The Truth About Obamacare’s Exchanges

          Paul Krugman: “There are two remarkable things about this kind of doomsaying. One is that the doomsayers haven’t rethought their premises despite being wrong again and again — perhaps because the news media continue to treat them with immense respect.”

If you Google “Obamacare,” “Exchanges,” and “Disaster,” more than 20 million articles will pop up.

One month into a six-month enrollment process, the Media Pundits have spoken.

In truth, there are two tales to be told: one that is getting widespread coverage, and one that is not.

The stories that you are Not hearing come from folks like Michael Cadigan, the president of a New Mexico law firm who enrolled his firm’s four employees the day his state’s Exchange opened. “I thought it was going to be an administrative nightmare,” he confesses. Instead, he quickly found a policy “that will cost $1,000 less a month than I’m currently paying.” 

Or, Randall Bennett: His family will be paying more for the coverage he signed up for in Utah’s Exchange, but it will be significantly better than what they had before. This year, Bennett reports he has been paying a $420 monthly premium with a $2,000 annual deductible. Next year, he’ll be paying a $720 premium, but the deductible will be only $500 and his family will be getting maternity and dental coverage — something they couldn’t  get in the individual market before Obamacare came along.

As for the application process, Bennett says: “Before, trying to get insurance was so difficult that surprisingly even with all of the bugs, I still found [the Exchange website] simpler (In the past, people attempting to buy their own coverage in the individual market had to provide carriers with detail medical information, in order to prove that they were not suffering from a pre-existing condition. Under Obamacare, that isn’t necessary. Insurers can no longer use your medical records as an excuse to jack up your premiums.

“So for us this is a huge win,” Bennett concludes, “because we’re paying what we think is fair. And yes it’s more than before, but we actually have coverage that we like now.”

As of October 24, Cadigan and Bennett were just two of some 700,000 Americans who have filed applications in the Exchanges. The truth is that Obamacare’s websites are working– though not in all states.

Make no mistake: enrolling millions of American in Obamacare represents an enormous challenge. But we know that it can be done — because it is being done, and done well– in many states.

Unfortunately this is not a story that sells newspapers, especially when a program is as controversial as Obamacare.

State vs. Federal Exchanges

The marketplaces that are working best are in states that chose to set up their own Exchanges.

Originally, conservatives in Congress argued that states should be able to construct—and control– their own online sign-up sites. The Affordable Care Act offered them that opportunity.

But after thinking it over, 26 states (24 of them led by Republicans) refused. In these 26 states, it was left to the Feds to run “Healthcare.gov.”

Health IT pioneer Fred Trotter says he is “not at all surprised” by what happened next: Computers and human navigators have been overwhelmed by the sheer size of a sprawling project. Technical glitches have created virtual gridlock.

“When you get a tremendous amount of traffic going to any site on the internet a single computer can’t handle it,” Trotert told Ezra Klein in a recent interview. “You have to have more than one computer sharing a task. At modern sites like Amazon and Ebay . . . the main innovation they’ve pioneered is using lots of computers at the same time to answer one query.”

Trotter explains Washington’s mistake: Congress looked at Amazon et. al., and said: “’They do these amazing things and we should do that, too.’ They didn’t realize what a tremendous amount of invention has gone on at sites operating on that scale.”

And Healthcare.gov isn’t  just trying to sell books: “They’re trying to do something entirely new.”

          Comparing Obamacare to the Medicare Part D Roll-Out                                  

New is hard.

Back in 2005, Medicare Part D, the prescription program for seniors  was a minor version of “new” and in the early weeks, its roll-out was equally fraught. The Washington Post described what sounds like a slow-motion train wreck: “The original debut date was Oct. 13, but officials delayed it, citing the Jewish holiday, Yom Kippur. Next it was promised on Oct 17, but that day, too, came and went without personalized plan comparisons being available.” A news briefing promised the site would be up in the afternoon. It didn’t happen. Senior citizens were not able to use the website to compare prescription plans until November.   

Jack Hoadley, a researcher at Georgetown University who has studied the Part D program since before its launch recently told the Washington Post’s Sarah Kliff: “It was pretty regularly a source of frustration just like what we’re experiencing now.”

