Critics of the Affordable Care Act have long predicted a “death spiral” of rapidly rising premiums, flight by healthier consumers, and retreat by insurers. We’ve already seen signs of that spiral, but in Tennessee, the spiral has advanced further. More than half of the state’s exchange customers will have to choose new plans for 2017, see their premiums go up by more than half from the previous year, and have fewer choices than ever. Two Tennessee-based leaders for the free-market group Americans for Prosperity assess the damage:
All told, more than 60% of our state’s ObamaCare consumers will lose their coverage heading into 2017. When they go in search of a replacement plan, they will confront two unfortunate realities: a dearth of options and skyrocketing costs.
Seventy-three out of Tennessee’s 95 counties will have only one insurer on the exchange, meaning no meaningful competition whatsoever. In regions where BlueCross BlueShield is pulling out, there will be two remaining major carriers, Cigna and Humana. The only large metro area with more options will be Chattanooga.
Then there are the premiums. State regulators have already approved the highest annual rise in the nation, a weighted average of nearly 56%, according to data at ACASignups.net. The rate increases authorized in late August include an average of 62% for BlueCross BlueShield, 46% for Cigna and 44% for Humana. The latter two companies could ask to revise their rates upward depending on how many former BlueCross consumers they pick up.
The bottom line is that Tennesseans on ObamaCare must choose from fewer, and increasingly unaffordable, options. Some exchange buyers, those covered by subsidies, will bear only part of this additional cost. For the roughly 30,000 Tennesseans who are ineligible for subsidies, the higher price will come completely out of their own pockets. Not to mention that all ObamaCare consumers face rising deductibles, which aren’t covered by subsidies and can range up to $6,850 for the most “affordable” family plans.
This isn’t even the endgame for Tennessee, but you can certainly see it from here. As choices narrow and prices go up, the incentives for healthier consumers to pay the tax penalty and stay out of the exchanges goes up. As they flee, the utilization curves get progressively worse for insurers, who then have to keep hiking premiums and deductibles in order to stay solvent. Eventually the market exhausts itself, a victim of the irrational government mandates that present unresolvable obstacles to healthy market operation.
How has the White House responded? With spite and vindictiveness. The Obama administration wants to cut off the completely rational escape of healthier consumers from the markets. They lost a court battle to require fixed-benefit plans to be sold only in conjunction with HHS-approved health insurance last July when an appeals court upheld a ruling that prioritized the 1996 statute authorizing the sale of such insurance over HHS regulations. The plans, which have no deductibles and do not interfere with retail pricing signals, have come under renewed attack by the Obama administration, which wants to force them to be just as irrational as ObamaCare in order to kill them:
A fixed indemnity plan pays out benefits based on the type of service provided and provides a flat amount no matter how much the service costs. For instance, it may pay a consumer $200 a day for a hospital visit or $100 for a doctor appointment.
Insurers say that the Obama administration is trying to change the definition of the plans that was written in the 1996 Health Insurance Portability and Accountability Act. The change would ensure that a fixed indemnity plan pays the same amount regardless of what service is being done. So a visit to the doctor would pay out the same amount as surgery.
The administration is trying to regulate the plans “out of existence” so that people will turn to Obamacare’s exchanges because it is the “only option remaining,” said Joel White, president of the Council for Affordable Health Coverage, an industry group fighting the proposed rule.
In my column for The Fiscal Times, I call this a deeply cynical and hypocritical move, one designed to punish consumers for acting rationally by avoiding what even Bill Clinton called “the craziest thing in the world“:
Not only is this irrational, but it also has no precedent in insurance or any other form of commerce. Rather than make fixed-benefit plans less confusing – the ostensible rationale for the Obama administration’s hostility toward such offerings – it makes them almost incomprehensible and completely unmanageable.
This move is a measure of the administration’s desperation with their signature legislative achievement. The White House wants to force consumers to abandon these plans so that they will have no choice but to get plans approved by bureaucrats in Washington DC, but especially those younger and healthier consumers who have every reason and financial incentive to use fixed-benefit plans. Forcing them to pay the higher premiums into the ACA risk pools with their low utilization rates might –might – slow down the rapid increases in premiums that have plagued Obamacare since its first year.
Congress approved these plans as solutions for consumers who don’t require comprehensive insurance but who do need a rational, low-cost backstop for a moderate level of use. That was a step in the right direction.The White House’s heavy-handed attempt to force everyone into their failing Obamacare system is several steps in the wrong direction. In fact, to quote Bill Clinton on the ACA and its irrational approach: “It’s not like life insurance, it’s not like casualty, it’s not like predicting floods –
In fact, to quote Bill Clinton on the ACA and its irrational approach: “It’s not like life insurance, it’s not like casualty, it’s not like predicting floods – it doesn’t work.”
Millions of people will find that out — again — when open enrollment begins on November 1. A week later, they have the opportunity to do something about it.
Addendum: It might be worse in Oklahoma:
Obamacare premiums will raise a staggering 76 percent on average for Oklahoma residents, and the state’s top insurance regulator says the state’s insurance exchange set up by the law is on “life support.”
Oklahoma’s Insurance Department said on Tuesday that increases in individual marketplace plans will range from 58 percent to 96 percent.
“These jaw-dropping increases make it clear that Oklahoma’s exchange is on life support,” said Insurance Commissioner John Doak, in a statement. “Health insurers are losing massive amounts of money. If they don’t raise rates they’ll go out of business. This system has been doomed from the beginning.”