Free Markets, Free People
In the middle of last week the buzz was all about McDonalds possibly dropping its health care coverage for its employees because of a requirement called the “medical loss ratio” which mandates that insurance companies spend 80 to 85% of the premium on health care. Because of the McDonalds business model, that’s not possible.
Not to worry we’re told, the administration will work it out with McDonalds. No word on how those businesses in the same boat but that don’t enjoy the political heft of McDonalds will fare.
Earlier in the week we were alerted to the fact that Harvard Pilgrim Health Care will be dropping coverage on about 22,000 senior citizens in the Northeast. Again, thanks to ObamaCare, the promise that if you liked your insurance, “you could keep it” was clobbered by the reality of the law.
Last Friday, two new developments foretold by the critics came to pass.
The first is that the Principal Financial Group has made the decision to stop offering health care insurance as a direct result of the new law:
At the Principal Financial Group, the company’s decision reflected its assessment of its ability to compete in the environment created by the new law. “Now scale really matters,” said Daniel J. Houston, a senior executive at Principal, which is headquartered in Des Moines. “We don’t have a significant concentration in any one market.”
The decision will affect approximately 840,000 Americans. Principal’s insurance product was mostly offered through employers. It’s assessment of the law and what it would cost the company gave it no choice but to quite offering the product.
“If you like your insurance, you can keep it.”
Finally, another problem that critics of the sweeping health care law said was as inevitable as Principal’s decision. A report today says ObamaCare will worsen the doctor shortage:
The U.S. healthcare reform law will worsen a shortage of physicians as millions of newly insured patients seek care, the Association of American Medical Colleges said on Thursday.
The group’s Center for Workforce Studies released new estimates that showed shortages would be 50 percent worse in 2015 than forecast.
"While previous projections showed a baseline shortage of 39,600 doctors in 2015, current estimates bring that number closer to 63,000, with a worsening of shortages through 2025," the group said in a statement.
Legislation passed by Congress is always criticized by some faction or another. Rarely, however, is it ever 100% correct. But in the case of ObamaCare, that may change. Thus far almost every criticism and warning leveled by the opposition to this monstrosity has been shown to be true. Unfortunately we’re just now beginning to see its impact.
Stay tuned for more and more of the critics arguments to be proven right as we wend our way into this almighty mess created by Congress and the President. Today’s news is reason enough to jettison the entire mess as soon as the numbers line up correctly in Congress and the right person is in the White House. Hopefully we’ll only have to wait a couple of years for that all to be in place.
Because internal White House documents estimate that 51% of employers are likely to have to give up their current health care coverage due to ObamaCare. And that’s the conservative estimate. Worst case, the percentage goes to 69% of all employers and 80% of smaller firms.
Why? Well, ObamaCare states that existing insurance plans will be “granfathered in” (i.e. you can “keep your plan”) if they meet certain criteria. Main among them is employers may not make any changes to their existing insurance plan after March 23rd of this year until the ObamaCare implementation of this provision on Jan. 1st, 2014. Those changes an employer might make that would bar it from being grandfathered in include:
• It eliminates benefits related to diagnosis or treatment of a particular condition.
• It increases the percentage of a cost-sharing requirement (such as co-insurance) above its level as of March 23, 2010.
• It increases the fixed amount of cost-sharing such as deductibles or out-of-pocket limits by a total percentage measured from March 23, 2010, that is more than the sum of medical inflation plus 15 percentage points.
• It increases co-payments from March 23, 2010, by an amount that is the greater of: medical inflation plus 15 percentage points or medical inflation plus $5.
• The employer’s share of the premium decreases more than 5 percentage points below what the share was on March 23, 2010.
Most of us who have and have had insurance for any amount of time know that those are fairly routine changes driven by cost increases, benefit changes, and the like. However, any of those puts the plan outside the “grandfathered” status and the ObamaCare law requires the firm to either adopot a new plan or drop coverage and pay a penalty.
How likely is it employers won’t make those sorts of changes in the next 3 years? Not very:
Analyzing data on employer-provided plans from 2008 and 2009, the report stated: “Many employers who made changes between 2008 and 2009 that would have caused them to relinquish grandfather status did so based on exceeding one of the cost-sharing limits.”
In total, 66% of small businesses and 47% of large businesses made a change in their health care plans last year that would have forfeited their grandfathered status.
. Essentially government has taken away the ability of employers to manage their plans and will, by force of law, force any of them that do so within the criteria above to drop that plan for another or drop coverage altogether and pay a penalty.
