{"id":1494,"date":"2013-10-28T06:30:35","date_gmt":"2013-10-28T10:30:35","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=1494"},"modified":"2013-10-28T07:08:32","modified_gmt":"2013-10-28T11:08:32","slug":"website-will-insurers-prosper-obamacare","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/website-will-insurers-prosper-obamacare\/","title":{"rendered":"More Than A Website: Will Insurers Prosper Under Obamacare?"},"content":{"rendered":"
\"The<\/a>

The Bee Gees\u2019 \u201cMore Than A Woman\u201d was a 70s sen\u00adsa\u00adtion. In pro\u00admot\u00ading his health care law, the Pres\u00adi\u00addent has adopt\u00aded a sim\u00adi\u00adlar phrase, remind\u00ading us that Oba\u00admacare is more than a web\u00adsite. (Cred\u00adit: AP<\/span>)<\/p><\/div>\n

The Pres\u00adi\u00adden\u00adt\u2019s health care law has had a trou\u00adbled first month, but it is far too soon to know whether its prob\u00adlems will prove last\u00ading and severe.  Even some of its most fer\u00advent sup\u00adport\u00aders, like the Wash\u00ading\u00adton Post\u2019s Ezra Klein<\/a>,<\/span> acknowl\u00adedge that its defi\u00adcien\u00adcies run deep\u00ader than a clunky web\u00adsite.  Oba\u00admacare, the Pres\u00adi\u00addent reminds us, is more than a web\u00adsite, but its prob\u00adlems extend far beyond its 5 mil\u00adlion lines of errant code<\/a>.<\/p>\n

Its tech\u00adno\u00adlog\u00adi\u00adcal prob\u00adlems will even\u00adtu\u00adal\u00adly be cor\u00adrect\u00aded, but that alone will not ensure the law\u2019s suc\u00adcess. The make or break issue is this: can insur\u00adance com\u00adpa\u00adnies prof\u00aditably sell cov\u00ader\u00adage through the exchanges? If they can, the law will sur\u00advive its present tur\u00admoil; if they can\u00adnot, it prob\u00ada\u00adbly won\u2019t.<\/p>\n

That is why it con\u00adtains so many pro\u00advi\u00adsions to induce insur\u00aders to sell through the exchanges and to help them make mon\u00adey if they do. These pro\u00advi\u00adsions are a form of cor\u00adpo\u00adrate wel\u00adfare that should be repealed or, at the very least, delayed.<\/p>\n

The pro\u00advi\u00adsions run counter to the express pur\u00adpose of the exchanges, which the Admin\u00adis\u00adtra\u00adtion has late\u00adly tak\u00aden to call\u00ading mar\u00adket\u00adplaces<\/a> to give them a less bureau\u00adcrat\u00adic feel. The notion is that con\u00adsumers will ben\u00ade\u00adfit from free and fair com\u00adpe\u00adti\u00adtion among insur\u00adance com\u00adpa\u00adnies, which will vie for their busi\u00adness on gov\u00adern\u00admen\u00adtal or qua\u00adsi-gov\u00adern\u00admen\u00adtal play\u00ading fields and play by gov\u00adern\u00adment-set rules. The vol\u00adume, com\u00adplex\u00adi\u00adty and rigid\u00adi\u00adty of those rules makes this a very unusu\u00adal mar\u00adket\u00adplace, one that is hard\u00adly com\u00adpa\u00adra\u00adble to the sort of com\u00adpe\u00adti\u00adtion that con\u00adsumers encounter on Ama\u00adzon, Expe\u00addia and ehealth\u00adin\u00adsur\u00adance, which may help explain why those web\u00adsites work and the government\u2019s doesn\u2019t.<\/p>\n

That said, the real dis\u00adtor\u00adtions in this sys\u00adtem are the var\u00adi\u00adous incen\u00adtives and sub\u00adsi\u00addies that the gov\u00adern\u00adment offers insur\u00aders to entice them into sell\u00ading through the exchanges and ensure them a prof\u00aditable expe\u00adri\u00adence. These pro\u00advi\u00adsions are not so much intend\u00aded to help con\u00adsumers \u2013 indeed, some of them penal\u00adize con\u00adsumers \u2013 as they are to ben\u00ade\u00adfit insur\u00aders who agree to help make Oba\u00admacare work.<\/p>\n

