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You are here: Home / Anderson On Health Insurance / Death spirals all around

Death spirals all around

by David Anderson|  December 8, 20166:04 am| 30 Comments

This post is in: Anderson On Health Insurance, C.R.E.A.M., All we want is life beyond the thunderdome, Bitter Despair is the New Black, Bring On The Meteor

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We’re going to see how the Republican Party can create a death spiral in the individual market in sixty days or less. They have a few choices:

US Individual Market Policies

First Philip Klein in the Washington Examiner wants to create one the old fashion way:

In contrast, Republicans could immediately freeze enrollment — allowing those who already have insurance through Obamacare to continue receiving subsidies, but preventing new enrollees from receiving any (though they’d still be free to purchase insurance on their own if they aren’t seeking subsidies). The current open enrollment period for privately-administered insurance ends on Jan. 31, so that would be a natural cutoff point.

Do you know who is extremely likely to buy community rated, guaranteed issue insurance with a subsidy? People who are very sick.
Do you know who is extremely unlikely to buy community rated, guaranteed issue insurance without a subsidy? People who have reason to believe they are very healthy.

This proposal will get the individual insurance market to look like the individual markets from the mid-90s in the non-subsidized, non-mandated guarantee issue states. Super high premiums and very sick risk pools. And since insurers set their 2017 rates with the assumption that subsidies are available for Special Enrollment Members, they will lose a lot of money.

Means #2 is just pulling the Cost Sharing Reduction subsidies. Insurers will flee the market. The American Academy of Actuaries have their hair on fire as they look at the impact of Congress not funding Cost Sharing Reduction subsidies after January 20th.

Eliminating CSR reimbursements could also cause insurers to withdraw from the market Premiums for 2017 have been finalized, and they assume that CSR reimbursements will be made. Without those reimbursements, premiums would have been higher for all individual market enrollees. Regardless of whether CSR reimbursements are made to insurers, the ACA requires insurers to provide cost-sharing subsidies. If those reimbursements are not made, premiums will be too low to cover the costs of care. This creates the potential for insurer losses and solvency concerns. Due to contract provisions, insurers would be permitted to withdraw from the market if CSR reimbursements are not made.

Splitting the a Replacement Bill into discrete and seperate chunks will also death spiral the market:

I am open to be proven wrong. But statements like this suggest that GOP senators underestimate the complexity of health policy. @sahilkapur pic.twitter.com/JvjyhHH44Z

— Margot Sanger-Katz (@sangerkatz) December 6, 2016

The issue is the popular stuff (guarantee issue, no pre-existing conditions, community rating etc) will get 85 votes in the Senate and 400 in the House. The unpopular stuff (participation enforcement mechanism, definitions, subsidy attachment formulas) won’t get a majority as no one really wants to vote for either a mandate tax OR continuous enrollment criteria without being able to point to a lot of other good stuff enabled by the bad stuff.

So again we’ll get the mid-90s markets of guarantee issue, community rating for only very sick people.

The Urban Institute models out the impact of Repeal without immediate replacmement and it is ugly:

New report: The implications of partial repeal of the #ACA through reconciliation https://t.co/u36qs9xfcj pic.twitter.com/5TKpwaNDe9

— Urban Institute (@urbaninstitute) December 7, 2016

It is mostly a cost shift with massive extraneous suffering.

And that is where I think we’re heading.

So if you have an Exchange plan, I would try to get any problems that I was putting off on taking care of taken care of by January 31, 2017. After that the insurance markets will most likely be extremely chaotic and volatile with a decent tail risk of all carriers pulling all products in a number of states by early spring.

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Reader Interactions

30Comments

  1. 1.

    rikyrah

    December 8, 2016 at 6:15 am

    Sigh
    Sigh
    Sigh

    I knew that it was bad, and I appreciate your posts, Mayhew, but I am back to the rage.???

  2. 2.

    MomSense

    December 8, 2016 at 6:21 am

    I finally felt some stability for a few years.

  3. 3.

    OzarkHillbilly

    December 8, 2016 at 6:24 am

    Blunt is not sharp.

  4. 4.

    mai naem mobile

    December 8, 2016 at 6:33 am

    I am going to get hurt if the AVA is repealed but i am finding the Republican reaction to catching the car fucking hilarious. I find the reaction of the Republican enablers hilarious. The hospitals,insurance cos and drug cos. I can’t wait to see the reaction of the few GOP governors who have the medicaid expansion and know the effect on their budgets and election prospects. Please proceed assholes.

  5. 5.

    satby

    December 8, 2016 at 6:34 am

    @MomSense: Me too. And because I have been pretty healthy, I haven’t needed to go to a doctor at all. Now if I try to get something in in the next 7-8 weeks, it’s going to be difficult. Many appointments for January are already filling up, and if they find an issue and then I lose insurance?

  6. 6.

    MomSense

    December 8, 2016 at 6:43 am

    @satby:

    I was wondering about that. If you don’t have a pre existing condition, would you want to find out now?

  7. 7.

    gene108

    December 8, 2016 at 6:47 am

    @mai naem mobile:

    I hope Democrats can take advantage of this in state elections. People losing insurance will get noticed. Even Bevin, in KY, who ran on killing KYNect could not really do away with expansion.

    Also, from 2009, I thought businesses hated regulatory uncertainty. They kept saying Democrats were hurting business by trying to make so many sweeping changes.

    What a crock. Republicans are looking to be the chaos engine and businesses are not saying a damn thing.

  8. 8.

    satby

    December 8, 2016 at 6:51 am

    @MomSense: Yeah, I don’t think so. Because though the “no pre-existing conditions” is popular with the public it’s not with the insurance companies. I don’t believe that it will survive.

  9. 9.

    OzarkHillbilly

    December 8, 2016 at 7:24 am

    @gene108:

    I thought businesses hated regulatory uncertainty.

    I always answered that with, “OK, you are certain to be fucked. Happy now?”

  10. 10.

    Soprano2

    December 8, 2016 at 7:50 am

    @OzarkHillbilly:

    Yes, he is. I still can’t believe he got re-elected. Ugh…… I’m not surprised he doesn’t understand how insurance works.

  11. 11.

    JMG

    December 8, 2016 at 7:51 am

    For family reasons, I spent much of last week visiting a top-shelf Sun Belt hospital. It is easy to see why health care is expensive, hospitals have to be the most labor-intensive businesses extant. Repealing ACA and replacing it with nothing, which is obviously what is going to happen, will lead to any number of hospital closings, mergers with layoffs, etc. In rural areas, this means the end of the area’s biggest employer.
    I’m going to go out on a limb here and say that won’t be popular. ACA was not popular legislation, but it was less unpopular than what existed before 2010 and what will come after 2017. There was almost unanimous discontent among stakeholders with the health care situation in the early 2000s.

  12. 12.

    Hal

    December 8, 2016 at 7:51 am

    Question: If Republicans were to keep the ban on preexisting conditions and keeping kids on parents insurance until the age 26, are insurance companies obligated to offer plans at the same rate as everyone else, or could they just insure someone with a preexisting condition but make the plan completely unaffordable?

  13. 13.

    daveNYC

    December 8, 2016 at 8:18 am

    @Hal: I think that depends on the details of what is left of the ACA. Isn’t it the community rating or something like that that limits how much policies can charge? You could keep that, and then insurance companies would be limited in what they could charge, but without the mandate that everyone buy insurance, they’d lose a chunk of the healthy people whose premiums subsidize the care of the sick ones, which would kill the insurance companies. OTOH, if you remove either the pre-existing condition or whatever the price limiting thing is, you’ll be killing the patients.

    The tricky bit isn’t destroying the ACA, it’s doing so in a way that can’t immediately be blamed on the Republicans. They do the right tweaking and they might actually be able to pitch the resulting hole in the ground as the natural end result of what was passed in 2008.

  14. 14.

    cmorenc

    December 8, 2016 at 8:37 am

    I am SO glad I am now on Medicare instead of on an ACA policy. OH, WAIT! CRAP!. Ryan and his henchmen are out to immediately put Medicare on the chopping block too – and give me a voucher to purchase a conventional health care policy (which will be caught in the death spiral Richard outlines above).

  15. 15.

    Barbara

    December 8, 2016 at 8:47 am

    “Republicans in Congress want to pay insurers not to provide insurance.” That, in a nutshell, is the Republican plan for repealing the ACA without sending the insurance industry into a tailspin. The plan for saving hospitals and physicians has not been worked out yet. The plan for killing American people is right on schedule.

  16. 16.

    Another Scott

    December 8, 2016 at 8:59 am

    @JMG: Dunno how much impact that will have in actually changing votes in the House and Senate.

    Virginia didn’t expand Medicaid. Rural hospitals were screaming bloody murder that they were going to get killed unless it was expanded. The Teabaggers didn’t care. There’s still no Medicaid expansion and it doesn’t look (thus far) that it is going to have any impact on control of the House of Delegates. Just yelling about the damage it would do to the health care system wasn’t enough.

    I’m not sure the approach to take nationally, but probably a kitchen-sink full of tools is needed:

    1) “I paid in to Medicare for decades, how dare you take it away from me!”
    2) “Coupons can’t replace Medicare!”
    3) “How is it fair for us to get Medicare and our kids not to have it when they need it?”
    4) “How is it fair to throw 20+M people off their insurance plans and replace them with nothing?”
    5) “Congress has great guaranteed health care, paid for with our taxes. They’re proposing to take our tax money and replace our guaranteed health care and replace it with coupons. Coupons aren’t guaranteed health care.”
    6) “When was the last time you bought anything of value with coupons like Green Stamps? You want to count on Green Stamps to pay for your cancer surgery?”
    7) “There is no crisis in Medicare. Medicare helps control rising costs in the rest of the medical system. Every system needs to be tweaked occasionally as circumstances change. Tweak it, don’t replace it with coupons.”
    8) “There’s a reason why we have Medicare. We already tried being without it – there were too many people dying early, too many people who couldn’t afford health care, and too many wasted lives. Don’t let them destroy our progress to reward corporations.”
    9) “Medicare and Social Security used to be called the 3rd Rail of politics. Meaning if you touch it, you’ll die. Let’s remind those who want to turn Medicare into coupons of that fact.”
    10) …

    Cheers,
    Scott.

