The Affordable Coffee Act
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The Affordable Coffee Act
Robert Laszewski—a prominent consultant to health insurance companies—recently wrote in a remarkably candid blog post that, while Obamacare is almost certain to cause insurance costs to skyrocket even higher than it already has, “insurers won’t be losing a lot of sleep over it.” How can this be? Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
For some reason, President Obama hasn’t talked about this particular feature of his signature legislation. Indeed, it’s bad enough that Obamacare is projected by the Congressional Budget Office to funnel $1,071,000,000,000.00 (that’s $1.071 trillion) over the next decade (2014 to 2023) from American taxpayers, through Washington, to health insurance companies. It’s even worse that Obamacare is trying to coerce Americans into buying those same insurers’ product (although there are escape routes). It’s almost unbelievable that it will also subsidize those same insurers’ losses.
As Laszewski explains, Obamacare contains a “Reinsurance Program that caps big claim costs for insurers (individual plans only).” He writes that “in 2014, 80% of individual costs between $45,000 and $250,000 are paid by the government [read: by taxpayers], for example.”
In other words, insurance purchased through Obamacare’s government-run exchanges isn’t even full-fledged private insurance; rather, it’s a sort of private-public hybrid. Private insurance companies pay for costs below $45,000, then taxpayers generously pick up the tab—a tab that their president hasn’t ever bothered to tell them he has opened up on their behalf—for four-fifths of the next $200,000-plus worth of costs.
Isn’t this free healthcare great?!
Thought the incredibly unpopular Obamacare health plan (the most epic disaster story was the woman who was touted as a success and then later kicked off her plan) had put most of its problems behind it? Think again. Yesterday, after the stock market close, health insurer Humana warned that the “risk mix” of those who have signed up for the program will be “more adverse than previously expected.”
In plain english what this means is that only old and sick people are signing up, while younger generations with piles of student debt, a couch in their parents’ basements and no jobs decide to ride things out uninsured.
So unhealthy people are enrolling at a disproportionately higher rate than healthy people leading to a “premium rate death spiral.” Premiums have already risen by huge margins for much of the country and the law is in the early stages of implementation. Let’s not forget that the employer mandate would have already kicked in by now if the Obama administration hadn’t delayed it a year (unilaterally, without Congress, you know the legislators). Could you imagine the political fallout if along with the individual market cancellations we also heard about the employer policy cancellations?
In fact, the amount of Illinois residents seeking a conceal carry permit already surpasses those who enrolled in Obamacare after the first two months of the launch of healthcare.gov. The Chicago Sun-Times reported 4,525 individuals signed up on Sunday alone for their firearms permits, when the State Police first opened the process to all concealed carry applicants.
Illinois State Police spokeswoman Monique Bond said that number is included in Sunday’s total of more than 11,000 people who have signed up because of an early application process that began December 18 and was open to only firearm instructors. Officials told the Sun-Times they expect 350,000 to 400,000 people (about 1,000 per day) will sign up for conceal carry firearm permits this year.
In contrast, the number of Illinois residents going to healthcare.gov over a two-month period and enrolling in Obamacare is currently on a slower pace than those looking to become conceal carry permit holders. Only 7,043 Illinoisans were enrolled in Obamacare plans two months after the website’s launch, the Chicago Tribune reported in December.
Obamacare’s problems aren’t just website glitches. They’re systemic flaws that will do nothing to better the condition of health insurance in the U.S.. My favorite is number 4:
4. Another broken promise: Many members of Congress who voted for Obamacare did so because they wanted “universal coverage.” But we may end up further from that goal: If the numbers show that millions of those buying insurance on the exchanges had insurance before but lost it because it didn’t comply with Obamacare’s rules, we may wind up with fewer people with private insurance than before the $2.6 trillion law passed! That would be another betrayal of trust with the American people, who genuinely wanted to help expand access to health insurance.
Who would have thought that a federal government overhaul and regulatory apparatus would make healthcare more unaffordable and less available for those that need it? It’s not like I and many others have been predicting these effects since before the bill was passed.
The cost of President Obama’s massive health-care law will hit Americans in 2014 as new taxes pile up on their insurance premiums and on their income-tax bills.
