• Obamacare card burning

    The excellent artwork by Rand Renfrow accompanying the Bloomberg column by me and Adrianna:

    Obamacare burning


    • Lots of nasty trolls and a flame war at that site… Caution advised.

    • “under that rule, premiums charged to a plan’s oldest
      beneficiaries cannot exceed three times the premiums of younger
      individuals.” It crosses my mind that _three_ is a fairly large
      number in this context. Since young folks can remain on the parents
      insurance through early 20s, and Medicare takes over at 65, this is
      the 25 to 65 age group. And while life looks a lot different
      between 55 and 65 than it does between 25 and 35, it isn’t until
      one runs into end-of-life issues that one really incurs enormous
      medical costs. So a factor of three or even two should go a long
      way to making the burden on younger enrollees closer to that of a
      age-grouped insurance plan. How far off am I here? What is the real
      actuarial difference that an insurance company would charge for
      similar plans in the 25 to 35 and 55 to 65 age groups? (Or do these
      plans have to cover folks not vested in Medicare?)

      • I was in a meeting with a room full of actuaries on Friday and they said the real ratio (talking about younger retirees compared to older retirees, i.e. 65 year olds versus 85 year olds) would be five times the cost.

    • I would agree with Paula on that. The ACA also points out
      that the typical age curve between ages 64 and 21 is 5 to 1. I also
      agree with the authors who state “Thus, the health care law’s rate
      shock isn’t a result of the young subsidizing the old. It’s the
      result of reforming the system so it serves the needs of the
      sickest and most vulnerable.” There should be 2 rules of law for
      our health care system to be fiscally sustainable: 1. Provide for
      the sick and injured. 2. Attract the healthy who will need the
      system in the future. I would go further than the 3 to 1 modified
      community rating. I would go 1 to 1, which provides financial
      dignity to the sick and injured. It also is equitable to charge
      everyone, initially, the same premium. Over time, I would provide
      increasing discounts for those having low or no claims. That way,
      we can come closer to resolving the 2 important goals I cited. We
      need to have a balanced pool of no claimants, low claimants,
      medium, claimants, and high claimants, for this to be financially
      sustainable. In short, we must design a plan which is attractive to
      all, particularly over the long term. We must design plans people
      will want to keep for the long term, not 3-5 years, as is common
      today. Can you imagine how costly it is to have to replenish your
      entire customer base every 3 to 5 years? Don Levit

      • Don and Paula, thanks for the numbers. My intuition is off by a factor of two. Sigh.

        By the way, am I right in that Obamacare will cover very few of the over 65? Will it cover any? What happens to those of us not vested in Medicare (I spent most of my working life outside the US*)? Do the insurance companies have to accept us?

        *: I’m working on fixing this, but I have another 3 years to go.

        • David:
          Contact Medicare. Obamacare does not cover people over 65.
          Medicare will cover you, but Part A will not be “free,” and you willl probably be charged more than theRATES FOR PARTS B AND D (THEY ARE ONLY 25% OF THE ACTUAL PREMIUMS).
          DON LEVIT

    • “Thus, the health care law’s rate shock isn’t a result of the young subsidizing the old. It’s the result of reforming the system so it serves the needs of the sickest and most vulnerable.”

      Yes,of course. And which group is more likely to be sick and vulnerable?… The old. The “old” and “sickest and most vulnerable” are highly synonymous.

    • There will be rate shock in this country. If you buy your own health insurance and choose not to go onto a narrow network plan/HMO, the premiums will go up. I have seen the plan designs of the exchanges in Indiana and they are narrow networks. Community Hospital is about to get very busy with their contract with Anthem.
      Now there will be many people that have premium joy with the subsided premium inside the exchange or they could be on a high risk plan and will benefit from the guaranteed issue.

      People with have premium joy and premium shock. The people that have premium shock are going to be very upset. While the people that are OK with narrow networks will experience premium joy.

      • @Tony Nefouse: “If you buy your own health insurance and choose not to go onto a narrow network plan/HMO, the premiums will go up.”

        Compared to what?

        Premiums have been increasing at astronomical rates for a generation. Are you suggesting that any increase in premiums now is entirely a result of the ACA?

        • Yes, with the removal of underwriting and mandated coverage’s, This will increase premiums for healthy people. . In the past insurance companies have always used underwriting to control risk.

          I see rate increase everyday, so i know all to well about increased premiums. 9 out 10 times the rates increase are due to utilization and medical cost. I am not defending the methodology the carriers have used to calculate those increases.

          Future plans cost will be based on pooled ratings. This is the loss ratio for the entire block of insurance policies in a state. This may lead to lower rate increase or it lead to carriers pulling out.

          We just don’t know because the ACA is based on a concept.

          • Tony, you’re correct, of course, that no health underwriting and essential benefits may raise rates for some people. My point is that a blanket statement that “there will be rate shock in this country” is a vast overstatement.

            The impact of the law on rates depends on individual characteristics, location, etc. Young healthy males in some places will pay more (or maybe less, if we include the impact of tax credits). Many older women will pay less. Many people who were previously excluded from the market will have coverage. Blanket all-or-nothing statements and black and white conclusions do not reflect reality.

            As you point out, the law includes provisions that will tend to increase premiums. It also includes provisions – pooling, more transparent competition, MLR limits, etc. – that will tend to hold down premium increases.

            I intend to see how it works out and try to make it work better. I’m not willing to write it off as a failure, or draw conclusions, before it even begins.

            • Sheldon, I am one of the few brokers that is promoting the health insurance exchanges. I have reviewed the policies that have been submitted for my state. These are HMO policies with very narrow networks. A lot of people will not want to be restricted by network. They will be forced to pay higher premiums outside the exchange. People with means will be upset.
              My entire assessment of the law is there will be premium joy and premium shock. There will be more premium joy than premium shock.
              Here is one of my sites where I talk about the exchange in my state.
              This site is promoting the positive side of the law.