It is a game of \u201chelp me help you,\u201d in which insur\u00adance com\u00adpa\u00adnies that agree to sell through the exchanges receive cer\u00adtain ben\u00ade\u00adfits that their com\u00adpeti\u00adtors do not. Mar\u00adket\u00adplaces that require such spe\u00adcial treat\u00adment are not mar\u00adket\u00adplaces at all, but cozy arrange\u00adments in which the gov\u00adern\u00adment rewards com\u00adpa\u00adnies that agree to advance its social and polit\u00adi\u00adcal aims.<\/p>\n

Chief among these is the indi\u00advid\u00adual man\u00addate. Obamacare\u2019s entire edi\u00adfice rests on the premise that every\u00adone wants and needs health insur\u00adance, even if they think they don\u2019t. Gov\u00adern\u00adment is doing peo\u00adple a ser\u00advice by pun\u00adish\u00ading them for not buy\u00ading it. The notion is con\u00adsti\u00adtu\u00adtion\u00adal\u00adly dubi\u00adous. A major\u00adi\u00adty of the Supreme Court ruled<\/a> last year that Con\u00adgress has no author\u00adi\u00adty under the Com\u00admerce Clause to impose such a require\u00adment. Gov\u00adern\u00adment can\u00adnot con\u00adsti\u00adtu\u00adtion\u00adal\u00adly com\u00adpel you to buy some\u00adthing you don\u2019t want. It can, how\u00adev\u00ader, tax you for not buy\u00ading it, accord\u00ading to that same Supreme Court rul\u00ading. Such is the state of con\u00adsti\u00adtu\u00adtion\u00adal jurisprudence.<\/p>\n

The indi\u00advid\u00adual mandate\u2019s stat\u00aded ratio\u00adnale is fic\u00adtion\u00adal. The rea\u00adson that the health care law levies a new tax on the unin\u00adsured is not because gov\u00adern\u00adment wants to restore its way\u00adward chil\u00addren to the path of health secu\u00adri\u00adty and \u201cindi\u00advid\u00adual respon\u00adsi\u00adbil\u00adi\u00adty<\/a>.\u201d It is that insur\u00adance com\u00adpa\u00adnies would nev\u00ader have gone along with Obamacare\u2019s stric\u00adtures if the gov\u00adern\u00adment had not agreed to coerce peo\u00adple into buy\u00ading their product.<\/p>\n

The insur\u00adance industry\u2019s posi\u00adtion is under\u00adstand\u00adable. The peo\u00adple who want health insur\u00adance most are those who expect to use it most. They want it because they believe that they will run up some very sub\u00adstan\u00adtial med\u00adical bills, bills they would pre\u00adfer that oth\u00aders pay. If gov\u00adern\u00adment forces insur\u00aders to pro\u00advide cov\u00ader\u00adage to every\u00adone who wants it and to charge peo\u00adple of the same age the same pre\u00admi\u00adum regard\u00adless of their expect\u00aded med\u00adical claims, they will have to charge them very high pre\u00admi\u00adums indeed. That would be bad for insur\u00adance com\u00adpa\u00adnies and the gov\u00adern\u00adment alike.<\/p>\n

Requir\u00ading peo\u00adple who don\u2019t want health insur\u00adance to buy it is thus about ben\u00ade\u00adfit\u00ading gov\u00adern\u00adment and insur\u00aders, not con\u00adsumers, by help\u00ading make the pro\u00adgram a polit\u00adi\u00adcal and finan\u00adcial success.<\/p>\n

Sup\u00adport for the indi\u00advid\u00adual man\u00addate is erod\u00ading in the Con\u00adgres\u00adsion\u00adal wing of the President\u2019s par\u00adty. The move\u00adment to delay it has gained con\u00adsid\u00ader\u00adable trac\u00adtion over the past sev\u00ader\u00adal weeks, with a grow\u00ading num\u00adber of Democ\u00adrats<\/a> adopt\u00ading this posi\u00adtion  Those seek\u00ading delay offer two very dif\u00adfer\u00adent alter\u00adna\u00adtives. One group wants to exempt indi\u00advid\u00adu\u00adals from the tax on the unin\u00adsured through\u00adout 2014, just as the Admin\u00adis\u00adtra\u00adtion has exempt\u00aded large employ\u00aders who don\u2019t spon\u00adsor cov\u00ader\u00adage for their work\u00aders from the tax penal\u00adty for one year.  The oth\u00ader would delay the man\u00addate until the healthcare.gov web\u00adsite is deemed to be func\u00adtion\u00adal. Sen\u00ada\u00adtor Mar\u00adco Rubio<\/a> (R\u2011FL<\/span>) has announced his inten\u00adtion to intro\u00adduce such a bill this week.<\/p>\n

The prob\u00adlem with this approach is that it con\u00addi\u00adtions a spe\u00adcial arrange\u00adment for the insur\u00adance indus\u00adtry on the abil\u00adi\u00adty of a bungling fed\u00ader\u00adal agency and its pricey con\u00adtrac\u00adtors to suc\u00adcess\u00adful\u00adly com\u00adplete a project begun 3\u20131\/2 years ago. One can assume that, giv\u00aden enough mon\u00adey and time, HHS<\/span> and its belt\u00adway ban\u00addits will build a web\u00adsite that works. How does the suc\u00adcess\u00adful com\u00adple\u00adtion of that project legit\u00adimize the impo\u00adsi\u00adtion of a tax on peo\u00adple who decline to buy health insur\u00adance? Con\u00adgress should repeal or delay the tax on the unin\u00adsured with\u00adout preconditions.<\/p>\n

They should also repeal or delay the $10 bil\u00adlion in cor\u00adpo\u00adrate wel\u00adfare pay\u00adments to plans that par\u00adtic\u00adi\u00adpate in the exchanges. In order to raise this $10 bil\u00adlion, sec\u00adtion 1341<\/a> of the health care law requires an assess\u00adment of $63 on each of the rough\u00adly 159 mil\u00adlion peo\u00adple who are cov\u00adered under group health plans. This is a trans\u00adfer of $10 bil\u00adlion from peo\u00adple who will not get cov\u00ader\u00adage through the new exchanges next year to the esti\u00admat\u00aded 7 mil\u00adlion peo\u00adple who will. The mon\u00adey is intend\u00aded to fund rein\u00adsur\u00adance arrange\u00adments, help\u00ading to help pay the claims of peo\u00adple who run up unusu\u00adal\u00adly high med\u00adical bills. These bills should be paid with the pre\u00admi\u00adums that insur\u00aders col\u00adlect from the peo\u00adple they cov\u00ader, not by an assess\u00adment on peo\u00adple they do not. Labor unions have object\u00aded to the assess\u00adment, as have many busi\u00adness\u00ades. Con\u00adgress should repeal or delay both the assess\u00adment and the $10 bil\u00adlion pay\u00adment to insur\u00aders that the assess\u00adment finances.<\/p>\n

The same goes for the \u201crisk cor\u00adri\u00addors\u201d pro\u00advid\u00aded for in sec\u00adtion 1342<\/a>.  These com\u00adpli\u00adcat\u00aded arrange\u00adments lim\u00adit the loss\u00ades that insur\u00adance com\u00adpa\u00adnies will incur next year. Think of it as a safe\u00adty net for insur\u00aders who agree to sell through the exchanges. The law pro\u00advides that the gov\u00adern\u00adment will lim\u00adit insur\u00aders\u2019 prof\u00adits and loss\u00ades. But prof\u00adit and loss are the nat\u00adur\u00adal out\u00adcomes of com\u00adpe\u00adti\u00adtion. The mar\u00adket\u00adplace pro\u00adduces win\u00adners and losers. It pro\u00adtects com\u00adpe\u00adti\u00adtion, not com\u00adpeti\u00adtors. Insur\u00adance com\u00adpa\u00adnies that play by the government\u2019s rules in the government\u2019s \u201cmar\u00adket\u00adplace\u201d and turn a prof\u00adit should be able to use that prof\u00adit to expand their com\u00adpa\u00adnies, reward their share\u00adhold\u00aders and for oth\u00ader legit\u00adi\u00admate ends. Those that incur loss\u00ades should be left to deal with the con\u00adse\u00adquences. It is not the government\u2019s busi\u00adness to reward unsuc\u00adcess\u00adful com\u00adpeti\u00adtors with mon\u00adey it con\u00adfis\u00adcates from suc\u00adcess\u00adful ones.<\/p>\n