When seniors called the 1-800 Medicare phone number for help, a review found the agency “responded to calls accurately and completely only about two-thirds of the time.” At the time, the Washington Post reported that an annual booklet sent out to seniors called “Medicare & You” contained “inaccurate details about some of the prescription plan choices.” CMS later had to post a chart on the Web site with the accurate information

Yet the Part D “disaster” didn’t make front-page headlines. It was a Republican plan, and enough Democrats had voted for it (however reluctantly),  to make it appear bi-partisan.

Applications vs. Enrollments

 This time around, the supposed “failure” of the Exchanges has become a political cause celebre, with Republicans emphasizing how few Americans have actually chosen a plan in the Exchange, completed their enrollment and paid their premiums.  (A person is not truly considered “enrolled” in a private health care plan until she has paid the first month’s fee, which many people still have not done since the insurance does not start until Jan 1. News stories that focus on “paltry enrollment” rarely mention this fact.)

But in the early stages of a new program, what is important is not how many have finished the application the process, but how many have begun.

Wen Avalere Health, a private data analysis firm, took a close look at Part D enrollments, it found that two-thirds of Medicare beneficiaries who enrolled in a stand-alone Part D plan didn’t sign up until after coverage began on January 1, 2006. Twenty-two percent signed up in the final month of the open enrollment period. It can take time to select a plan.

People are slow to purchase coverage when new programs begin, and if past programs are any guide, we expect most exchange participants will wait until after January 2014 to enroll,” Caroline Pearson, vice president at Avalere Health explains.  “This suggests that if early website problems are resolved before the end of the year, they should not meaningfully decrease the size of these new exchange markets.  

 Trotter’s Solution

Still, Health IT expert Fred Trotter thinks the government should have taken a different approach to the Exchanges. He believes that reformers should have enrolled people in phases: “They didn’t draft everyone for Vietnam all at once,” he observes. “They should’ve said people born in January can now get health insurance. Then it should’ve expanded to everyone born in the first quarter . . .”

I would suggest that inviting people to participate in jungle warfare is rather different from offering them access to medical care. Sick Americans who can’t afford the medications they need have been counting the days. You can’t tell someone he must wait seven months simply because he was born in November.

       Exchanges Run By the States- A More Manageable Project

A “phase in” of enrollment in the Exchanges was not possible, either politically or practically. But breaking the project up into smaller chunks would have helped.

Fourteen states—plus D.C.—elected to run their own marketplaces, and their experience shows that when the challenge is scaled down, Exchanges can work  

Nineteen days into the five-month enrollment period, 500,000 Americans had filed applications to buy insurance,   and more than half lived in those 14 states.  Even in large states like California and New York—the marketplaces are humming.

As of October 23rd, New York had enrolled thirty-seven thousand people, more than twice the goal H.H.S. set for New York for the entire month of October.

               Don’t Believe What You Read—(Even in the New York Times)

Yet, Media Matters observes, the mainstream press has focused almost exclusively on the problems at Healthcare.gov, “at the expense of stories showing that the exchanges have allowed many people to successfully access affordable . . . coverage.”  

NOTE TO READERS: I originally wrote this post for HealthInsurance.org.  What you have just read is an expanded version of the first half of that post. To read the rest, and find out more about:

—  a front-page New York Times article that relies entirely on anonymous sources,

— differences between how younger and older Americans view the Exchange glitches,  and

— where the Exchanges are working,

Click here and Scroll down to the paragraph that begins:  “As an example, the media watchdog calls out a Wall Street Journal editorial claiming that website failures “have all but disabled Obamacare.”

You can comment on null.com or return here to comment. (I respond on both sites.)

 

 

 

25 thoughts on “The Truth About Obamacare’s Exchanges

  1. The ACA is uneven depending on what state you live in. In SC it really does not exist. Check out the BCBS of SC website. They are essentially the only player and all they offer are very restricted EPO’s. I live in SC on the NC/SC border and all my doctors are in Charlotte. None of them are on the provider list. Carolinas Medical Center and Presbyterian Medical Center,the major players are also not on the list. SC did the least amount it had to to cooperate. This means I must keep my NC plan which costs me $32,000 a year for my wife and I. I have a small business in NC and therefore can get a business insurance policy there. But, the ACA does not help me one bit.

    I checked into the SHOP marketplace for NC which is not really set up but early indications are that my insurance costs won’t change very much.

    Maggie, I know you are a great fan of the ACA but it is far from perfect. The insurance industry wrote this bill. Max Baucus was the chief designer and he was surrounded by lobbyists from the health insurance and pharmaceutical industries. The price curve has not come down. A husband and wife in NC in their 60’s who make $65,000 a year will still pay over $15,000 for a bronze policy and $24,000 for the top platinum. If they take the $15,000 policy their out of pocket costs can be up to $11,000 IN and $22,000 OON in addition to their premiums. That is NOT affordable!

