Ezra Klein Writes – And Gets It Right

I’ve pointed out before some of the oddities that Ezra Klein produces. All the more surprising when he writes something that makes sense.

Last week on Bloomberg, Klein takes apart some of the  assumptions that are used to support the single payer movement within the United States. His main point is that the focus on the role of insurance companies is misplaced. The real problem is on the underlying cost of care: drugs, physician charges, and hospital costs.

Surprising, and well worth the read.

 

 

 

HHS and Contract Law

At its most basic, individual health insurance is a contract between the insurance company and the individual being insured. While the ObamaCare roll out has been a series of ‘administrative’ changes to the letter of the ACA legislation; the latest HHS ‘suggestions’ to insurance carriers threaten the very nature of the insurance contract itself.

Basically, HHS has suggested that:

  • insurers give enrollees additional time to pay their first month’s premium while still providing coverage effective January 1;
  • insurers treat out-of-network providers as in-network during the initial month of coverage; and
  • insurers refill prescriptions based on previous policies.

Avik Roy in his look at these suggestions thinks that insurers being asked to provide coverage without paid premium is a form of taking that sets a dangerous precedent, especially with the threat by HHS to not allow carriers to continue in the exchanges if they aren’t flexible. I find it is the other two that are the most bothersome.

Is There An HHS Estoppel Defense?

In health insurance law there is a history of insurance companies being forced to provide coverage for items that were not covered under the terms of the initial health insurance contract if the insurance company initially and repeatedly paid for the item. The insurance company was estopped from enforcing the contract because they had set an expectation in the mind of the insured that the item was covered and for the duration of the contract had to cover the item as if it was covered. Will a ‘suggestion’ from HHS be  a legal defense?

In addition, there is just the basic administrative nightmare, how will an insurance company know what the previous carrier network and prescription coverage was? Once again HHS shows it firm grasp on how health insurance works.

Will State Exchanges Go Bankrupt?

For those states that are running their own health insurance exchanges there is another problem to consider other than site performance. The exchanges were established though federal government grants with the understanding that they would be self sustaining by 2016. Most have established a user fee based on sold policies (e.g $3.50 per policy). While some of the state exchanges have been more successful than the federal exchange, most are not meeting their enrollment projections leading to a shortfall in fee revenue.

A recent article in the Denver Post by Michael Booth (h/t Reason.com) illustrates the problem. If enrollment does not increase to meet budgetary projections what will be the strategy for the exchanges? There seem to be three possible scenarios:

  • decrease spending (marketing, staffing, etc);
  • increase fee levels; or
  • get funding from state general funds.

None of these will be popular.

ObamaCare – Question Answered Quickly

At the end of my last post I posed the question about how many more election cycles it will take to fully implement ObamaCare.

Bloomberg News is reporting today, that the administration has decided to push the enrollment start date for 2015 back from October 15, 2014 to November 15, 2014. Supposedly, this will give insurance companies more time to evaluate the performance of their exchange plans before setting rates for 2015. ObamaCare  apologist Jonathan Gruber is quoted as saying:

“This is an important business for them and they want to make smart decisions about how they set their rates. It’s in the nation’s interest they get time to make those decisions.”

Apparently Mr. Gruber has never worked with actuaries before, or has any knowledge about the rate filing cycle insurers go through with state insurance commissioners.

The fact that enrollees will not see their 2015 rates until after the November 4, 2014 Congressional elections must be simply coincidental.

 

ObamaCare – Making It Up As We Go Along

President Obama’s proposed ‘fix’ to allow people to keep there current individual insurance policies for another year even though they don’t meet the requirements of the ACA is just another example of administration politics trumping actual law. Observers from Yuval Levin to Nicholas Bagley to Howard Dean and Chuck Todd all point out the questionable nature of this action.

While some point to the previous delay of the employer mandate provisions of ObamaCare as an example of the administration’s ability to claim ‘transitional relief’ in rule making to delay an action, it is hard to see where that applies to letting insurers renew  policies that are considered illegal for 2014. In the former case, the IRS is simply delaying releasing regulations. There is no administrative wiggle room in the latter however, the law is clear that these policies are illegal to offer in 2014. The only thing the administration can point to is that they simply will not enforce the law in 2014. Since when does the Executive Branch have the authority to enforce whatever law they want to enforce and ignore others? This is a very dangerous course of (in)action.

Also, since it is every individual State that is responsible for approving health insurance plans, how can the administration push each State to comply with an unlawful request?

