PA’s Insurance Hypocrisy

I saw a commercial during an episode of Jeopardy from the Pennsylvania Insurance Fraud Prevention Authority. It warns people against trying to buy car insurance after an accident — which is illegal and represents insurance fraud. Here is the ad:

The law makes perfect sense — being able to receive an insurance claim settlement without having paid into the system drives up costs for those who have insurance. It also creates incentives to go without insurance until something bad happens.

In a nutshell, higher costs for insurance combined with no penalties for lack of insurance results in more uninsured drivers.

Oddly enough, the same government that polices auto insurance fraud will soon be working to encourage people to buy health insurance after they get sick. The new federal health care law forces insurance companies to cover people who sign up only after becoming ill or injured, and even prevents them from charging these folks more. The result will be higher costs and more uninsured residents.

ObamaCare Is Already Creating More Uninsured Americans

I just received an e-mail from a correspondent who is planning to drop his health insurance. His reasoning goes like this:

I’ve decided to not renew my coverage when the bill comes in for the 4th quarter. I currently pay $320/mo for a $2500 deductible BCBS plan. I have an HSA and have saved up a fair amount of money in it. Pretty good deal. So why drop it? 

1. I have never even come close to meeting my deductible. Everything I have done since HSAs came in has been paid for from my HSA. In fact, never in my life have I ever incurred more than $2,500 in medical expenses in one year.  The odds are that will not change, even though I am older.
 
2. I expect a pretty substantial increase in my premiums, but it doesn’t really matter. I would make the same decision anyway.
 
3. If I guess wrong and my health does change, I will be able to sign up for the new federal risk pool – but ONLY after I have been uninsured for six months. I might as well get started on that six month qualifying period now while I am still healthy.
 
4. There is no penalty for doing this. The federal risk pool is not allowed to charge me more than standard rates.
 
5. Meanwhile I will be able to save $4,000 a year on insurance premiums, which is no small matter these days that I am semi-retired.
 
6. I will not be able to contribute additional money to my HSA, but my income is low enough now that there is virtually no tax advantage to making an HSA contribution. My main tax issue today is the payroll tax, and the HSA has no effect on that.
 
So, I am joining the ranks of the uninsured. Thank you, Mr. Obama.

I can’t really criticize his plan.  He understands ObamaCare all too well.

Let the Price Controls Commence

Among other things, the federal health care “reform” law boosts the role of price controls over health insurance. Price controls of X (or Y, or Z) by their nature reduce the supply of X, but no matter. And no matter that if insurance premiums are too high, it’s due in large measure to government regulations. The cure for bad regulation? More regulation!

Under Obamacare, the U.S. government adds to deficit spending by giving out piles of money to state governments, so they can “better” control “unreasonable” insurance costs. The first piles of money have been distributed lately, which has resulted in a shower of news from across the states, including:

Alabama
Arizona
California
Maine
Montana
Nebraska
New Mexico
North Dakota
Ohio
Oregon
South Dakota
Utah

Did Judge Tauro Kill ObamaCare?

On July 8, a federal judge in Boston, Joseph Tauro, took it upon himself to find the Defense of Marriage Act (DOMA) unconstitutional. His decisions in two cases might have unwittingly facilitated the legal challenges to Obamacare.

Read entire article here.

States Are Right To Shun ObamaCare’s High-Risk Pools

One of ObamaCare’s first major cash flows was scheduled to start on July 1: $5 billion to bail out states’ so-called “high-risk pools” until January 1, 2014. 22 states want nothing to do with it. It’s a drastic choice for states with broken budgets. Nevertheless, it’s the right choice.

Read the full article here.

Victims of ObamaCare Emerge, as Insurer Closes Doors

Remember the president’s promise, “if you like your plan, you can keep it?” Somebody needs to do a mashup of Barack Obama and Joe Isuzu.

The Washington Times puts a face on the cost of nationalizing health care regulation by talking about Acorn Signs, a Virginia-based company whose insurer will be closing its doors due to the new regulations. Some provisions of the “patient protection” act effectively make some insurance plans, especially those with low premiums, illegal.

“Workers will wind up paying more for insurance – assuming their employers even can afford to continue providing insurance at the rates the big insurers charge. Even non-customers pay a price indirectly. With one of Virginia’s most aggressive and innovative insurers knocked out of action, the dominant players don’t have to compete as hard for their business.”