  2. If Mr Mathews pre-tax income is $65,000, then his after tax income is about $52,000 a year.

    I really wonder why the ACA could not have capped his premiums as a per cent of income. I know this would mean more dollars in subsidies.

    Persons like him who do not work for a large corporation have been left out in the cold for years by the individual market. It looks like they are still not helped by the ACA.

    We could also have helped persons in his group by a downward expansion in the Medicare eligibility age, even one year at a time. This was brought up way back to Bill Clinton’s time, but it never caught fire.

    • Perhaps Maggie will comment on MAGI. Isn’t eligibility for a subsidy based on modified adjusted gross income with some add-backs?

      The writer says he knows someone making $65,000 gross/year. Wouldn’t eligibility for subsidies be based on a lower number — MAGI?

      • Theresa– I have written about about MAGI (modified adjusted gross income) here.

        As you will see, if you are taking money out of a retirement account (IRA or 401k) that will add to your income.

        In addition, if you are paying alimony, that reduces your MAGI.

        So MAGI may be lower–or higher– than adjusted gross income.

        As I say in the post, some people will be pleasantly surprised to see that MAGI is lower than adjusted gross income–but not everyone.

        The bottom line: Everyone who doesn’t have good employer-based insurance needs to check with their own state’s Exchange to find out whether they will
        be eligible for a subsidy, how much it will be, and what insurance will cost them after the subsidy.

    • Bob–

      Reducing the eligibility age for Medicare was rejected because is a very wasteful system. We have about 20 years of research showing that 1/3 of Medicare’s dollars are wasted on unncessary and over-priced products and servicesn

      Why would we want to toss more people into such a wasteful system?

      The reason Medicare is so wasteful is because for years, Congress has been its board of directors.
      And someone out there is making $$$ on everyone of those unnecessary products and treatments.

      Under the ACA HHS will have the power to go around Congress and do many things–for instance, lower what it pays for
      certain treatments.

      I am hopeful that, in time, we will carve much of the waste out of Medicare.

      But even then, Kaiser Permanente will probably offer better care for less. (See Consumer Reports and NCQA ratings for hte quality of care KP offers.

  3. I think talking about the MAGI vs AGI is missing the point. The issue is affordability. Those like me who are in our early 60’s have been paying a small fortune for health insurance and if we miss the subsidy cut off policies on the marketplace are unaffordable! The $15,000 bronze cheapest plan for an older couple in NC comes with a $5500 individual deductible and an $1100 deductible for husband and wife. That’s unaffordable if you make $65,000 a year, it is unaffordable if you make $70,000 a year!

    Another point I want to make are the choices in some of these red states. Go to BCBS of SC. Look at the offerings. There is essentially one player: Blue Cross. They only offer a limited EPO product called Blue Essentials. Not one doctor or hospital I use is in the Network. You absolutely can not see a non network doctor. What good is this marketplace if you can’t purchase a PPO product?

    This is why we need a public option. Blue Cross of SC have the politicians in their back pocket. In fact, the politicians, (Republicans) are meeting in Columbia this week to pursue nullification of the ACA. They gave BCBS a wink and a nod to put out this pathetic product on the marketplace.

    • Jim–

      Here are the FACTS about South Carolina’s Exchanges: “Three companies are offering health insurance through the federally-run marketplace in South Carolina: Blue Cross Blue Shield of South Carolina, Consumers’ Choice Health Plan and Coventry Health Care of the Carolinas. In total, 52 options, with varying premiums and deductibles are available for individuals and families. A preliminary report [Note as you say these are all Blues, but they offer difference options.) Resarch released by the U.S. Department of Health and Human Services (HHS) found premiums in South Carolina to be slightly higher than the national average. In South Carolina, the average cost for the least-expensive bronze plan is $267 a month before tax credits or subsidies. The national average for the lowest cost bronze plans is $249 a month.”

      Your insurance is so expensive because you are in your 60s, and most likely will need more medical care (possibly far more medical care) than a younger patient.

      When Congress wrote the AFfordable Care ACt, it decided to let insurers charge you 3 times as much as they would charge a 20-something for exactly the same policy.