I wonder how many more election cycles we will go before we see the actual full implementation of ObamaCare?

WebMD Damages Its Brand

One of the greatest assets any on line company has is the integrity of its brand image. This is especially important for a site like WebMD that characterizes itself as “The leading source for trustworthy and timely health and medical news and information.”

However, the Washington Times reported yesterday that this trustworthy source has a price, $4.8m so far. As the article reports this money was spent in producing specialist content for WebMD’s Medscape platform that services physicians. This raises several questions:

  • Was the content on Medscape identified as being paid for by an HHS contract?
  • Did the size of the contract effect WebMD’s consumer information and opinion on ObamaCare?
  • Does WebMD have any other contracts with HHS?
  • Were the approving comments by HHS Secretary Sebelius part of the contract negotiation?

WebMD needs to go public with this relationship and what it entailed or it risks finding itself connected with the growing number of contoversies associated with the rollout of ObamaCare.

ObamaCare and the Culture of Deniability

Much has been made of the President’s ‘you can keep it’ phrasing and the fallout from insurance policies being discontinued due to the coverage requirements of ObamaCare. Depending on the spin, the President meant something and listeners heard something else. Another possibility is the President wasn’t aware of what the insurance companies would do.

Stories have also circulated about the presentation to the President of the supposed functionality of the website healthcare.gov were misleading and glossed over difficulties.

Now, as Congressional hearings are starting to dig deeper into ObamaCare problems we get another layer of a failure to communicate. CBS news has reported that the CMS project manager responsible for the building of the site was never informed of the serious security problems with the site outlined in a security risk memo. Anyone who has ever had work with project management in a large corporation or government know that this very non-standard.

So the question is whether the problems relating to the rollout of ObamaCare were systemic, politically motivated, or just plain old fashioned bureaucratic CYA? You decide.

Ezra Klein Writes – Hilarity Ensues

The Washington Post’s Ezra Klein is always dependable for incisive analysis of insurance issues. In his latest entry, he looks at the inequities of the individual health insurance market:

The individual market — which serves five percent of the population, and which is where the disruptions are happening — is a horror show. It’s a market where healthy people benefit from systematic discrimination against the sick, where young people benefit from systematic discrimination against the old, where men benefit from systematic discrimination against women, and where insurers benefit from systematic discrimination against the uninformed.

Let’s look at other insurance markets Klein could fix:

the auto insurance market – where old people benefit from systematic discrimination against the young, where safe drivers benefit from systematic discrimination against drunk drivers;

or perhaps,

the life insurance market – where young people benefit from systematic discrimination against the old, where women benefit from systematic discrimination against men.

What Klein and other commentators don’t realize is that the existence of underwriting rules in all insurance markets began in the time when the biggest issue that regulators had with insurance was the solvency of insurance companies. Insurance companies (and most weren’t for profit in the beginning) with inadequate underwriting rules went insolvent and no one’s claims got paid. That was the biggest regulatory concern.

I suppose that when we move to a single payer system, that will solve the solvency question, we’ll just raise taxes.

ObamaCare – You Do The Math

Nice, short article in USA Today by Tom Wilemon of the The Tennessean (h/t Drudge). He interviews several local employers about their decisions around providing healthcare insurance under ObamaCare. The key take away is the difficulty in trying to fit so many different types of small businesses into the regulations (that are as yet unfinished) and the problems that these business owners have in trying to make decisions. There are even strange examples such as the case of the  non-profit that doesn’t pay taxes qualifying for tax credits.

The irony of the ObamaCare regulations is that small business owners have the most difficult decisions to make and not very many resources to help them understand. Under ObamaCare, agent commissions are not included as a qualified administrative expense so the incentive of agents to provide guidance is lessened when they are needed the most. While the one year waiver on employer penalties will give more time, will the small employer ever be able to keep up with their larger competitors or should they just drop healthcare insurance all together and avoid the headache?

Is this an intended or unintended consequence of ObamaCare?

Who Profits From ObamaCare?

The more complicated the law, the more room for regulatory discretion. The more room for regulatory discretion there is higher profit to be gained for lobbying special interest favors. And given the size of the healthcare system and the complexity of ObamaCare, in a flat lobbying market, one of the most profitable lobbying efforts in Washington DC right now is around the implementation of ObamaCare.

Megan Wilson in The Hill published a quick piece on Sunday listing the,  “More than 30 former administration officials, lawmakers and congressional staffers who worked on the healthcare law have set up shop on K Street since 2010.”

Anyone surprised?