I pulled this mid-afternoon as I made a serious error of fact. I’m okay with making errors of analysis, but I want my signal to noise ratio to be fairly high, so I needed to pull the post for corrections. Original errors will be in the following post but struck through. Corrections took a while as I had an urgent tea party with Kid #1 and five stuffed animal friends and then I had to go to work.
Get ready to see a lot of stories like the following:
“My husband is already working a second full-time job and I occasionally tutor and pick up some extra students,” said Charlotte, a public school teacher who did not want to disclose her full name. “We are looking at a three-hundred dollar per month increase in premiums for blue choice.”
This is in
North South Carolina, and reading through the story, context is given and roughly a third of the projected cost increase is due to PPACA:
BlueChoice said in a statement “The Affordable Care Act is adding federal taxes and fees, and additional costs due to enrichment of benefits; it is one-third of what is causing this particular insurance product to increase so significantly.”
The argument that roughly a third of the cost increase is attributable to Obamacare regulations and benefit enrichment is extremely plausible. It is line with other companies and their public release of information. For instance UPS saw a 12% increase in the cost of self-insuring its employees. A third of that cost was due to PPACA.
UPS officials said that the company’s actuaries expected overall employee health costs to rise by about 12 percent next year—and that about a third of that increase was in reaction to Obamacare.
The big drivers of additional premium costs due to PPACA is the individual mandate pushing people into the risk pool who previously were running naked at companies that offered insurance, and adding adult children to the age of 26 to parental policies. The elimination of life time maximum coverage is also playing a part.
However, this is not the entire story. Below the fold will have some reasonably well informed but complete speculation.
More than 250,000 public and state employees who use BlueCross BlueShield’s’ BlueChoice heath insurance and state insurance plans were notified their premiums were going up.
BlueChoice, however, says the exact number of their customers who are seeing increases to their premiums is as low as 16,678.
What drives rate increases?
Money that goes into an insurance plan will leave the insurance plan in four manners. The largest category of expense is the medical expense ratio. This is the money that actually pays for care and it also pays for some disease and case management functions. PPACA requires insurers to pay out 85% of their premiums as medical expenses for large groups.
BCBS of North Carolina exceeds that in large groups at 87%. South Carolina BCBS has a very low medical loss ratio and has been issuing refunds for the past several years to come into PPACA compliance.
The next biggest cost center is administration of the plan. It pays for me, it pays for the member service reps, it pays for the actuaries, it pays for the claims adjusters, it pays for the hookers but not the blow for the senior leadership.
After that, capital expenditures and investment costs are neck and neck with retained earnings or profit (depending on whether the insurer is non-profit or for profit. These last three groups eat up the non medical expenses from premium income.
in the case of BCBS North Carolina 13% of premiums. BCBS of North Carolina is fairly lean as it is and it has been getting leaner.
On large groups, insurers want to cover their costs and make a small and reliable profit. They can do this because the law of large numbers allows the actuaries make very good projections across 16,000 people or 250,000 people that they can not guess over 12 people.
If we hold the non-medical loss ratio expenses constant, then I think an interesting spiral is going on. If the medical loss ratio is constant as well, then medical costs are increasing. Total medical costs increases for one of two reasons. The first is the cost of services have increased. The second is that more services are being used. It is highly likely that the 16,000 people are using more and more expensive services for some reason, and a $200 a month premium increase year over year covers that increase.
However, let me depart into pure speculation.
$200 a month increase is a very large increase for a large group that has enough members to absorb statistically unlikely events. So what could be going on?
My first thought is the risk pool is changing. It is plausible that there is a very nice plan that has been offered to employees for years. It could have had rich benefits with a good size portion of premiums covered by the state or local district. This worked as long as there was a steady stream of relatively young and healthy people spent a year or two in the very nice plan risk pool.
However, we know that since 2009, teaching in North Carolina has been made to be a relatively unattractive profession for recent college graduates. The age profile of North Carolina teachers has been getting older than anticipated. Since 2012, the state of North Carolina has been actively making teaching a job and profession suck. Pay raises have been effectively zero, class room sizes have increased, and the public rhetoric has been strong against teaching as a profession that deserves non-starvation wages. Teachers with options have been leaving the system, and young/healthy/cheap teachers are not coming in as fast as they have in the past.