      Why? Because in the U.S. younger people do not want to have to help pay for healthcare for older people. It’s that simple.
      Any Congressman who voted against letting insurers charge you more would risk being voted out of office.

      I personally think that 20-somethings should help 60-something– and then, when they are 60, a younger generation will help them.

      That’s how it works in Europe. But ours is a “youth culture’– we worship youth, not age.Younger Americans just don’t feel responsible for older Americans and resent being asked to help pay for them.

      Your doctors and hospitals are not in the network because they wanted to charge more than other doctors and hospitals who agreed
      to discounts. If they were in a network that included them., your premiums would be that much higher.

      Obamacare cannot force doctors and hospitals to accept lower payments.

      But you do have options.

      There are other companies offering individual insurance outside the exchange. No doubt, there are insurers who include your doctors and hospital in their network.

      But that insurance will be more expensive — because your doctors and hospital charge more. If they were willing to accept lower pays, the Blues would happily include them in their networks.

      (Note if an insurer offers a particular plan both inside and outside the Exchange, it cannot charge more outside of the Exchange. But if it offers a different plan outside the Exchange– with a different network– and doesn’t offer that plan inside the Exchange can charge whatever the market will bear.)

      The good news is that in a few years you will be eligible for Medicare–Though you will find that Medicare is not free.
      And you will have to buy supplemental insurance (Medicare Advantage or MediGap) to cover the many things that Medicare
      doesn’t cover.

      The bottom line is that health care is very expensive, particularly as you get older. Why is it so much more expensive than in Europe? (It’s not the insurance companies. All countires in Western Europe use insurance companies, though they are non-profits. But Blue Cross is also a non-profit)

      Healthcare is less expensive in Europe because A: doctors charge less (even after factoring in medical school debt and difference in the cost of living. ) In most European countries doctors fees are regulated by the government. Secondly, hospitals charge
      less. (In most other countries they don’t offer resort-like amenities. Fewer private rooms, fewer jacuzzis, — hospitals in Germany, for instance, are far more Spartan. But in terms of outcomes they are as good or better than hospitals here for most
      conditions.

      In addition, governments in Europe negotiate with drug-makers and device-makers for lower prices. Here, drug-makers and device-makers can charge whatever they choose.

      Finally, in this country, we undergo many more tests and surgeries. We take more medications. In many cases, the extra treatment does the patient no good.

      In short, we are “overtreated.” Research tell us that up to 1/3 of the medical services and products we pay for offer no value for the dollars. As we move toward evidence-based medicine, reformers hope that we can reduce the over-treatment.

      I too am hopeful that we can reduce costs, but only when patient (and their doctors) realize that “more care is not necessarily better care.”

  4. I believe if the goal is fair and secure universal coverage, then we must learn from the past. Many, many citizens facing the individual PRIVATE health insurance market have and will get screwed in the security and/or affordability arena. If we keep doing the same old thing, we will not see any change here! People with powerful third party involvement in their favor, especially Medicare but to a lesser degree employers, fare much better. What can we learn from that, and in current America can we do anything different for universal secure and meaningful converage???

  5. after we have done every thing else mabe we will figure out how to have a single payer system with universal health care.
    The stupidity of paying an insurance company to figure out how to not pay for our health care just does not make sense

    • John–

      Under the Affordable Care Act insurance companies make very little profit –which is why so many for-profit insurers are not trying to sell insurance in the Exchanges. See this post: https://healthbeatblog.com/2013/05/who-will-sell-insurance-in-the-exchanges-non-profit-insurers-for-consumers-this-is-great-news-part-1/
      and this post https://healthbeatblog.com/2013/10/insurers-had-a-seat-at-the-table-when-reformers-hammered-out-the-aca-but-things-didnt-work-out-quite-as-they-expected/ (Scroll down to State Regulators Show Spine)

      My point is that under reform, insurers will be tightly regulated and won’t be making that much money. So if we got rid of them, we wouldn’t save that much. (The government would have some of the same administrative costs-enrolling in plans, helping them switch plans, paying doctors and hospitals’ bills etc. ) This is why every country in Western Europe uses insurance companies–though they’re non-profits. That is what is now happening here.

