President Obama’s Monday Rose Garden speech replayed the same talking points he has been using for more than three years about Obamacare, while also offering old-tech suggestions, such as telephone hotlines and paper applications, to work around the law’s disastrous website.
But enrollment in Obamacare insurance ultimately does depend upon the website’s problems’ being fixed, because the information gathered via phone calls and paper applications must be entered into massive federal government databases to check eligibility. A delay of the individual tax penalties will be inevitable if the site isn’t fixed soon; you can’t penalize people if they can’t enroll.
But eventually, software can be fixed. Obamacare’s epic policy flaws can’t.
1. Deductible shock: When consumers finally do get onto the Healthcare.gov website, they are in for a new kind of sticker shock. Avik Roy of the Manhattan Institute has exposed the high cost of Obamacare premiums — the next price shock will be the whopping cost of the deductibles.
A Chicago Tribune analysis showed that 21 of the 22 lowest-priced plans offered for Cook County residents on the Illinois exchange have annual deductibles of more than $4,000 for an individual and $8,000 for family coverage. (Deductibles are the money consumers must spend on health care before most insurance benefits kick in.)
This policy design is a direct result of the law’s instructions about the percentage of average health costs that insurance must cover (60 percent for Bronze, up to 90 percent for Platinum plans). The result: Americans who choose the relatively lower monthly premiums, probably in part to avoid rate shock, will be faced with huge deductibles.
2. Will people pay? When people see they have to pay several hundred dollars a month for a plan with this huge deductible, will they pay the premiums? Many will find it hard to fit the cost into already-strained family budgets.
The Congressional Budget Office expects 7 million people to enroll in health insurance through the exchanges by 2014, and it needs about 2.7 million of them to be “young healthies” who will enroll, and pay premiums that are higher than their age or health status would warrant because of the law’s regulations. Enough Americans may enroll, but will they keep up with their premiums month after month? A key date will be April 1, when people who enroll by December will be dropped from their plans if they haven’t paid the premiums. If they default, they will be forced to pay the penalty.
3. Attracting the sickest: Sicker Americans, with high health costs, are the ones most determined to get through the Healthcare.gov website to enroll. If they dominate enrollment, premiums will have to rise in 2015, discouraging even more young healthies from applying in the future. The industry calls this a “death spiral.”
We’ve already seen a preview: People enrolled in the temporary high-risk pools created under the health law have cost an average of about $28,994 a year, so much more than expected that the pool ran out of money and closed enrollment almost a year early.
4. Less expensive plans vanish: Many people just want to stay with their current plan — as the president repeatedly promised they could. But Kaiser Health News reports that thousands of people are being notified their current insurance is being cancelled because the policies don’t comply with Obamacare’s benefit mandates. Just a sample:
Florida Blue, for example, is terminating about 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California has sent notices to 160,000 people — about half of its individual business in the state. Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual market customers, while Independence Blue Cross, the major insurer in Philadelphia, is dropping about 45 percent.
But the cancellation notices, which began arriving in August, have shocked many consumers in light of President Barack Obama’s promise that people could keep their plans if they liked them. “I don’t feel like I need to change, but I have to,” said Jeff Learned, a television editor in Los Angeles, who must find a new plan for his teenage daughter who has a health condition that has required multiple surgeries.
5. Families lose out: Obamacare’s subsidies will mean that the federal tax code’s existing marriage penalty will get much bigger for certain Americans, especially older, middle-income couples. Families will have to reckon with the fact that remaining married could cost them $10,000 a year or more because single people with lower incomes qualify for bigger subsidies.
6. Repaying subsidies: It’s going to be very important to accurately indicate annual income on one’s insurance application. Those who understate income, either because their situation changes or they reported inaccurate information, and therefore get a larger subsidy than they are entitled to will be required to repay the excess, possibly amounting to thousands of dollars.
7. Public health-care costs are going to explode. The Centers for Medicare and Medicaid Services, where actuaries make calculations about the trajectory of public health expenditures, have this to say:
In 2014 the implementation of provisions of the Affordable Care Act related to major coverage expansions is expected to accelerate health spending growth to 6.1 percent. Through the remainder of the projection period . . . this rate of growth is sustained as a result of improved economic conditions and an aging population’s increased demand for health care.
Following this 2014 cliff, they expect that — under optimistic assumptions about the law’s cost-saving provisions — Obamacare will modestly increase the rate of health-care cost inflation, which is set to wreck the federal budget already.
So much for the president’s promise to “bend the cost curve.” It’s bending the wrong way.
8. More jobs lost: The Obama administration delayed for a year reporting requirements for the mandate that companies provide health insurance for their employees. But with those provisions coming into effect in 2015, employers will continue to restructure their businesses to stay under 50 employees and push workers under 30 hours a week to avoid the hefty fines that will be used to enforce this regulation. Andrew Puzder, chief executive of CKE Restaurants, wrote in The Wall Street Journal that “the evidence that Obamacare is having a negative impact on hiring is unequivocal, abundant and consistent with common sense.” Job creation will continue to suffer.
9. Identity theft and fraud will explode: Tens of thousands of “navigators,” “assisters,” and other agents are being hired, generally by nonprofit organizations, to help people apply. They will be gathering personal information, such as one’s Social Security number, address, income, employer’s name and address, children’s names and birthdates, and health habits, to find out if you qualify for Obamacare subsidies. Others are going door-to-door to get people enrolled, and there is no easy way of determining if the person at your door is legitimate. While these aides do receive some training, they’re not professionally licensed and don’t go through the background checks required of insurance agents and brokers. The risks of potential identity theft are very real, and 13 attorneys general have expressed deep concerns about the security of the exchanges’ information. When this starts happening, it will generate a new wave of negative coverage of the law.
10. Federal-exchange subsidies eliminated? A number of lawsuits are making their way through the courts that could further challenge key aspects of the law. Suits in Oklahoma, the District of Columbia, Indiana, and Virginia federal courts are challenging the legality of distributing health-insurance subsidies through the exchanges created by the federal government, correctly contending that the law explicitly says the subsidies are available only to people enrolled in exchanges created by the states. That could mean that people in 34 states would not be eligible for Obamacare subsidies (even if they were to slog their way through the complex application process).
If you thought Healthcare.gov was bad, just wait.
— Grace-Marie Turner is president of the Galen Institute.