Final\u00adly, there is the mat\u00adter of cost-shar\u00ading, in which the calami\u00adties of Oba\u00admacare and seques\u00adtra\u00adtion inter\u00adsect. The law\u2019s back\u00aders speak often about pre\u00admi\u00adum sub\u00adsi\u00addies, in which peo\u00adple with incomes between 100 per\u00adcent and 400 per\u00adcent of the fed\u00ader\u00adal pover\u00adty lev\u00adel are eli\u00adgi\u00adble to have tax\u00adpay\u00aders pay part of their pre\u00admi\u00adum. What is less well known is that the law also pro\u00advides rich\u00ader cov\u00ader\u00adage and low\u00ader lim\u00adits on out-of-pock\u00adet spend\u00ading for cer\u00adtain low-income indi\u00advid\u00adu\u00adals. The pre\u00admi\u00adum sub\u00adsi\u00addies help pay for the cost of insur\u00adance; the cost-shar\u00ading sub\u00adsi\u00addies help with the out-of-pock\u00adet costs for cov\u00adered ser\u00advices. So cer\u00adtain low-income peo\u00adple, in addi\u00adtion to get\u00adting a break on their pre\u00admi\u00adums, will pay less when they see a net\u00adwork doc\u00adtor or pick up a pre\u00adscrip\u00adtion than mid\u00addle class peo\u00adple who sign up for the same plan. Deliv\u00ader\u00ading these cost-shar\u00ading sub\u00adsi\u00addies is com\u00adpli\u00adcat\u00aded. To over\u00adsim\u00adpli\u00adfy, if an insur\u00adance com\u00adpa\u00adny signs up some\u00adone with a very low income \u2013 say 150 per\u00adcent of pover\u00adty \u2013 the gov\u00adern\u00adment will give them an addi\u00adtion\u00adal pay\u00adment that the insur\u00ader must use to juice up their cov\u00ader\u00adage and reduce their cost-sharing.<\/p>\n

But as Chris Jacobs<\/a> of the Her\u00aditage Foun\u00adda\u00adtion  has not\u00aded in a recent Wall Street Jour\u00adnal piece<\/a>,<\/span> the cost-shar\u00ading sub\u00adsi\u00addies (unlike pre\u00admi\u00adum sub\u00adsi\u00addies) are sub\u00adject to seques\u00adtra\u00adtion. Jacobs cites a May 2013 OMB<\/span> report<\/a>,<\/span> which esti\u00admates that gov\u00adern\u00adment pay\u00adments to insur\u00aders for cost-shar\u00ading sub\u00adsi\u00addies will be reduced by 7.2 per\u00adcent if seques\u00adtra\u00adtion occurs again next year.<\/p>\n

The prob\u00adlem, Jacobs observes, is that low-income peo\u00adple are being told when they enroll (assum\u00ading that they suc\u00adcess\u00adful\u00adly nav\u00adi\u00adgate the process) what their reduced cost-shar\u00ading will be. If Con\u00adgress and the Pres\u00adi\u00addent can\u2019t come to terms on elim\u00adi\u00adnat\u00ading seques\u00adtra\u00adtion, then some\u00adone will get hosed: either the low-income per\u00adson who won\u2019t get the promised cost-shar\u00ading assis\u00adtance or the insur\u00adance com\u00adpa\u00adny that will have to pro\u00advide the promised assis\u00adtance, though with a small\u00ader pay\u00adment from the government.<\/p>\n

Jacobs notes that CMS<\/span> had vowed to sort this all out and issue guid\u00adance by Octo\u00adber 1. But like the promise that healthcare.gov would be up and run\u00adning smooth\u00adly by that date, the agency hasn\u2019t deliv\u00adered. Choos\u00ading whom to betray \u2013 impov\u00ader\u00adished fam\u00adi\u00adlies or its busi\u00adness part\u00adners \u2013 is evi\u00addent\u00adly prov\u00ading almost as dif\u00adfi\u00adcult for the embat\u00adtled agency as mak\u00ading a web\u00adsite work. But as moral choic\u00ades go, this one should be easy. Insur\u00adance com\u00adpa\u00adnies should be required to make low-income peo\u00adple whole.<\/p>\n