RomneyCare vs. ObamaCare: Adverse Selection

The Wall Street Journal’s Joseph Rago recently wrote an indictment of the Massachusetts health reform, generally viewed as the model for recently enacted federal health reform. One of the criticisms he notes is that people in Massachusetts who do not have employer-based benefits can wait until after they have become sick to apply for health insurance via the Commonwealth Connector. This is because the fine levied by the state for not having health insurance is much less than actuarially fair premiums.

Many fear that this will also happen under ObamaCare. As of 2016, unless a person has qualifying coverage from his employer or through an exchange, the IRS will levy a penalty of the greater of $695 or 2.5% of a taxpayer’s household income. On its own, this would hardly seem enough to dissuade people from waiting until after they have become sick to buy increasingly expensive health insurance. Furthermore, people with incomes under 133 percent of the Federal Poverty Line (FPL) will now be eligible for Medicaid, which means they will be exempted from the penalty, as will anyone whose health insurance costs over 8 percent of his gross income.

Responding to Mr. Rago, Professor Jonathan Gruber of MIT asserted that ObamaCare will not suffer the same adverse selection as RomneyCare, because ObamaCare limits people who wish to apply for coverage in an exchange to an annual open-enrollment period. This is true: The U.S. Secretary of Health & Human Services has the authority to define annual open enrollment periods, as well as special enrollment periods similar to those that currently exist under the Health Insurance Portability and Accountability Act (HIPAA)]. Furthermore, people with incomes up to 400 percent of the federal poverty level are eligible for refundable tax credits to subsidize their premiums.

John Goodman has concluded that households with incomes up to $80,000 will receive bigger subsidies in the exchanges than under employer–based health benefits. So, the combination of limited open enrollment and huge subsidies for buying health insurance via an exchange surely mitigates adverse selection.

On the other hand, ObamaCare will give a three-month grace period before levying fines on people without coverage. If the affected persons find the open enrollment too difficult to navigate, political pressure may force the Secretary to make the window very wide. (This is the case in Medicare Advantage. Although the open-enrollment period for the following year’s coverage is from November 15 to the end of the current year, beneficiaries have the free option of switching again until March 31 of the new year.) If this is what ObamaCare’s open enrollment will look like, every individual will have up to six and a half months to gain some benefit from adverse selection: Either waiting to buy health insurance or switching to a richer plan after becoming sick.

Boston Globe: New Law Lets People Game the System

Many people, myself included, warned that some provisions of ObamaCare would let people do in health insurance what we never let them do in homeowners’ insurance: Shop for and buy at low rates a policy after the need for it was obvious. It would be, in other words, like waiting until your house caught on fire before you bought property insurance.

Today, I bring you the first paragraph of a sentence from the Boston Globe, which is published in Massachusetts, whose law (RomneyCare) inspired ObamaCare:

The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

Being able to say, “See, I told you so” is of little consolation, since that logic is going to be played out nationwide.

If you’re looking for the report itself, I believe you’ll find it here (PDF). Notice that the URL of the link calls it the “adverse selection report.”

NoDak Insurance Commissioner: People Want Basic Policies

The North Dakota Insurance Department recently conducted some Internet-based focus groups with residents across the state, asking them to design an insurance plan for everyone in the state. Not surprisingly, not one of the 17 focus groups included “quality of life” coverage. Such coverage includes infertility, impotence, and hair loss.

According to a report on mandated benefits issued by CAHI in 2009, 15 states required some insurance plans to cover in-vitro fertilization, 9 required “other infertility” treatment, 11 required coverage for hair prothesis (not necessarily the same as hair loss),

Obama Puts Slow Squeeze on Insurers

ObamaCare isn’t, strictly speaking, a government takeover of health care–at least not immediately. But the signs for the long-term success of health care outside the control of government aren’t good.

For example, exercising freedom in health care means having a number of insurance companies to choose from, offering a variety of policies (some high-deductible, some low-deductible, PPOs, HMOs, fee-for-service, etc.) But the new law attacks insurers in so many ways, by micromanaging what can and can’t be included in a policy.

Now comes a more direct path, as President Obama suggests that price controls on insurance–already in place to some extent–may be becoming stronger. Here’s the word from the DC Caller:

In a shot across the bow to the insurance industry Tuesday, President Obama warned companies facing higher costs in part because of his health care law not to hike their prices, saying “we’ll be watching closely.”

Backing up his rhetoric behind the scenes, the Department of Health and Human Services (HHS) is quietly working on a new regulation to determine when insurance price increases are “unreasonable” and potentially prohibited by law.

As a friend of mine put it, Barack Obama channels Richard Nixon.