Now if people with options are leaving, that means people without options are staying. One of the sources of non-options may be health. If a teacher is in the glide path to retirement and has significant health concerns or has a spouse with significant health concerns, staying on a state health insurance plan is attractive. If this is the case, then a “rich” benefit package may be creating an adverse selection death spiral as the risk pool last year was significantly sicker than projected because more older teachers who were not handcuffed by a health plan to their increasingly less rewarding job have left the pool.
And if this speculation is right, the $200 a month marginal cost increase due to utilization is occurring because services are being used more often and at a higher cost level.
Well there goes thinking North Carolina will go purple.
Very interesting analysis. I’d also like to point out that saying that 1/3 of the price change being due to the ACA itself ought to make people ask why the other 2/3rds are happening and whether that rise is necessary. I keep seeing these stories about how the ACA is forcing prices up but apparently 2/3 of the increase ought to be blamed on other things. Our focus should be on bringing down the 2/3 of the increase, not expecting no increase.
Rob in CT
Hmm. Our benefit info came out today. Premiums up 5%.
Like: how much of this would have risen, anyway?
Because that was part of the driver behind reform; the relentless cost increases.
Howard Beale IV
I just got word that thanks to the PPACA not only is our premiums will be going to go up 15%, but because we have a self-funded healthcare plan those who wish to opt-out and try their luck on the exchanges will be ineligible for the tax deduction.
pseudonymous in nc
South Carolina. So that sort of invalidates your speculation, I’m afraid, though your comments are accurate about NC.
The NC state plan’s open enrollment this month has three options: a grandfathered 70/30 PPO, and an ACA-compliant 80/20 PPO replacing an earlier 80/20, and an ACA-compliant CDHP that’s brand new. The latter two have “wellness activity” incentives. Premiums are up, but not massively. One side-effect of NC not participate in a state exchange or Medicaid expansion is that the BCBSNC behemoth is a monopoly provider in 61 of 100 counties, and a part of a duopoly in the other 31 (richer) counties.
SC has four providers.
Sister Rail Gun of Warm Humanitarianism
I wonder how much this is contributing to the increases.
The state employees’ health plan has been a mess for several years.
ETA: Ha. I missed that it’s in the asylum to the south. I figured the difference between what my materials say and the teacher’s situation was in terms for her buying into the plan. IOW, that her school board wasn’t covering the entire premium.
Thanks. I have been wondering about all the conservative whining about premiums going up. The Town Hall Harlot has been making a big deal of it without explaining here details. (As she is want to do).
Let me posit the next tea conspiracy theory will be that Exchange registrations have been deliberately sabotaged by Obama so that taxpayers could not find out what their costs would be during this present crises.
Also, I have to wonder how the increases now compare to increases prior to the exchanges going into effect. Are the premium increases generally smaller now than before? Or are they larger or unchanged? And, how many people are seeing their premiums going down, as opposed to going up?
@Howard Beale IV: Are you in Indiana?
Howard Beale IV
@Ash Can: Nope.
I’ll be able to validate once we hit open enrollment. but that’s what the rumor mill is squaking about the hike; but for sure the tax-deduction loss if you hit the exchanges is a real deal.
Anna in PDX
@aimai: That was my question. If the premiums are going up a sizeable amount, and 1/3 of that is because of the PPACA, what about the other 2/3? What’s driving that?
when a complaint comes from a state whose assholes have NOT been doing everything they can to sabotage Obamacare..
get back to me.
but, stories of people getting fucked over in states where their elected officials have decided to fuck them over with regards to Obamacare do not interest me.
sorry, but it’s just how I feel.
“urgent tea party”??
That’s just … unfortunate timing.
Wouldn’t it be more cost effective if everyone paid into a state plan, at the same rate? No if ands or but. Works in Canada. Given the American preferance for all things private enterprise, they could have one large company adminsiter it. It spreads out the money spent over a larger group.
Yes, if older, sick teachers stay on the plan, and the plan has to make money, then of course fees will go up. But it is still preferable to the alternative (no health care, and you die)
States that didn’t take the Medicaid expansion (thanks for the spite, NC!) are also predicted to have higher premiums. Possibly having to do with the fact that the uninsured STILL GO TO THE ED FOR TREATMENT WHICH THE INSURED HELP PAY FOR.
@e.a.f.: I have tried thinking about how you would achieve single payer in the US via a corporation, and the only thing I can come up with is a private company (basically operating at almost no profit), with a massive starting fund so that it can convince companies to convert to it. It’s that massive starting capital that kind of kills it.
