Great news: Another wave of health-plan cancellations on the way?
posted at 12:21 pm on April 24, 2014 by Ed Morrissey
A new report on ObamaCare would tend to distract from the White House victory lap earlier in the month, and might even — gasp! — “re-open” the debate that Barack Obama insisted was closed. Don’t look for this information on the right-wing blogs, though. Vox’s Sarah Kliff, formerly at the Washington Post, warns that another class of policies will get canceled due to coverage mandates, and that will put some lower-income Americans in a fiscal bind:
The Obama administration is quietly trying to stamp out some of the skimpiest health plans, a decision that industry officials say could trigger yet another wave of cancellation notices.
The administration is targeting a type of coverage called fixed benefit or indemnity insurance, which give patients a fixed sum of money whenever they visit the doctor or land in a hospital.
These plans are less expensive than regular medical insurance because they are less robust. And new federal regulations would make it illegal for insurers to sell these plans as stand-alone insurance coverage. Instead, the Obama administration only wants to allow people to buy fixed-benefit plans as supplemental insurance to a more comprehensive medical plan.
So why cancel these plans? Well, for one thing, they don’t meet the coverage mandates of the ACA. For another, as Kliff reports, “consumer advocates” who know better than the consumers themselves want this provision enforced on fixed-benefit plans. That’s going to create yet another wave of consumers who will find out the hard way that the Lie of the Year for 2013 just keeps on chugging along:
“We’re going to have another public outcry about, ‘if you like your health plan, you can keep it,'” says Pat O’Neill, general counsel at US Health Group, which sells fixed-benefit plans. “Not as long as its fixed benefit, you can’t.”
Fixed-benefit plans don’t provide the kind of health-expense coverage most people are used to. Instead, they pay the patient directly a set amount when they use health care services. Some might, for example, pay out $100 for each day spent in the hospital or $50 for a trip to the doctor.
Unlike traditional health insurance, payouts from these plans aren’t tethered to which doctor a subscriber sees. There are no networks; patients can see whichever doctor they want. This is very different from traditional health insurance, where networks have been shrinking.
In other words, they cost less for consumers because they lower costs for risk pools, as well as make them more predictable. On the flip side, patients know what their reimbursements will be and can shop for providers to get them the best retail price. That can still leave people far short of the actual bill when dealing with serious illnesses, though, which is why this kind of plan makes a lot more sense for younger, healthier people who don’t necessarily need to spend thousands each year on health insurance premiums only to get a few hundred dollars in benefits — if that, considering how high deductibles have now risen.
The Obama administration wants to keep fixed-benefit plans available, but not eligible to meet the individual mandate as primary coverage. That would mean that people who have and like these plans now would have to pay premiums for both, which is perhaps an implicit admission that deductibles have made health insurance a bad bet for nearly everyone. The kind of consumers most likely to have fixed-benefit plans now, though, are the ones who were least likely to be able to afford the comprehensive insurance now required through ObamaCare.
In fact, the insurers tell Vox that enrollments in such plans have increased because of the escalating deductibles in ObamaCare plans, as well as the escalating premium prices. The number of people in these plans are at least in the six figures, if not in the millions, which means yet another major disruption for Americans — probably one that will hit lower-income earners disproportionately.
In the fall, parts of the employer mandate will come into play for larger firms that employ 100 or more people. The Obama administration postponed the mandate for smaller businesses of 50-100 employees in an attempt to avoid the consequences of the negative incentives on those firms. The Wall Street Journal reports today that attempt to dodge the predictable and rational choices being forced on employers hasn’t actually worked:
Some owners have begun to weigh strategies that might help them avoid complying with the law later on, such as opting out of providing the required coverage and instead paying a federal penalty of $2,000 for each full-time worker after the first 30.
Others have begun restructuring their businesses, reducing their employees’ hours, for example, or trimming their total head counts to fewer than 50 full-time workers.
“You’ve really got to run the numbers and find out what’s going to work best for your bottom line,” says Melinda Emerson, chief executive of Quintessence Group Inc., a small-business consulting firm in Philadelphia. “You don’t want to wait and then have to make a drastic cost increase to your customers or make a significant reduction to your labor force” when the law’s provisions take effect, she says. “You want to do that gradually.”
In January, nearly half of small-business owners with at least five employees, or 45% of those polled, said they had had to curb their hiring plans because of the health law, and almost a third—29%—said they had been forced to make staff cuts, according to a U.S. Bancorp survey of 3,173 owners with less than $10 million in annual revenue that will be released Thursday.
Businesses react to incentives as soon as they become known and reasonably fixed. So do consumers. And voters usually do as well, which is going to be bad news this fall when larger employers start scaling back coverages, increasing deductibles, or just bail out on providing health insurance at all — just as the next round of premium spikes hit.
Of course, we can expect plenty of “debate is over” declarations between now and the midterms, complete with quotes of statistics that have more in common with Pinocchio than reality. In my column for The Fiscal Times today, I point out that pattern from the Obama administration on ObamaCare — and other parts of the White House agenda, too:
This dishonesty with numbers continued last week as Obama himself claimed, “thirty-five percent of people who enrolled through the federal marketplace are under the age of 35.”Kessler again called foul, noting that not only did this distort the actual data from the White House data sheet (where the figure was actually 28 percent), but also ignored the fact that the Obama administration itself was on record that it needed the number to be 40 percent for the sake of the risk pools.
“By the time the dust settled, the original 40 percent goal was largely forgotten,” Kessler wrote, “as well as the fact that the final 28 percent figure was only slightly better than the 27 percent achieved in March.” …
The 77-cent myth has been repeatedly debunked, so much so that even Obama’s allies began objecting to the “revolting equal-pay demagoguery.” The National Republican Senatorial Committee used the White House formula on pay equity to note that Obama only pays women 88 cents for every dollar earned by men, and that Democrats running for the Senate perform far worse. Slate’s John Dickerson wondered whether lying was a deliberate strategy, akin to the axiom that there’s no such thing as bad publicity.
The federal government applies policies and exercises authority on a vast scale, far too broad to see the impact from one limited vantage point. Citizens need reliable metrics to judge policy and regulation on a rational basis. As government grows larger, though, the need to distort those rational measures has increased, especially in this administration – and that undermines confidence in authority in general and especially in big-government accountability.
If we can’t trust the big-government activists to tell us the truth, then there’s a 100 percent chance we can’t trust the institution they represent.
Hey, if you like your reality … you can keep your reality.