      Most importantly, what makes our health care so expensive is not the insurance companies but the fact that hospitals, nursing homes and doctors in the U.S. charge far more than they do in other developed countries. In addition, Americans undergo many more tests, take more medications and undergo more surgeries. Many of these treatments are not needed– the patient does not benefit. In addition we over-pay for drugs and devices–paying far more than in other developed countries where these prices are regulated.
      If we addressed these problems, we could cut the nation’s health care bill by 20%— or more. That’s far more than we could save by going to single -payer– even if that were possible.
      The reason single-payer isn’t possible is that the majority of Americans have insurance sponsored by an employer who pays 70% to 80% of the cost. Most Americans like having employer-sponsored care.
      And if we put them all into a single-payer system we would somehow have to come up with the money their employers or now contributing–that 70% to 80%of the cost.
      Couldn’t we just tax employers to cover what they are spending now? No. Today, employers are getting something in return for providing health insurance–employee loyalty. And, if they offer good insurance, they can attract the cream of the labor market.
      If we went to single-payer no doubt we could raise corporate taxes to some degree–but not enough to cover the 70% to 80% of their employees’ health care costs that they are paying.
      This is why we need to build on the employer-based system that we have. In the future, I believe that in addition to
      insurance offered by private-sector companies (most of them non-profits), we will have a public option– something like Medicare for everyone– that will compete with the private sector non-profits.

      Finally, keep in mind that Medicare is not as good as the best non-profit insurance: Kaiser Permanente, Geisinger, etc.

  6. Good points, Maggie, but there is a direct answer about the awful plans still allowed by the ACA. I think that a $15,000 premium with a $5,000 deductible is very awful.

    This occurs because of age rating. Most European countries do not allow this. You have written about New York which at least in the past has not allowed this.

    There probably was a way to design a public option with no age rating. It would have involved a complex risk adjustment system.

    And the ACA did nothing of the kind. I am not much impressed with going from 6:1 age rating to 3:1.

    bob hertz

    • Bob–

      Let’s get real.

      Anyone in Congress who voted for a public option that didn’t allow age rating would be voted out of office. He would have lost the under-40 vote. (For Democrats, in particular, this is a very important group.)

      Bob, it doesn’t really matter whether you are “impressed.”

      It’s very easy for an armchair critic to take shots at the ACA. But the people in Congress who risked their careers–and worked very, very hard to write the law and push it through Congress– knew what they could and could not do.

      I, too, would have liked a public option. I personally don’t believe in age rating. But I
      realize that doesn’t matter. (Too many people in this country think only about what “I want”) rather than what is feasible, and what would be best for the country as a whole. It would not have been best for the country as a whole if left-liberals had held out for a public option with no age rating. The ACA never would have passed, and a great many low-income and lower-middle income Americans would have no health care.

      This is not Sweden. Young Americans are not willing to share the cost of health care for their elders. As one HealthBeat reader wrote to me: “I’m willing to pay for my mother, but not for someone else’s mother.”

      As for a $15,000 premium with a $5,000 deductible–$15,000 is about what it costs to provide the healthcare that most upper-middle class couples (folks who don’t qualify for subsidies) in their early 60s want and expect. (When I say “average” I mean median.) Those suffering from 2 or 3 chronic diseases that don’t kill them quickly (some cancers, diabetes, congestive heart failure) and/or who want artificial hips, knees, etc.)–plus a private room in the hospital bring the median up to about $15,000.

  7. You are correct that the ACA would not have passed if the abandonment of age rating had forced young persons to pay higher premiums.

    Could ACA have passed if persons over 55 had gradually been added to Medicare, say ages 63-64 the first year, ages 62-61 the next year, etc.

    This would have required a tax increase. Either we could use the income tax, which is progressive and does not hit anyone very hard if they make less than $35K; or we could raise the payroll tax but only put the increase on payroll amounts over $20-$25K a year. Or some of each.

    • Bob–

      Again unrealistic. Adding 62 year olds to a wildly inefficient Medicare system (1/3 of dollars wasted) hugely expensive.
      And in Congress there were (and are) NOT the votes to raise taxes for people earning less than $200,000.

      Also, if taxes were raised we have other priorities: poverty among U.S. children the highest in the world. Kids go to bed hungry.

  8. Maggie: Too many points I need to challenge you on. Where do I begin.

    ACA and great competition:
    SC is not forced to compete on price because there is NO competition. All what is offered are networks with very little choice offered by BCBS. I agree, in some states like California competition may help somewhat. Not here. Check out SC’s attempt for nullification. http://www.charlestoncitypaper.com/TheBattery/archives/2013/10/29/sc-lawmakers-to-discuss-nullification-bill-in-charleston-hearing

    Also check out the BCBS of SC website and see the narrow offerings.