How many other companies that contemplated dipping a toe into South Carolina’s marketplace did Blue Cross elbow out or otherwise covertly discourage?
@Howard Beale IV:
I’m not sure what you mean by “tax deduction.” Do you mean the subsidies, or are you talking about something different?
Here in California, the Giant Evil Corporation I work for is self-funded, but our plans stayed basically the same, payroll contribution-wise, and I thought the paperwork they sent me said that I WOULD be eligible for a subsidy if I took my chances on the exchanges.
Anna in PDX
Thanks for putting this back up with corrections! I hope the tea party went well. This topic is still sort of bewildering to me, I will have to read it over again when not so tired.
pseudonymous in nc
Honestly, I’d be fine with a system like that in many countries where there’s a primary and secondary insurer, and the primary covers the bulk of stuff with strong community rating and pooling and price controls, and there’s a competitive playground in the supplemental market. Funding? Capped payroll tax, plus premium. High floor, low ceiling. If Canada were to build a system from scratch, it might do that, but like the NHS in the UK, it’s in a position the system it originally went with is the system it’s got.
That’s a question I’d like to ask Richard: does being the state employees’ insurer (esp. in a relatively poor state like SC with above-average uninsured percentage) give the Blue Monster a competitive advantage in the exchanges? And if so, is that a problem? By my reckoning, those 250,000 state employees in SC are about 5% of the entire state population, covering a pretty broad risk pool. But it’s also presumably self-funded… so I’m interested in knowing whether it matters.
@Mnemosyne (iPhone): RIght, I’d guess that’s because California is participating in the Medicaid expansion? Teabagger-run states like SC did not, and it caused costs to go up in some situations, not sure if this is one of those.
If so, the people of South Carolina can thank Roberts, Scalia, Alito, Thomas, etc, and their own teabagger governors and legislaturs, for their high-ass premiums now.
Of course they’ll try to blame Obama and the Democrats, and will conveniently ignore that the PPACA specifically built in methods to prevent this cost increase from happening (if I understood the law correctly), but were struck down by the Republicans on the SCOTUS.
Sister Rail Gun of Warm Humanitarianism
BCBSNC is advertising the subsidies.
Saw an ad from them tonight that talked about monthly premiums after subsidy. Numbers like $40/month kept appearing on the TV screen.
I think I like this turn of events.
I’m not sure what state Howard Beale IV is in, and it was his comment about not being eligible for a “tax deduction” that confused me. He may not be able to get back tonight to clarify, though.
A much more likely explanation than the ludicrous assertion that the risk pool is changing is that the ACA uses government power to force everyone who makes more than 133% of the poverty level to buy private for-profit health insurance. The medical devicemakers, the hospitals, the doctors, the imaging clinics, and big pharma correctly view their new captive customers as an opportunity to rape and pillage, economically speaking, and charge all the market will bear. So medical costs skyrocket.
This was of course predictable and in fact I did predict it — I’ve been beating the table and yelling at the top of my voice about medical costs increasing in Massachusetts faster than the national average after the passage of a so-called “reform” plan upon which the ACA is modeled.
Seriously — what did you expect to happen?
Obama himself ridiculed the Romney non-solution during his 2008 campaign: “If mandates were the answer, we could solve homelessness by mandating that every homeless person buy a house.”
The ACA (like the Massachusetts non-reform) does nothing to reduce health care costs. And, as Ezra Klein and Arnold Relman and many others have proven, the fundamental problem with American health care is that it costs too much — not that Americans use too many health services.
Source: “The Disquieting Truth About Health Care,” Dr. Arnold Relman, The New York Review of Books, 30 September 2010.
One word Richard Mayhew absolutely positively refuses to use in his verbal calisthenics about America’s sky-high medical costs is the word “bribes.”
Take a look at the article “The Medical Professions’s Culture of Corruption, Part 1: Respected Physicians Call for End of Conflicts of Interest with the Drug Industry,” where you’ll find the following gem:
Another website put matters more bluntly:
Source: “JAMA says doctors should stop accepting bribes from drug companies,” Wednesday March 1, 2006.
Another phrase you’re never going to hear from Richard Mayhew in his elaborate and incoherent and highly improbable explanations for America’s stratospheric medical costs is the term “nondisclosure contract.”
Source: “Experts warn of health industry cartels’ power,” The San Francisco Chronicle, Sunday September 21, 2010.
We now pause to pre-emptively debunk the lies and smears which will be hurled at these sources. The first lie is the easiest to debunk: “These are fringe source, wacky alternative medicine journals! You can’t trust what they say!”
Riiiiiiiiiiiight. The Journal of the AMA is a fringe source. The San Francisco Chronicle is a wacky alternative medicine journal. Try again, smearbots: your lying technique needs work.
The next lie will assert that these are “special cases,” just “a few examples of isolated bad apples,” not characteristic of American health care.
Another obvious lie, easily disprove. Take a look at Ezra Klein’s article “21 graphs that show America’s health-care prices are ludicrous.” Then keep trying to tell us the flagrant lie that America’s health care costs are just “bad data” or “a few bad apples” or “a handful of greedy hospitals” or “a small group of greedy insurers.”
(A) I appreciate your desire to make sure the facts were straight!
(B) I hope the tea party went well, and the stuffed tiger on the left didn’t get shorted.
I got a letter from my insurer a few weeks back. If I continue with my current insurance, the premiums are actually going down by $20 a month and nothing else changes. Some plans on the exchange are even nicer, with roughly the same premium but a lower deductible and no co-pay or co-insurance. I am not sure why health care seems to be getting more affordable here. Competition?
@Pamoya: Where is here? I haven’t heard much about any sort of pricing up here in WA but I bet Regence is bending over backwards to maintain their huge market share. And GroupHealth is probably PISSED that they can’t cherry-pick their members as much now.
Another Holocene Human
Is this the Republican party’s Chicago?
Dixiecrats rent one political party asunder, and now they’re coming for the other one with their freaky backwoods evangelical fundamentalist* allies?
*-may, technically, profess any faith including Catholicism or Russian Orthodox or any flavor of j000000
@Pamoya: Same here. My state is using the exchanges, there are 11 competitors for my business, and the non-Blue system that was covering me last year wants badly to keep me in a grandfathered plan this coming year. Despite the fact that I became a cost center in 2011 and created a bunch of paper-pushing in 2012, they like me! so much they’re throwing in a premium comparable to what we’re paying now, before subsidies. Just to sweeten the pot they’re covering my gym membership ($62/mo) and 1 of 2 annual dental cleanings ($129 per family member).
We are totally jumping on this thing, then renewing our now-legally-honored vows for an insurable event to add Mrs Phoenix in December.
On Jan 1, everyone in our family will have health insurance. From the health plan’s perspective, our family = HOH 13 yr old in $3500 a year of hearing aids; 50 yr old leukemia survivor with asthma; 41 yr old ocular melanoma patient, 24 mo out from diagnosis (i.e. still in the expensive part of the followup curve where we learn whether I’m a long term cost center or hospice referral, as those are the two options from this disease; obv I like that first one, they prefer the second because it’s really cheap).
I wish it weren’t a miracle for my family that they are being forced to compete for our business. But it is. All y’all who have to pay a bit more to keep your coverage, sorry, but it was going to go up 2-7% this year regardless.
Another Holocene Human
@mclaren: wow, swing and a miss mclaren
You missed within the same body of research that FOOD is the most powerful reciprocating factor OF ALL and it is precisely this–FOOD–which drug reps give out to doctors and their staffs, whether it’s steak dinners during pharma talks or pizza at the office. FOOD. Very inexpensive, too, and unlikely to be stopped by mere disclosure or de minimus requirements. No, stopping that would take brains, it would take doctors taking their egos down a notch, it would take specific ethics regulations banning pharmaceuticals from offering free (or discounted) food to health care providers. Ever.
A few doctors who have been bought out outright by Big Pharma get all the press, but I’ve just laid out the real problem.
The other real problem is that full time wages don’t pay the rent. That’s what’s driving the high level of “lifestyle” disease which is treated by five-figure-annually drug regimens.
The prophet Nostradumbass
@Another Holocene Human: Another big swing and a miss in there is the assertion that if you make more than 133% of the poverty line you’re required to buy “for-profit health insurance”. Uh, no.
@The prophet Nostradumbass: My main insurer is a non-profit and has been even after affiliating with BC/BS. But mclaren is not known for her honest debate.