Most insurers aren’t advertising the ObamaCare taxes that are added on to premiums, opting instead to discretely pass them on to customers while quietly lobbying lawmakers for a break.
But one insurance company, Blue Cross Blue Shield of Alabama, laid bare the taxes on its bills with a separate line item for “Affordable Care Act Fees and Taxes.”
The new taxes on one customer’s bill added up to $23.14 a month, or $277.68 annually, according to Kaiser Health News. It boosted the monthly premium from $322.26 to $345.40 for that individual.
The new taxes and fees include a 2 percent levy on every health plan, which is expected to net about $8 billion for the government in 2014 and increase to $14.3 billion in 2018.
"It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer it." — Thomas Sowell
In the past (not going to bother digging it up), Krugman has argued that the Republicans who were desperately trying to avert the onset of ObamaCare were belying their own arguments. If they actually thought it would be a disaster, Krugman argued, then they should let it get implemented, because then everyone would see how awful it was, and it would get repealed, much to the chagrin of the Democrats.
I’m not kidding, that’s really what he argued. In case you’re not seeing why that’s so absurd, Krugman unwittingly spells it out whenhe blogs today:
For almost two months, the debacle of healthcare.gov allowed conservatives to live the life they always wanted. Health reform was a dismal failure; Obama would go down in history as a laughingstock; government can’t do anything; viva Ayn Rand!
Meanwhile, the technicians were working on what was always a technical IT problem, not a problem with the fundamental structure of the law. And while things are far from completely fixed, the crisis is clearly over. Obamacare will have millions of beneficiaries by the time open enrollment ends; it will add many more in the 2015 cycle. Health reform is pretty much irreversible at this point.[Bold added.]
Let me add one final clarification on the above point: No Tea Party partisan ever denied that handing out federal money to millions of people, would create millions of people who supported the government program. That was part of the objection all along, that once this thing started, it would be impossible to turn off, no matter how awful it was.
Next, young progressives who really love ObamaCare and trust Paul Krugman should take pause at this throwaway line:
Apparently, however, many people on the right are still stuck on the notion that Obamacare is doomed, indeed that it’s collapsing as we speak. The latest version is the supposed “death spiral” of young people not signing up.
As Ryan Cooper says, don’t count on it. There are lots of good reasons for the young to sign up, including the fact that it’s the law.[Bold added.]
Incidentally, I can’t remember the last time I heard anybody mention this–certainly none of the people explaining how great ObamaCare is going to be–but let mequote from healthcare.govto make sure we all realize what’s in store:
The penalty in 2014 is calculated one of 2 ways. You’ll pay whichever of these amounts is higher:
* 1% of your yearly household income. The maximum penalty is the national average yearly premium for a bronze plan.
* $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
The fee increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and later years it’s 2.5% of income or $695 per person. After that it is adjusted for inflation.
(Note you are exempt if you are below 133% of the federal poverty line.)
Now why would they have the (minimum) fee at $95 per person in 2014 when it first kicks in, but by 2016 it rises to $695? Is that because something changes in the underlying actuarial tables? Of course not. It’s because they wanted the initial fee to be something extremely modest, so the media could focus on that. If you surveyed Krugman and Yglesias’s readers and asked, “What will the minimum individual mandate penalty be in 2016 for not having health insurance?” what do you think the median response would be?
Also, note that even in 2014, the tax for not having insurance is either $95 or 1% of household income, whichever is higher. So, if you’re a young person out there who currently doesn’t have insurance, unless you make $9,500 or less annually, you’re paying more than $95. (I think it’s technically adjusted gross income, but you get my point.) This whole thing is unbelievably deceptive.
Oh, the government’s official term for this tax is“individual shared responsibility payment.”
But remember everyone, the only reason anybody could possibly oppose this, is hatred of poor sick people.
Megan McArdle’s coverage of the Obamacare fiasco has been some of the best:
On Wednesday, Politico’s Carrie Budoff Brown reported that the administration was saying fewer than 500,000 people had actually lost insurance due to Obamacare-induced cancellations. This struck me as a strange leak: Half a million is a lot less than many people (including me) have been estimating, but it is still not a small number, and the administration has tended to sit on negative information until the last possible moment.