    Your comment regarding $15,000 for a policy with a $5,000 deductible is about right: What does that mean? Right for whom? And by the way, the deductible is really $5500 and that is for husband and another $5500 for wife. Thats the cheapest Bronze plan in NC. A couple who make $65,000 will have an income of about $52,000 after taxes. If they use the health care system which is quite likely when you are 62, they can have out of pocket costs of $26,000. That gives them $26,000 for car, mortgage, food, etc. Not very easy!

    Medicare is inefficient as compared to what? Are you confusing Medicare with healthcare in general? Yes, there are many inefficiencies in our healthcare system because of our fragmented system of care. But, by leaving this patchwork of private for profit companies in control does not change this. Blue Cross is not changing these inefficiencies, nor Aetna, nor Wellpoint. They are just trying to get their piece of the action. You said that Medicare is 1/3 inefficient. Tell me how private insurance improves these inefficiencies. Medicare has less overhead and administrative costs. They don’t have the same middle man.

    And your point on young people not wanting to pay for old people. Remember young people someday become older people. They pay when they are young and when they age someone younger is helping the risk pool that they wind up in. I don’t hear young people screaming about Medicare! So someone 65 is OK to subsidize but no way if you are 64! Most don’t even know wheat Medicare is-which is too bad. And they generally don’t vote! (As compared to older demographics)

    You mention that Wellpoint and other insurance companies only profit from the ACA on the Medicaid piece. Where did you get that information from? I really am interested in reading about this. Do you have any articles with actual financials for the insurance companies that show they will lose money on the ACA? The NY Times says health insurance stocks have been up and will continue to do so: http://www.nytimes.com/2013/10/27/business/insurers-stocks-unhurt-by-the-dawn-of-obamacare.html?_r=0

    Health insurers will make huge profits if young people sign up. Here they get millions of people to pay them with subsidized dollars. It’s a government subsidy for them. This should be a slam dunk for more profits. Look at the stock prices now. I will bet you that one, two and three years from now there stock prices climb.

    Believe me, if this was a losing proposition they would be rushing for the exits. I also predict Aetna, United Healthcare etc. will have a bigger presence in 2015.

    • Jim Matthews–

      I wrote $15,000 a year (plus deductible) is about right in terms of what it would cost, on average, to provide medical care for a couple.

      You ask: “About right? What does that mean? Right for whom?

      As Bob Hertz points out in his comment above: “I agree that $15,000 a year is an understandable price for reasonably comprehensive insurance (for a 62-year old couple) . . . the average cost per beneficiary in Medicare is $12,000 or $24,000 for couple,”

      That’s what it costs Medicare to provide health care for seniors–$24,000 for a couple. You’re a little younger than the average Medicare beneficiary, so $15,000 is about what it will cost to care for people in your cohort.Se

      Secondly, You assert that “health insurers will make huge profits if young people sign up (in the Exchanges).

      Not true. (When it comes to the stock market, I have some expertise. I was senior editor at Barron’s for more than 10 years and wrote a book about the stock market (Bull!) that Warren Buffet still lists as one of his favorite books.)

      Here’s the truth: If young people DON”T sign up insurers will lose money. IF young people DO sign up, their profit margins will be narrow.

      My sources:
      • On September 27 Morningstar, a premiere investment research firm, warned: “the new state Exchanges are hardly a bonanza for managed care companies. . . A consensus [is]emerging that state-based exchanges” will mean “relatively low [profit] margins for Managed Care Organizations.” http://news.morningstar.com/articlenet/article.aspx?id=611713&part=1 .

      • On October 14, Investors’ Business Daily reported that the medical-managed care group (ie. insurers) it tracks was sliding: “It is now ranks No. 82 of 197 industry groups vs. No. 20 four weeks ago.” http://news.investors.com/business/101413-674954-unitedhealth-wellpoint-aetna-cigna-and-humana-to-report-q3.htm

      Why won’t they make money in the Exchanges?