@Yatsuno: It would take you about 10 minutes to look up prices on the Washington exchange, with the subsidies they’re very low. I’m looking at about 1/2 of what I currently pay for cobra coverage. You can plug your own income level and see what you can come up with. It’s very easy.
Contract it all out to the Mayo Clinic.
Right, because that comes out of the medical expense bucket, not the salary budget :)
@Howard Beale IV:
I work for a company that self-insures and we use United Healthcare as the administrator. Haven’t seen the package yet for this year, but they held costs the same for 2013 by increasing the deductible. I know, it’s not keeping my cost the same… we maxed out our $3k deductible back in March.
I had a cow-orker try to tell me how the ACA was taking away his freedom because he had to pay for insurance. I asked him how my paying for the uninsured at the ED is freedom for me. He had no response to that.
My wife was in the ED a few weeks ago – migraine that got worse and worse and didn’t go away. After a CT scan and spinal tap (make sure it wasn’t meningitis) and an IV with some good meds, we were out about 12 hours later. Insurance paid around $7K for that visit. Our cost, $0 based on hitting the deductible mentioned earlier.
Another North Carolinian
Uh-oh. I think I’m screwed. 58, buy my own insurance for about $325/mo now. My wife is on the edge of retirement from the NC state system, so I am eligible to be added to her insurance (for $528/mo which is maybe a little better and costs about the same as a bronze plan here). After she retires and all the bonuses etc settle down, we’re looking at about $35k/year in income. Because I’m eligible for insurance under her plan, subsidies aren’t available for me to buy on the exchanges. Given all that, as near as I can tell, the ACA says her plan is not “affordable.” Does that mean subsidies ARE available? No, I think it gives me permission to go without insurance. So it’s that or pay ~16% of our income for similar coverage to what I have now. I’m not going to bet everything we have that I don’t get sick or injured. This is not working out particularly well for us, here, now. Hoping I’ve misunderstood something bigtime.
Insurers are using ACA as an excuse to do something they always want to do. I remember, before Obama was even elected, that Anthem in California announced increases of 39%. This is nothing more than the exceptionalistic greed of capitalism.
@Yatsuno: My cheaper premiums and I are in Minnesota, specifically the Twin Cities metro.
Another sign that health care competition might be helping prices here is that I’m seeing billboards for health insurance companies. Never noticed that before. Some of the billboards even tout specific plans.
@jenn: It is the sheep that scare me, those big eyes and the long bleating baaaah.. my dreams are haunted.
@Another North Carolinian:
You can always buy on the Exchange. The question is whether or not you get subsidies. If the insurance offered to your wife is deemed unaffordable for her, you are both subsidy eligible. If it is deemed affordable for a single person (the subscriber) but not the dependents, you are not eligible for the subsidies.
Snarki, child of Loki
Well, South Carolina is filthy with TeaTards spinning further and further away from reality, so the “mental health” expenses must be growing astronomically.
Another North Carolinian
@Richard Mayhew: Thanks for an expert view on this. Her premiums in retirement are zero or next door to it (it’s a good retirement plan), and I’m eligible to join her plan as a spouse (for a price, of course). Which is (I think) unfortunate for our finances as I think that disqualifies me from subsidies. It’s my insurance that’s about to become a problem; hers is just peachy. But rather than hijack B-J’s comments for a whiny consult, I think I’ll pester the college’s retirement / insurance reps and fling real numbers around. Also, it’s past time to call BCBSNC who tell me that my current plan is grandfathered, but so far they ain’t saying at what cost. Thanks for taking the time to comment here.
@Yatsuno: I got a come-on from Group Health this week. It basically said that I might be interested in their offerings if i was uninsured or did not like the insurance i was getting from my employer. So I’m not seeing cherry-picking.
BTW my company provides me very nice coverage for nothing from Regence. It costs a ton and is more insurance than I need. I’d like my company to spend less on health insurance premiums and more on salary. So as I transition further into part-time work (I lose coverage at work if i dip below 50%), i might look into the GH plans…and others as well as a bridge to medicare in a couple of years.
Another North Carolinian
@Another North Carolinian: Well; if anyone else is in my boat, “Grandfathering” my old plan evidently means I get to keep the old rates (plus the usual few % for surviving to another birthday) as well as the old coverage (I’m fond of it; it replaced a hip this year and the whole show cost me just exactly what I expected it to, a significant virtue in that it makes budgeting possible if not exactly easy). So our bizarre governor has not managed to murder my grandfather. Yet.