The editors of the Wall Street Journal, never great fans of the PPACA, take note of two metrics by which the healthcare reform law is not doing particularly well: new enrollments and loss ratio. New enrollments appear to be falling behind both HHS’s and CBO’s projections:
This month the Health and Human Services Department dramatically discounted its internal estimate of how many people will join the state insurance exchanges in 2016. There are about 9.1 million enrollees today, and the consensus estimate—by the Congressional Budget Office, the Medicare actuary and independent analysts like Rand Corp.—was that participation would surge to some 20 million. But HHS now expects enrollment to grow to between merely 9.4 million and 11.4 million.
Recruitment for 2015 is roughly 70% of the original projection, but ObamaCare will be running at less than half its goal in 2016. HHS believes some 19 million Americans earn too much for Medicaid but qualify for ObamaCare subsidies and haven’t signed up. Some 8.5 million of that 19 million purchase off-exchange private coverage with their own money, while the other 10.5 million are still uninsured. In other words, for every person who’s allowed to join and has, two people haven’t.
The PPACA limits the “loss ratio”, the proportion of premiums paid out for care, to a floor of not less than 85%. That does not appear to be something its authors need have worried about:
MLRs measure the share of premium revenue that flows to reimbursing medical claims. ObamaCare sets an MLR floor of 80% for patient care, with one-fifth left over for overhead like administration and profits, and the pre-ObamaCare 2010-13 historical trend for the individual market ranged from 79% to 86%.
The researchers found that in 2014—the first full year of claims experience in ObamaCare—average MLRs across all health plans sold on 16 state exchanges roamed from 90% to 99%. Average MLRs in 11 states climbed to 100% or more, reaching as high as 121% in Massachusetts. A business can’t stay solvent for long spending $1.21 for every $1 that comes in.
The 2014 MLRs are used to set rates for 2016 premiums, which are still under regulatory review. But the researchers estimate that to rebound to an MLR of 85%, premiums in the 11 money-losing states need to rise by 10% to 36% in the best estimate and 23% to 52% in the worst scenario. The familiar danger is that as rates rise, more people drop out, and thus rates must rise still higher, as the states that attempted ObamaCare-like regulatory schemes in the 1980s and 1990s discovered.
They propose that the law be amended to deal with the problems:
ObamaCare will almost inevitably be reopened in 2017, whoever wins the election. The good news is the emerging consensus among Republican candidates about a credible, pragmatic and optimistic alternative. Jeb Bush was the latest to release a plan two weeks ago—and this is a debate that has always deserved to be litigated at the presidential level to create a mandate for reform.
The basic approach is to deregulate insurance and medical practice while replacing ObamaCare’s complex subsidy schedule with a refundable tax credit for individuals who lack job-based coverage. Unchained from benefit and redistribution mandates, insurance products and prices would come to reflect what consumers want. The credit would be sufficient to buy at least coverage for catastrophic expenses if people get sick, and the trade-offs of such skinnier plans might look better to voters priced out of ObamaCare.
I think that’s going to prove more easily said than done. As I pointed out with boring repetitiveness back in 2009, it’s the first piece of major social legislation passed on a straight party line basis (insert boilerplate about the recalcitrance of Republicans here). Said another way it’s been a political football since before it was enacted into law. The acrimony of the debate has only risen over time.
I predict that Democrats will resist any Republican attempt at reforming the law and Republicans will similarly resist Democratic attempts at reforming it. The words “gutting”, “stonewalling”, and “hate poor people” come to mind.
In an earlier comment I mentioned the many weak assumptions made in the framing of the PPACA. One of the weakest was that incremental reform of the law was a viable plan.
I think I suggested some time back that they would eventually need a high risk pool for the previously uninsurable. It would be similar to flood insurance, and it would only cover specific illnesses or dollar amounts. Regular health insurance would be like homeowners insurance, and you could get riders for your health insurance to cover extras to your government high risk insurance.
Well, if the GOP wins and deregulates, I am making big bucks. Guess I can’t lose. Anyway, this is the same newspaper that predicted large increases in premiums the last 2-3 years. Didn’t happen. The CBO projections were made before they knew Medicaid would not be expanded in red states, and without knowing how much resistance there would be to the plan. Not that worried yet.
Steve
“I think I suggested some time back that they would eventually need a high risk pool for the previously uninsurable.”
Many states had these before. They didn’t work, which was one of the reasons we needed health care reform.
Steve
@steve
I doubt the states worked the way flood insurance works. I suspect it was more like high risk auto insurance.
Flood insurance is a government program, and it is nationwide. During the good years, the fund built up, and during the bad years, it is drawn down. The government will backstop any additional funds needed, and premiums will rise to help offset those funds.
To have the program totally funded through premiums would be cost prohibitive for most homeowners, and the government picks up the tab for a lot of flood damage. Republicans will howl. So what.
You keep saying that it is a small percentage that are the problem. If this is the case, this is what you need to do. Otherwise, there is no way to include them, have affordable premiums, and get acceptable care. I do not know what the details would be, but with flood insurance, there are flood maps with zones rated for floodability. Your premiums are based upon this. I would think you could devise something similar.
I realize that the government is going to be spending a lot of money every year on this program, but if you want universal coverage without bankrupting the insurance companies, you need to take the worst conditions off their coverage. (They still cover this group for everything else.) Philosophically, I do not like it, but in the real world, it would keep people from being told that their insurance has run out. Again, Republicans will howl. So what.
A medical loss ratio of 85% that doesn’t include an allowance of an extra 5% for profit and administrative expenses implies a return to the health insurance consumer of 80 cents for every healthcare insurance premium dollar spent.
The 15% between the 85% and the 100% is the allowance for administrative overhead and profit.