      There are many ways that Exchange regulations will whack carriers’ profit margins:
      • Insurers can no longer shun customers suffering from “pre-existing conditions”—and they cannot charge them more.
      • All policies must offer free preventive care.
      • The amount that a carrier can ask patients to pay out of pocket is capped.
      • But insurers cannot cap the amount they pay out in a given year, or over the course of a life time.
      • All Exchange policies must cover the 10 essential benefits—no more “Swiss Cheese” policies filled with holes.
      • Perhaps worst of all, from the industry’s point of view, if carriers don’t spend at least 80 cents of every premium dollar on medical care for individual and small business policyholders (85 cents for large groups), must send rebates to customers, letting them know they were overcharged.
      .
      In order to keep their seats at the table, insurers also agreed to pay annual fees to help fund reform. The fees begin at $8 billion in 2014, grow to 14.3 billion in 2018, and then rise to track any growth in premiums. http://jaeckle.com/files/Health_Care/Link_Library/Summary_of_the_Health_Care_Reform_Law.pdf

      ON MEDICAID Insurers:
      From Barron’s : “Investors can go with a sure thing: Medicaid. The government-sponsored health plan for the poor is undergoing its biggest expansion since it was created in the 1960s, providing an enormous boon for health insurers that specialize in Medicaid and Medicare. The big names in that space are Centene (ticker: CNC), Molina Healthcare (MOH), andWellCare Health Plans (WCG).
      “These companies can grow earnings 15% a year even without the Medicaid expansion from the Affordable Care Act,” says Marshall Gordon, an analyst with ClearBridge Investments. “These are stocks with long runways.” Rather than trying to pick the best value or strongest player among these three, investors might be better served by owning the basket – they should all benefit as their customer base expands.
      The trend was in place before anyone had heard of Obamacare. Over the past decade, a growing number of states have hired private insurers to manage benefits for an increasing number of Medicaid recipients, looking to cut costs and ease budget woes. By 2011, private insurers managed benefits for 29 million Medicaid recipients. And that figure could explode by the end of the decade, a fact that led Barrons.com to weigh in bullishly on the industry last year (see Weekday Trader, “There’s Wealth in HMO Stocks Geared to the Poor,” April 12, 2012).
      The Affordable Care Act adds another piston to the earnings engine. So far, 26 states have opted to expand their Medicaid programs under the provision established in the law, representing $4.6 billion in additional Medicaid spending. Another 16 states have refused, while eight, representing another $3 billion, have yet to make a decision.
      The industry sees green: In December, WellPoint (WLP), one of the nation’s largest health insurers, placed a $4.9 billion bet on the Medicaid market when it bought Amerigroup to become the biggest provider of Medicaid coverage in the U.S. behindUnitedHealth (UNH).
      But unlike either of those goliaths, Centene and Molina get the lion’s share of their revenue from Medicaid, and reap bigger rewards from its expansion. How big? The Street expects Molina’s earnings per share to rise an eye-popping 39% in 2014 to $2.23, making it the fastest growing health insurer tracked by Thomson Reuters.
      Analysts expect Centene to earn $3.56 a share next year, a 27% jump over this year. And the Street sees WellCare’s earnings per share climbing 12% in 2014 to $5.49 a share.
      To be sure, some of the bright future for Medicaid insurers is already priced into the stocks: Over the past two years, shares of Molina, Centene and WellCare have climbed 126%, 96% and 68% respectively.
      And their valuations reflect that run – in fact, Centene and Molina are among the most expensive insurance stocks tracked by Thomson Reuters, trading at 19.6 and 23 times forward earnings, respectively. WellCare is more exposed to Medicare, and its lower valuation, 13.9 times estimated earnings, reflects that.
      Above from http://online.barrons.com/article/SB50001424053111903533504579095103832318872.html

      AS for waste in Medicare– see http://www.dartmouthatlas.com

      About 1/3 of Medicare’s dollars are wasted on unnecessary and over prices reserach– See more than 20 years of Dartmouth research . –Wasteful when compared to the most efficient providers in teh U.S. (Mayo Clinic etc.) and Europe (where prices are regulated, and people don’t undergo nearly as many tests and surgeries. This is why it costs Medicare $25,000 a year to provide healthcare for a couple.

      As for young people not wanting to help older people– I agree that it would be better if different generations cared for each other.
      But few Americans think collectively. Thus many older people don’t want to pay high property taxes to support public schools because they no longer have children in the schools.

      I also agree that the politics of South Carolina are appalling. That’s why I wouldn’t choose to live there. I live in New YOrk, a far more liberal state where insurers cannot charge older Americans more–and younger Americans pay higher premiums as a result. But because I live in New York, I pay much higher income taxes, sales taxes and property taxes than I would in SC.
      Those taxes go to help people who are less fortunate than I am.