Yesterday, we had a more official announcement from the administration: Anyone who has had their policies cancelled will be exempt from the individual mandate next year. The administration is also allowing those people to buy catastrophic plans, even if they’re over 30.
What to make of these two statements? On the one hand, the administration is trying to minimize the number of people who have been affected by cancellations, and on the other hand, it is unveiling a fix to the problem of cancellations. And these are not minor changes.
As Seth Chandler points out, Healthcare.gov doesn’t even let you see catastrophic plans if you’re more than 30 years old. Is now the time to be making technical changes to the website?
As Avik Roy points out, catastrophic plans aren’t that much cheaper than the so-called bronze plans. They’re also not eligible for subsidies. This is unlikely to be much help to folks who lost insurance; all it does is introduce some much-unneeded complexity to Healthcare.gov.
As Aaron Carroll points out, insurers calculated their premiums for this year on the expectation that the relatively healthy folks who were already buying insurance would be buying policies on the exchange. The insurers are not happy about this latest change, and Carroll predicts that they will ask the administration to push more money to them through the “risk corridors.” I think he’s right.
As Ezra Klein points out, this seriously undermines the political viability of the individual mandate: “But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it’s wrong. But it’s hard to argue that it’s right for the currently uninsured but wrong for people whose plans were canceled … Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people whose plans were canceled more deserving of help than people who couldn’t afford a plan in the first place?”
Obama Repeals ObamaCare
Under pressure from Senate Democrats, the President partly suspends the individual mandate.
Individuals whose health plans were canceled will now automatically qualify for a “hardship exemption” from the mandate. If they can’t or don’t sign up for a new plan, they don’t have to pay the tax. They can also get a special category of ObamaCare insurance designed for people under age 30.
So merry Christmas. If ObamaCare’s benefit and income redistribution requirements made your old, cheaper, better health plan illegal, you now have the option of going without coverage without the government taking your money as punishment. You can also claim the tautological consolation of an ObamaCare hardship exemption due to ObamaCare itself.
These exemptions were supposed to go only to the truly destitute such as the homeless, bankrupts or victims of domestic violence. But this week a group of six endangered Senate Democrats importuned HHS Secretary Kathleen Sebelius to “clarify” that the victims of ObamaCare also qualify. An excerpt from their Wednesday letter, whose signatories include New Hampshire’s Jeanne Shaheen and Virginia’s Mark Warner, is nearby.
HHS and the Senators must have coordinated in advance because literally overnight HHS rushed out a bulletin noting that exemptions are available to those who “experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan.” A tornado destroys the neighborhood or ObamaCare blows up the individual insurance market, what’s the difference?
Yesterday the Obama administration suddenly moved to allow hundreds of thousands of people who’ve lost their insurance due to Obamacare to sign up for bare-bone “catastrophic” plans. It’s at least the 14th unilateral change to Obamacare that’s been made without consulting Congress.
The fact that no one really knows just how Obamacare is doing (the administration is hiding the numbers) or where it’s going (it’s like an impressionistic painting in progress) may explain the public consensus that’s developed behind delaying its implementation. This week’s Fox News poll found Obamacare to still be a polarizing issue with 53 percent of respondents wanting it repealed and 41 percent wanting to keep it. But then this question was asked: “Setting aside how you feel about the law, do you think implementation of it should be delayed for a year until more details are ironed out, or not?”
It wasn’t even close. By 67 percent to 28 percent people now want the law delayed. And every demographic group agrees: 57 percent of liberals, 65 percent of women, 67 percent of those under age 35, and 60 percent of lower-income voters. Even African Americans, the bedrock of Obama’s support base now favor a delay by 48 percent to 47 percent.
Those with canceled policies will be exempt from Obamacare’s penalty for not buying insurance.
More demonstration that the Obama administration has no grasp on what the term “rule of law” means. I also wonder if he missed that day in civics when they discussed that Congress writes the laws. Where does he get the idea that he can just change the law for some at a whim’s notice? What kind of precedent is he setting for future presidents who want to change the law when it’s inconvenient?
Serious liberals are those for whom the primary purpose of politics is to protect personal liberty and advance social equality. Their liberalism has been the motive force of America’s political history—which is the saga of extending legal and political rights, social status, and realized liberty to ever-wider groups, and legislating “welfare state” protections against the social and economic vicissitudes of life. They have been eclipsed in recent decades by those who call themselves “progressives”—who borrow the language of liberalism but are in practice devoted to enlarging and valorizing government itself rather than the liberty and equality of citizens. Critically, progressives predominate among Democratic party and interest-group activists whose careers consist of acquiring and deploying state power. But serious liberals are still prominent in intellectual and university life and in the party itself; they may be said to be the party’s conscience.
Serious liberals were silent or supportive during the Affordable Care Act’s legislative debates, bitter enactment, and initial implementation. That was understandable, for the effort promised to dramatically expand health care availability and to correct several evident injustices, such as the unavailability of insurance to those who have developed serious maladies; and Republicans were working hard to stop it and might well have succeeded. Then, when the troubles first appeared earlier this year, it seemed natural to many liberals to attribute them to fixable technical glitches and executive incompetence. But now that the program’s true nature and future course have come into sharp relief, it is time for serious liberals to find their voice. For Obamacare’s two central features are as inimical to liberal values as to conservative values. The first is monopoly and the suppression of diversity and competition. The second is extreme concentration of power, exercised continuously in monitoring and directing the activities of millions of citizens.
Obamacare is not an outright government monopoly, but it achieves the same dreary results through standardization and regimentation. It establishes a profusion of regulatory controls over prices, entry, and services in insurance and medical care, policies whose systematic anticonsumer perversities have been documented by generations of economists of all political persuasions. (Not long ago, the elimination of entry and price controls in competitive markets was a bipartisan project, championed by Edward Kennedy as well as Ronald Reagan.) That some states operating their own Obamacare insurance “marketplaces” are already moving to ban the private sale of individual and small-business insurance is one example of the program’s tendency toward explicit monopoly.
A+ Commentary here.
The penalties are not very high to begin with. In 2014, the fine to remain uninsured is $95 per person (up to a family maximum of $285, or 1 percent of family income, whichever is greater).
But the penalty will increase more than sevenfold in the next two years, with the fine running as much as $695 per person by 2016. The family maximum would be as high as $2,085 (or 2.5 percent of family income, whichever is greater).”
— In other words, buy healthcare or we’ll rob you. And the Supreme Court says that that’s a legitimate use of the federal government’s taxing power.
Imagine if we created a similar rule for banks, requiring them to give loans to the entire population. Further, imagine if we not only required banks to stop using risk-based underwriting for determining who they would give loans to, but also forbade risk-based underwriting to be used for determining the amount of the default-risk interest-rate premium over the risk-free interest rate that they could charge to different borrowers. This is an untenable business model. The banks would quickly become insolvent, and banks wouldn’t be viable to stand alone as independent entities without subsidies and blank-check government bailouts.
The same core business principle applies to insurers of all types, not just health-care insurers. The model of having to give insurance to the entire population and not being able to do risk-based pricing is untenable. Health-care insurers can’t remain solvent and viable without subsidies and bailouts under these circumstances.
Much of the recent focus on ObamaCare has been on the administration’s failure to build and launch a website portal that requires massive systems integration between the government’s “marketplace” and multiple private-sector companies’ enormous and complex database systems. This is a massive undertaking, though not impossible.
But the fatal absurdity of ObamaCare is its underlying premise of command-and-control central planning of economic activity.
The die has been cast with ObamaCare, and the fatal blow to the entire enterprise’s financial viability can best be paraphrased with: “It’s the model, stupid.”
A byzantine web of price controls and mandates will necessitate rationing of care (an accepted given for anybody in the Medicare or Medicaid markets), lowering the quality of care and lowering the innovations that have been the hallmarks of our country’s health-care system, which despite its many flaws has produced the most successful medical advances in the history of the world.
With the passing of ObamaCare, insurance compensations are already regulated public utilities, and future subsidies and bailouts are guaranteed by ObamaCare to be the order of the day. Unless of course health insurers are allowed to fail and the federal government is required to step into the breach with a “single payer” system.
And that always has been the left-statists’ end-game hasn’t it?