I har\u00adbor no ani\u00admus toward insur\u00adance com\u00adpa\u00adnies and I have long sup\u00adport\u00aded reform\u00ading the way that health care is financed. Reform, in my view, should be based on con\u00adsumer choice and com\u00adpe\u00adti\u00adtion. Oba\u00admacare erred by sub\u00adject\u00ading the mar\u00adket to a stul\u00adti\u00adfy\u00ading reg\u00adu\u00adla\u00adto\u00adry regime. By impos\u00ading strin\u00adgent and unbend\u00ading require\u00adments on con\u00adsumers, insur\u00aders and providers, it has ren\u00addered true mar\u00adket-based reform impos\u00adsi\u00adble. Thus, the need to woo insur\u00aders through spe\u00adcial arrange\u00adments that fur\u00adther dis\u00adtort mar\u00adkets, bur\u00adden tax\u00adpay\u00aders and con\u00adsumers, and favor some com\u00adpeti\u00adtors over others.<\/p>\n

In pro\u00admot\u00ading his health care law, the Pres\u00adi\u00addent over\u00adlooks these defects and rhetor\u00adi\u00adcal\u00adly embraces mar\u00adkets. On Sat\u00adur\u00adday<\/a>,<\/span> he once again described the gov\u00adern\u00adment exchanges as \u201cmar\u00adket\u00adplaces\u201d and said that the \u201cchoice and com\u00adpe\u00adti\u00adtion\u201d they facil\u00adi\u00adtate will ben\u00ade\u00adfit mil\u00adlions of Amer\u00adi\u00adcans.  If only that were so. The law is rid\u00addled with spe\u00adcial arrange\u00adments for insur\u00adance com\u00adpa\u00adnies that have lit\u00adtle to do with mar\u00adkets and no place in this law. Con\u00adgress should elim\u00adi\u00adnate them, repeal\u00ading or delay\u00ading the tax on the unin\u00adsured, along with the rein\u00adsur\u00adance pay\u00adments and risk cor\u00adri\u00addors for plans that sell through the exchanges. And it should require insur\u00aders, should seques\u00adtra\u00adtion occur next year, to pro\u00advide their low-income enrollees with the cost-shar\u00ading assis\u00adtance they\u2019ve been promised.<\/p>\n

Oba\u00admacare has giv\u00aden insur\u00aders who agree to sell through the exchanges one great com\u00adpet\u00adi\u00adtive advan\u00adtage: peo\u00adple can only get pre\u00admi\u00adum sub\u00adsi\u00addies if they buy through exchanges. That is advan\u00adtage enough. The gov\u00adern\u00adment has laid out its play\u00ading field and estab\u00adlished its rules. Let the insur\u00aders compete.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Pres\u00adi\u00adden\u00adt\u2019s health care law has had a trou\u00adbled first month, but it is far too soon to know whether its prob\u00adlems will prove last\u00ading and severe.  Even some of its most fer\u00advent sup\u00adport\u00aders, like the Wash\u00ading\u00adton Post\u2019s Ezra Klein, acknowl\u00adedge that \u2026 Con\u00adtin\u00adue read\u00ading \u2192<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":1498,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[16,124,159,13,344],"tags":[413,651,51,648,649,69,623,334,122,641,647,379,1188,468,650,1190,203,1192],"class_list":["post-1494","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-health-care","category-obamacare","category-president-obama","category-sequestration","category-supreme-court","tag-aca","tag-chris-jacobs","tag-cms","tag-corporate-welfare","tag-cost-sharing","tag-health-exchanges","tag-health-insurance-exchanges","tag-heritage-foundation","tag-hhs","tag-individual-mandate","tag-insurers","tag-marco-rubio","tag-obamacare","tag-omb","tag-premium-subsidies","tag-president-obama","tag-sequestration-2","tag-supreme-court"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t