  17. 17.

    Darkrose

    December 8, 2016 at 9:01 am

    Aside from my prescriptions, which I’ll be able to order once more before 1/30, I don’t immediately need to see my doctor. It’s the chronic conditions that are my problem.

  18. 18.

    Another Scott

    December 8, 2016 at 9:04 am

    @Another Scott: Oh, and I think one could use the same arguments for changes to the ACA – “Congress has great health care, I’m finally getting it too and they want to replace the system with Green Stamps…”

    Cheers,
    Scott.

  19. 19.

    azlib

    December 8, 2016 at 9:21 am

    On thing the Dems could do is propose an amendment to repeal Congress’s health insurance or put it on the same footing as the ACA repeal timeline. Won’t pass, but it will point out the hypocrisy of repeal.

    What infuriates me is the utter cluelessness of Republicans thinking the “market” will magically solve all the cost problems with healthcare. Medicare shows when you tax everyone to provide the income stream and keep the pool large, you can actually do decent cost containment.

    Seems to me the Republicans put themselves in this box with their relentless demonizing of the ACA. Repeal is apparently a great campaign slogan, but a terrible governing action. Except for the fact a lot of people will die if they go through with this action, my attitude is they break it, they own it. Dems if they are smart will do nothing to assist.

  20. 20.

    burnspbesq

    December 8, 2016 at 9:34 am

    California is a very large market and has Dem supermajorities in both houses of the Legislature. I suspect we will Do Something About This.

  21. 21.

    Barbara

    December 8, 2016 at 9:40 am

    @Another Scott: I think the issue of bailing out insurers while at the same time kicking people off insurance is a significant one. In 2008, when Congress was forced to face the fact that Medicare Advantage plans were actually causing Medicare costs to escalate (Congress set up the funding to pay plans substantially more than fee for service costs to enter rural areas), Senator John Cornyn was basically trying to keep the funding to insurers in place while at the same time imposing reductions on other providers, especially physicians. The Texas Medical Association began running advertisements in Texas telling people to call Cornyn and ask him why he thought insurers were more important to Medicare beneficiaries than their own doctors. After a week of this publicity blitz, Cornyn capitulated. So the moral of the story: the issue was made local by a trustworthy party and it was made personal to Cornyn, such that his constituents were apparently calling him non-stop. That’s how you do it.

  22. 22.

    Barbara

    December 8, 2016 at 9:44 am

    @azlib: Medicare is not doing decent cost containment. People are taking three times out of Medicare what they put into it. It’s like $120,000 in and $360,000 out. It’s not sustainable. However, the Obama administration has begun focusing on the issue and even though progress is incremental, it has been happening. Medicare has the power of the United States behind it to extract low costs from providers, but it does not engage in cost containment the way insurers do. It makes almost no effort to impose rational decision making on either providers or patients except at the bluntest level (“we never cover X” or “we are being defrauded by y”).

  23. 23.

    MomSense

    December 8, 2016 at 9:47 am

    @burnspbesq:

    How long will Cali’s water last if a bunch of displaced persons all move out there?

    Asking for a friend.

  24. 24.

    Barbara

    December 8, 2016 at 9:55 am

    @MomSense: Think about Washington, Oregon, Minnesota, Vermont, Massachusetts, and New York as alternatives. While they are not as large as California, they are still mostly progressive and they have more water. Maryland as well. Illinois and New Jersey have too many fiscal problems at this point in time to try anything truly progressive on health care.

  25. 25.

    Timurid

    December 8, 2016 at 10:10 am

    @MomSense:

    They’ll run out of jobs and housing long before they run out of water.

  26. 26.

    chopper

    December 8, 2016 at 11:15 am

    @Another Scott:

    How is it fair for us to get Medicare and our kids not to have it when they need it?

    this. i’m 40 and i’ve put more money into medicare already than my mom ever did. why does she get medicare and i don’t?

  27. 27.

    princess (now general) Leia

    December 8, 2016 at 1:07 pm

    @MomSense: Exactly what I am thinking!

  28. 28.

    azlib

    December 8, 2016 at 1:10 pm

    @Barbara:
    Medicare does much better than private insurers. I agree it has a way to go and the big thing it needs to do is say “no” to procedures which do not have significant benefits.

  29. 29.

    burnspbesq

    December 8, 2016 at 1:27 pm

    @MomSense:

    After secession, we may require visa applicants to document their ability to import their own water.

  30. 30.

    Karen

    December 8, 2016 at 1:36 pm

    What if you get Medicare through another insurance company? Is that Medicare advantage? I get Medicare part D and I think Medicare C through this insurance and I have the option to get Medicare Pius where I can go outside the network. I’ve got Rheumatoid Arthritis and other auto-immune issues so I’m keeping an eye out.

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