Tuesday, November 18, 2014

Insurers Gleefully Partner with Government for Mandated Taxpayer Premium and Claim Support Created by PPACA

Health Reform Cements Government-Insurer Complex

It should surprise nobody that alliances change so dramatically when the government starts handing out money.  As you read the below NY Times article, remember that many insurers invested a significant amount of money "buying in" to PPACA very early in the game.  They were promised heavily subsidized premiums as well as additional government checks to cover excessive claims from sick enrollees in the reinsurance and risk adjustment programs (Three Rs Program).

There is not a carrier on the planet that would voluntarily pass up those federally mandated cash "bailouts" before 2017 when that program is set to expire.  I've spoken to carriers who have told me that is the only reason they are "buying" business in the Exchanges and plan to completely reverse course once the federal spigot slows.

After 2017, some insurers will continue to support the law as they will have grown addicted the the government premium checks.  However, I suspect most of them will be ready to abandon the program due to the loss of the Three Rs, horrific levels of adverse selection, and the ever-mounting pile of regulatory burdens.

This is from Robert Pear writing at the New York Times:
... [S]ince the Affordable Care Act was enacted in 2010, the relationship between the Obama administration and insurers has evolved into a powerful, mutually beneficial partnership that has been a boon to the nation’s largest private health plans and led to a profitable surge in their Medicaid enrollment. 
The insurers in turn have provided crucial support to Mr. Obama in court battles over the health care law, including a case now before the Supreme Court challenging the federal subsidies paid to insurance companies on behalf of low- and moderate-income consumers. Last fall, a unit of one of the nation’s largest insurers, UnitedHealth Group, helped the administration repair the HealthCare.gov website after it crashed in the opening days of enrollment. 
“Insurers and the government have developed a symbiotic relationship, nurtured by tens of billions of dollars that flow from the federal Treasury to insurers each year,” said Michael F. Cannon, director of health policy studies at the libertarian Cato Institute. 
So much so, in fact, that insurers may soon be on a collision course with the Republican majority in the new Congress. Insurers, often aligned with Republicans in the past, have built their business plans around the law and will strenuously resist Republican efforts to dismantle it. Since Mr. Obama signed the law, share prices for four of the major insurance companies — Aetna, Cigna, Humana and UnitedHealth — have more than doubled, while the Standard & Poor’s 500-stock index has increased about 70 percent. 
“These companies all look at government programs as growth markets,” said Michael J. Tuffin, a former executive vice president of America’s Health Insurance Plans, the main lobby for the industry. “There will be nearly $2 trillion of subsidized coverage through insurance exchanges and Medicaid over the next 10 years. These are pragmatic companies. They will follow the customer.”
The relationship is expected only to deepen as the two sides grow more intertwined. ... 
“We are in this together,” Kevin J. Counihan, the chief executive of the federal insurance marketplace, told insurers at a recent conference in Washington. “You have been our partners,” and for that, he said, “we are very grateful.” 
Despite Mr. Obama’s denunciations of insurers in 2009, it became inevitable that they would have a central role in expanding coverage under the Affordable Care Act later that year when Congress ruled out a government-run health plan — the “public option.” But friction between insurers and the Obama administration continued into 2013 as the industry bristled at stringent rules imposed on carriers in the name of consumer protection. 
... [I]nsurers say government business is growing much faster than the market for commercial employer-sponsored coverage. The Congressional Budget Office estimates that 170 million people will have coverage through Medicare, Medicaid and the insurance exchanges by 2023, an increase of about 50 percent from 2013. By contrast, the number of people with employer-based coverage is expected to rise just 2 percent, to 159 million. ...
WellPoint is a case study in how companies have adapted to the law. 
In 2010, as Democrats attacked the insurance industry for what they said were its high prices and discriminatory practices, no company was more of a target than WellPoint, which had sought rate increases of up to 39 percent in California. But WellPoint, which operates Blue Cross and Blue Shield plans in a number of states, is now prospering. 
WellPoint announced recently that it had gained 751,000 subscribers through the health insurance exchanges and 699,000 new members through Medicaid. Since the end of 2013, WellPoint’s Medicaid enrollment has increased by 16 percent, to a total of five million. 
“Our government business is growing along multiple fronts” and accounted for about 45 percent of the company’s consolidated operating revenues, said Joseph R. Swedish, the chief executive of WellPoint. ...
Remember how much President Obama and the Democrats portrayed Obamacare as a broadside to the special interests, especially the health insurers?
Nancy Pelosi said of the insurance companies, "They are the villains in this." Obama pitched the bill as an improvement on a system that "works well for the insurance industry, but it doesn't always work well for you." ...
Well, clearly the story has changed, Tim writes as he quotes from the above NY Times article.
This dovetails with what I've been seeing for years. It was the health industry that has pushed states to expand Medicaid and build Obamacare exchanges — a loss for taxpayers. And here's an example that shows how the gains made by Obama and the insurers is a loss for patients: Obamacare's regulations create a moat around the existing insurers and protect them from competition.
Finally, below is a montage of what President Obama said when he was trying to pass PPACA versus what he says now about the law, his relationship with economist, Jonathan Gruber and a number of other topics.  This is from Dan Joseph at MRCTV:

*** Update: on Wednesday morning, November 19, Armstrong and Getty covered this story and revisited the prior post on this blog about PPACA's record low approval among Americans.  Here is a portion of that audio: