Wednesday, January 11, 2017

Obamacare's death spiral in Georgia

The numbers are eye-popping:

67% -- Humana
51% -- Harken Health 
21% -- Blue Cross and Blue Shield
21% -- Alliant
18% -- Kaiser Permanente
14% -- Ambetter

Those were the rate increases approved by the state of Georgia for the 2017 Obamacare insurance plans from the remaining major insurers now that Aetna has pulled out to try to blackmail the government into approving its merger with Humana.
Of special note, Humana and Blue Cross. 
Humana's increase is, in part, the counterpart of Aetna's withdrawal but also, in my area, Humana offers the best insurance plans, with the most comprehensive coverage and highest-quality, least-restrictive networks of providers. And that is clearly proving to not be a viable business model.
Blue Cross is the largest and "default" provider as it has offers insurance across the entire state.
Why the huge increases? Undoubtedly, there is no small amount of price-gouging and profiteering going on, but mostly, the people getting insurance are sicker than anticipated.
Healthier people without insurance are rolling the dice, not buying insurance at all or dropping it once they've had their yearly exam and discovered there's nothing wrong with them. Similarly, couples planning to have children plan their insurance purchases accordingly.
You could, of course, find yourself without insurance and with a catastrophic illness mid-year, but even then there are ways to game the system, for example by moving to another county or another state (at least insofar as your mailing address goes), which will trigger a special enrollment period.
Why would people do this? Well, look at my case. I was 64 at the beginning of the year, and could have bought the absolutely worse individual Obamacare plan for about $525/month, or $6,300 a year, with a $6,700 deductible.
In other words, over a year's time I'd have to spend $13,000 BEFORE the very rock-bottom p-o-s Obamacare plan paid one penny.
If you're sick, of course, you don't buy the $6,300/year plan but the most comprehensive, most expensive plan on offer, in my area, probably one from Humana.
But that means terribly sick people tend to migrate towards Humana, raising its costs (and therefore its request for a huge jump in premiums).
Ambetter (aka Peach State) is asking for the lower increase because they're the ones that offer junk insurance, but even so, they're raising rates an order of magnitude above the overall rate of inflation.
The Republican critique of Obamacare is essentially correct: healthy people will figure out how to avoid the huge insurance premiums or simply choose to pay the (much lower) tax penalty (2% of income) for not having insurance. 
Sick people will sign up for insurance, driving rates ever higher. The higher the rates, the fewer people that are not as sick sign up the next year. That is the "death spiral" and even after only a couple of years, it is clearly evident.
This effect is especially noticeable in a Republican-dominated state like Georgia where there was no broadening of the layer of people covered by insurance through Medicaid.
A "public option" is no solution. It may well prove to be a political trap. To the degree it would be cheaper than private insurance, this choice would drive other insurers out of the market. But even then, the same logic that undermines private insurance would apply to the public option insurance offering. Especially as you get older, and the premiums get much more expensive, you try to figure out how to game the system so as not to buy insurance until you *really* need it. But when you do, you tend to get the "luxury" plan with the best and broadest network of providers and most comprehensive coverage.
The biggest problem in the United States is not the cost of medical insurance but the cost of medical care. We are spending one-sixth or more of GDP on medical care, about half again as much as the next closest country and almost twice as much as the average of the so-called "Western" democracies (Western Europe, USA, Canada, Japan, Australia and New Zealand). One obvious place to cut costs is in administration. For example, according to a good friend who is in a supervisory position in nursing in a hospital, they spend several dollars' worth of effort tracking who should be billed for each and every aspirin, each of which is worth less than one cent. The billing and payments system in health care includes not just the 20% overhead & profits included in insurance premiums, but the costs to doctors, hospitals, labs and so on of complying with the billing practices of each payer. The small (half dozen) group of doctors that my primary care physician belongs to has six people in administrative roles, three of them almost exclusively dedicated to billing and insurance. In addition to which, the nurses and doctors themselves spend a great deal of their time complying with insurance requirements.
A second place to cut costs is pharmaceuticals. First, all advertising and promotion of prescription drugs to the public at large should be banned, just like it is in all other industrialized countries (except New Zealand). 
Second, either there is marketplace price regulation through the existence of at least four or five providers of the same drug, OR there is government price regulation. And international pricing should be used as a yardstick. If the rule becomes, you cannot go over an additional 10% or 20% more than in Canada or Britain or the Western European average price, the costs of our prescription drugs would plummet. 

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