      Btw, I am self-employed, buy my own insurance, now pay $680 a month for ONE person. Next year will buy it in an Exchange. I won’t get a subsidy, and will probably wind up paying over $600 plus deductible and co-pay. I am younger than you are, in pretty good health, and rarely go to a doctor. But I understand that I’m contributing to an insurance pool– spreading the risk. None of us knows when we will need care. If I’m lucky I won’t get $680 a month in care. .

      Finally, Jim, you really should focus on the fact that you make more money that half of all American couples, live in a part of the country where prices are much lower than they are elsewhere, and own your own business. Presumably you also have savings, and a retirement fund.

      Compared to most people, you’re doing very well. Try to concentrate on that– you wouldn’t be so angry, and would probably live longer–certainly more happily. .

  9. I cannot disagree with your points, but I am still bothered by stories like Jim Matthews above.

    I agree that $15,000 a year is an understandable price for reasonably comprehensive insurance. What the heck, the average cost per beneficiary in Medicare is $12,000 or $24,000 for couple, granted that includes 85 year olds as well in the average.

    But if a couple has after tax income of $52,000 a year, ($65,000 gross), the law is telling them to spend 30% of that income just on health insurance (and still face a deductible and coinsurance if they do need care).

    Perhaps the real problem here is the ACA subsidies have a very harsh “cliff”. If a couple earns $61,000 a year, hardly a lot in many urban areas, their cost is capped at 9.5% of income. If their income goes up $1200 a year, their cost for health insurance goes to 30% of income!

    Actuarially, I believe that
    that if the ACA had tried to smooth out the ‘cliffs’, the cost of subsidies would be much higher.

    We should still look at a smoothing, in my view.

    Well, I tin

    • Bob-

      The Affordable Care Act is designed to help low-income and median-income Americans. A couple grossing 65,000 is above median income– particularly if they are living in South Carolina, a state where the cost of real estate, total taxes, services, and food all are relatively low. (I’m familiar with costs because my son lives in North Carolina, which prices are slightly higher, but
      still much, much lower than in New York.)

      In addition, upper-middle-class people in their early Sixties routinely take money from savings to pay for healthcare–which at that age is becoming a bigger portion of their budget. They can afford to do this because in two or three years they will have Medicare.

      Finally, resources are limited, and we have to make choices. I’m more worried about the 23-year-old single mother whose child does not have glasses than I am about the 62-year-old who is “doing okay.” And I’m very worried about the 17-year-old who cannot
      afford college and cannot find a job. What will happen to him?

      At one time older Americans were the poorest group in the country.

      Now those who are above median income ar the wealthiest group.

      And children are the poorest group in the country.

      Ultimately, that’s where we should focus our resources.

  10. Really, $65,000 at age 62 with healthcare expenses exceeding $25,000 is easy street? I can’t tell you how many people I meet in the South who are in their 60’s and don’t have health insurance and have many health issues such as diabetes, hypertension etc. So let me see if I get this straight: We can’t help you if you are 62 because we are helping someone who is 15. Why can’t why strive to help everyone? I don’t see this attitude in Sweden, Germany, Australia, England, Canada, France, etc.

    Let’s build one less aircraft carrier. Or stop the Abrams tank program. (We don’t use tanks anymore anyhow) Listen, I agree we should help poor kids. I agree we should help young mothers. But why do we have to make a choice and exclude a very vulnerable group. People at age 62 get sick, more so than those younger. That’s why they cost more and health insurance is so unaffordable for them.

  11. The take away from this article in my view is that we should leave health care to the individual states as it should be and keep the federal government largely out of it. Romney made that point and I believe he was correct.

    I cannot blame any state for opting out when it was hard for them to accurately figure out the costs and many challenges.

    • Todd S.–

      Twenty-four of the twenty-six states that “opted out” are controlled by Republican politicians.
      So they opted out for political reasons.

      If Kentucky could figure out how to estimate costs and meet the challenges, so could these states. (Kentucky is not a wealthy state). But it does have a smart Democratic governor who was committed to getting the Exchange up and running.

      The architects of Obamacare agreed with you that the states should run their own Exchanges. Every state is different and has
      different needs and a different medical culture. So they offered to give the states $$$ to do the job.

      But conservative politicians saw an opportunity to throw a wrench into the works by saying “No.”

      Finally, I agree that dividing the task up into 50 pieces makes it much more manageable. The Feds are trying to run an enormous,
      sprawling Exchange–and that is the main reason why they have run into so much trouble.