exchanges could affect the cost of premiums people pay for coverage. Proponents of the Affordable Care Act say the online marketplaces will help hold down premium hikes because insurers will be competing against each other as customers compare several policies side by side to find the best match.

There have already been on-line health insurance marketplaces. It IS true that no two plans were alike, and that will still be true today. All the carriers Bronze plans will not be exactly the same. That said, they will be quite similar to meet the demand they cover, on average, 60% of their health care expenses. But to think this somehow is going to force great competition? Give me a break. For the first few years the insurance companies main fear is the adverse selection and trying not to lose a boatload of money. I don’t think they are having sleepless nights worrying about the competition, they are having sleepless nights trying to price their plans to not lose money.

I’m also going to predict (again) a different type of adverse selection. Applicants with chronic diseases requiring expensive treatments or ongoing medications are going to purchase the Platinum plans. Hence, there are going to be two types of adverse selection coming into play:

  1. As mentioned above, “sick” applicants will be at the front of the line to sign up for Obamacare
  2. The there will be inter-plan adverse selection where the sicker an applicant is, especially long term chronic conditions, the more likely they will be to sign up for the Gold or Platinum plans with better benefits. Hence, the pricing for Gold and Platinum plans will be driven up due to the higher claims experience.

Prediction: This is not just an Illinois problem. Chaos…


Obamacare off the rails

EDITORIAL: Obamacare off the rails – Washington Times.

Obamacare’s shortcomings run far deeper than anything that can be fixed by a slick marketing campaign and fraudulent television commercials. Mrs. Sebelius‘ department expects to spend $4.4 billion by the end of the year on grants to help states set up insurance exchanges. That’s double last year’s estimate; we can expect the final tally to climb yet higher. The state of California alone has spent more than $900 million to establish an Obamacare health care exchange. By contrast, privately funded Esurance set up a nationwide exchange similar to what the government has ordered with an initial outlay of $5.5 million in venture-fund investment in 1999 and a second round of $34 million a few months later.

Government just isn’t very good at health care. Obamacare devotees treated the law like a health care version of “the Field of Dreams,” believing that if they built it, people would come. They haven’t. In addition to spending billions to build it, states are forced to spend tax dollars to cajole prospective customers to sign up. California is paying 20,000 part-time “enrollers” a bounty for every person they push into the system.

Colorado is a state that has “bought in” to the Obamacare “Field of Dreams”. They have even gotten a head start by implementing gender neutral pricing and mandatory maternity coverage. The initial effect of these mandates has been higher insurance premiums leading, most likely, to more uninsured. Undoubtedly, the state has told themselves that when Obamacare kicks in and subsidies become available everyone will sign up. One thing is for sure, the sick will sign up (adverse selection) and those that qualify will enroll into Medicaid, or be enrolled when they show up at the hospital. The rest of us that are affected, primarily individual policyholder or potential individual policy holders, we’ll have to wait and see.


Smokers cloud states’ rollout of ‘Obamacare’

Unbelieveable: Smokers cloud states’ rollout of ‘Obamacare’ – Washington Times.

States are wrestling with how to treat smokers under the new health care law as they navigate the thorny issue of providing coverage for those who knowingly engage in harmful behavior and how much taxpayers should pay for those folks’ choices.

The Affordable Care Act allows states to charge up to 50 percent more for smokers who refuse to enter a cessation program, with advocates saying it could encourage smokers to ditch the habit, and would make sure they end up paying the higher costs for their health needs.

Those places argue that the purpose of the health law is to insure all Americans and that includes smokers, who are disproportionately old, poor or minorities all populations that the bill is trying to make sure get coverage.

You really can’t make this stuff up. Let’s cut all feedback between lifestyle, how it effects your health and how it effects your premiums. The article doesn’t point this out, but common sense tells us that non-smokers in these states are paying higher rates to “carry the load”.


Shikha Dalmia: Obamacare is Obama’s Iraq War | WashingtonExaminer.com

Shikha Dalmia: Obamacare is Obama’s Iraq War | WashingtonExaminer.com.

Shikha claims:

Not even the most ardent defenders of Obamacare — aka the Patient Protection and Affordable Care Act — claim anymore that the law will lower health coverage costs for Americans. How, then, will it achieve universal coverage, its central goal?

The short answer is, it won’t.

and I agree with her. So it’s not affordable except with substantial subsidies. How about universal? Not likely…

Continue reading Shikha Dalmia: Obamacare is Obama’s Iraq War | WashingtonExaminer.com