Bombshell 2016

Obamacare premiums to JUMP in 2016

Sure there were always the obvious jokes about the Unaffordable Care Act (ACA). But under strict scrutiny, insurers are requesting rate increases. HUGE increases. These increases, unfortunately or fortunately, are in line with dramatic increases in spending on health care by the insurance companies.

Why?

Very simply, the ACA changed how health premiums get calculated. How dare you charge less to (healthy) people who use less health care! How dare you charge less for non-smokers (in California). How dare you charge more for people who have had elective cosmetic surgery (breast implants which notoriously leaked and caused all kinds of damage in the 1990s). In the old system, those people might have paid more or get put into the state major risk program.

The new regime says: Let's charge the same regardless of pre-existing conditions. Good health; doesn't matter. Smoker/non-smoker/drug use: doesn't matter. As a result, people using the exchange are older, sicker, and savvy-er about using their benefits. One official said there was 'pent up demand' for all these great new health benefits, thus showing how necessary and important Obamacare is. These rate increases are significant because they are based on the first full year of claims experience under Obamacare.

I have worked with a lot of families who simply can't afford ACA. They try to buy the lowest cost plan. But the deductibles and co-pays are so high, they can't afford to actually use the insurance. On top of a $5,000 deductible, the premium seems like a waste of money. On top of that, premiums are now expected to climb 25% to 40% for 2016 in some jurisdictions according to the NYT.

CNBC link to NYT story

Funny how the NYT didn't report the potential for miscalculation and over-utilization before the law was put into place. [Welcome to the party guys. You're only 4-5 years late.] But they do report with gusto that ONLY 15% buy ACA coverage on an unsubsidized basis. That means 85% buy it with subsidies; and that's before we add in the 50% to 100% increase in medicare (free) users.

I'm sure it's wonderful that so many people can now use the healthcare system.
The question is: who is going to pay for it. 
The answer is: you are.

Interesting fact: 

Did you know that EVERY individual health insurance policy (on-exchange and  off-exchange) sold in California has an monthly fee to support the CoveredCA exchange? The exchange has already spent ALL of that money plus over 90% of an additional Billion dollars from the federal government. AND... The ACA allows Covered California to charge assessments or participation fees to health insurance issuers to generate funding, to support its operations.

It's over in 8 days. We mean it this time!

The bureaucrats have changed their minds before. These are the last 8 days to buy health insurance for all those who 'didn't know' they would have to pay a penalty if they didn't have coverage. Smart, eh? Let the tax preparer tell you to go out and buy health insurance.

 

To answer the above question: Don't hold your breath.

The geniuses at Obamacare think they'll get more people covered by making it illegal to sell health insurance 305 days out of the year. 

Artificial scarcity. Usually, there are only 60 days in a year when people can buy individual/family health insurance. That is the 'open enrollment' period which runs from mid-October to mid-December. Unless political consequences get in the way and they move it (to avoid an issue with election fallout) or extend it (like they did the first year). Or re-open it as they did this year through April 30, 2015.

And there are about a dozen circumstances which allow for a 'special enrollment period' at other times of the year including my favorite: because we (the bureaucrats at the healthcare exchange) feel like it.

What happens if you don't buy health insurance?

For 2014, the penalty was $95 per person or 1% of yearly income per person (for the whole family) --whichever is larger.
In 2015, the fee increases to $395 per person or 2% of yearly income per person (for the whole family) --whichever is larger.
In 2016, the fee increases to $695 per person or 2.5% of yearly income per person (for the whole family) --whichever is larger.
The penalty is capped at the average yearly premium for a Bronze plan (the cheap plan), which is insurance that pays an average 60% of the cost of health care.
Children count half (each) and families are capped at 3x the above per-person numbers. So if it's a single parent with more than 4 kids... they're in luck!

So if you have a family with mom and dad and 3 kids... that's 2 x 2% (adults) + 3 x 1% (children) = 7%. That's 7% of their income. That's a huge chunk of money for a whole lot of nothing. Remember, that doesn't pay for coverage or anything else for them. It helps subsidize all those who get coverage for free or at greatly reduced cost.

Subsidies illegal in 37 states?

The Supreme Court will be hearing a case regarding subsidies in Obamacare. Turns out, the law says that state exchanges can offer federal subsidies. It does not say that the federal government can offer subsidies. Since 34 states use the federal government's portal (yes, the one that had so many problems last year), those states are at risk of losing subsidies for their citizens.

On the one hand it seems clear that the ACA was rushed due to undeniable political opposition, and this oversight is one of the consequences. On the other hand, it seems ridiculous that the court won't rule that the federal government has the authority to 'stand in the place of' the very states who are authorized to dole out the subsidies.

The reality is... ACA has changed the face of health insurance in this country. Good health is no longer a factor. Citizenship status is paramount. Costs are either ridiculously low (due to subsidies) or completely unaffordable. Meanwhile their are a lot of questions (like this one pending before the court).

FACT: If you spent the last 20 years as a drug user, then spent a stint in prison smoking several packs a day...you qualify for health insurance at the SAME RATES as those who have taken care of their health.

FACT: For moderate- and low-income families, if the cost of insurance seems too high they just need more dependents. That way the qualify for more subsidy.

FACT: ACA models are based on INCOME, not ASSETS. So if you are a multimillionaire with multiple homes and a muli-million dollar income, BUT you have solar tax credits that exceed your income... you know qualify for low- or no-cost insurance.

FACT: Immigrant children (born here as citizens) get free coverage through medicaid. Their parents, however, don't qualify for subsidies. So a paid policy for 2 people in their 20s costs $420/mo for bronze (with a $10,000 deductible: 2x $5000) or $490 a month for platinum. Both unaffordable.

What you may not realize is that insurance companies also have new procedures. So insurers who cover mostly healthy people now have to pay the government, which in turn gives the money to insurers who cover sicker people. It's a rather odd gave of chicken where insurers get multi-hundred-million-dollar checks to cover sicker (but not too sick in a costly way) people.

NY Times: what-ending-health-subsidies-means