The document in which this information was found is a draft HHS, Labor and IRS joint study of the impact of the bill. When asked about it, a White House spokesman said:
“This is a draft document, and we will be releasing the final regulation when it is complete. The president made a promise to the American people that if they liked their health care plan, they can keep it. The regulation, when finalized, will uphold that promise.”
That, of course, is the official talking point position, aka spin, or if you prefer, smoke and mirrors. The same official then conceded:
“It is difficult to predict how plans and employers will behave in the coming years, but if plans make changes that negatively impact consumers, then they will lose their grandfather status.”
That is the unspun or “it’s exactly as you said it” version. And of course the government will waste no time blaming the loss of the insurance “you like” on your employer.
Because, as we’ve witnessed for 16 months – that’s what this administration does best – blame-shifting. Simple fact: no law, no loss of the “insurance you like”.
End of story.
The Democrats are bound and determined to demonize the private health insurance industry and use that demonization as a basis for further control by government. Seizing on one insurance company’s rate increase in California as a reason for government intervention the House has passed a piece of legislation in the House to remove the industry’s anti-trust exemption. That’ll teach ‘em (and by the way, the vote was 406-19 so a whole heck of a lot of Republicans have bought into this again).
The White House, of course, backs the bill claiming:
The repeal of the antitrust exemption in the McCarran-Ferguson Act as it applies to the health insurance industry would give American families and businesses, big and small, more control over their own health care choices by promoting greater insurance competition.
But will it do what the White House says it will do. Most likely not:
The Congressional Budget Office concludes that repeal “would have no significant effects on either the federal budget or the premiums that private insurers charged for health insurance.” University of Pennsylvania economist Scott Harrington says, “This is just barking up the wrong tree…It might sound good, but I can think of very few things …that would be less consequential for consumers of health insurance.” Professor Austin Frakt of Boston University notes, “Repeal of the exemption is popular, but like a lot of things done in anger, it isn’t particularly wise and won’t be very effective.”
In essence this is a political temper tantrum of the type where bad law is usually made. It’s not clear that this particular law will have negative effect, but it is apparently not going to do what the White House claims. But it will accomplish one thing – increase the power of the federal government.
To understand that, a little background concerning the exemption might be informative:
In 1944, the Supreme Court overturned prior case law and held that the antitrust laws should apply to insurance.
Congress responded with the McCarran-Ferguson Act, which created a limited exemption from federal antitrust law for the “business of insurance.” To qualify for the exemption, each state had to engage in oversight of its insurance market. States responded by creating insurance commissioners and regulating insurer conduct.
The logic of the exemption was that prior to 1944, insurance had been regulated by the states anyway. No one felt any compelling need for intrusion by the federal government, or to allow private litigants to bring federal antitrust suits against insurers. In addition, insurers — particularly smaller insurers —can more accurately price risk if they can share information on their actuarial experience. The exemption created a safety zone for insurers to share information free from the threat of private antitrust suits.
McCarran-Ferguson still left insurers subject to state regulatory oversight and federal antitrust scrutiny for matters that don’t involve “the business of insurance.” Contrary to Sen. Reid’s claim, the federal government already scrutinizes mergers for anticompetitive consequences, and has brought several challenges.
The point of the exemption was to actually help make the industry more competitive. Sharing “actuarial experience” will now be an anti-trust violation. Additionally, private litigants will now be able to bring federal anti-trust suits against insurers – if this passes the Senate.
So when the White House continues, saying:
The repeal also will outlaw existing, anti-competitive health insurance practices like price fixing, bid rigging, and market allocation that drive up costs for all Americans. Health insurance reform should be built on a strong commitment to competition in all health care markets, including health insurance.
It’s describing what was formerly considered to be “the business of insurance.” Now it is “price fixing” and “bid rigging”. And most disingenuous of all is the claim it will spur competition.
So what will this do?
Insurers fear that losing the exemption would force them to deal with an additional (federal) regulator and expose them to private federal antitrust suits. State insurance commissioners also want to keep the exemption, because they prefer to remain the dominant regulator. On the other hand, federal antitrust authorities want to scrap the exemption because they don’t like exemptions — although they don’t seem to be claiming that repeal would result in greater competition.
Then the point of the bill is to increase what? Federal regulation. More federal control of the private health insurance industry that states have always regulated. This isn’t about competition, “bid rigging” or “price fixing”. This is about gathering more power at the federal level.
The excuse is this “greedy” insurance company in California (btw, the health insurance industry’s profit margin is 35th among all industries at 2.2%) that is raising premiums.
But what most don’t seem to understand is there are different types of greed. And one of them is a greed for power. That greed has been on display for years, and intensely so for the last year, within the federal government. This bill is nothing more than another manifestation of that greed.