Not Everyone signing up for Obamacare is paying for Obamacare

Posted by PITHOCRATES - April 6th, 2014

Week in Review

The big question in the Obamacare signups recently released by the Obama administration is this.  How many people have actually sent a payment into their insurance company?  For signing up for health insurance doesn’t mean you have health insurance.  You have to pay for it first.  With ‘first’ being key.  As anyone who has paid a health insurance premium knows.  You pay for next month’s health insurance this month.  That is, it’s cash before delivery.  As the insurance companies need the cash before they can pay any benefits.  This is the way all insurance has worked since the dawn of insurance.  First money goes into an insurance pool.  Then said insurance pool pays insurance claims.  The money must come first.  There’s just no other way for it to work.

So, is the money coming first with Obamacare?  As it turns out, the majority of it is.  At least, according to a leading federation of Blue Cross and Blue Shield health plans (see Blue Cross group sees Obamacare premium payments at 80-85 percent by David Morgan posted 4/2/2014 on Reuters).

A leading federation of Blue Cross and Blue Shield health plans said on Wednesday that it is receiving premium payments from 80 to 85 percent of its new Obamacare health insurance customers.

The estimate, released by the Chicago-based Blue Cross Blue Shield Association, reflects enrollment activity among 35 Blue Cross Blue Shield plans in 47 of the 50 states, including plans sold by WellPoint Inc, from October 1 through February 1…

If the Blue Cross Blue Shield payment rates held true for enrollment across the board, between 5.7 million and 6 million of the 7.1 million would actually be enrolled in coverage.

So that means the Obama administration is overstating the enrollment numbers from 18.3% to 24.6%.  And between 1.1 million and 1.4 million haven’t paid for the Obamacare they signed up for.  Of course, that’s assuming that the 7.1 million were all new Obamacare enrollees into private health insurance plans.  And not those who signed up for Medicaid who will never write a check for their coverage.  Which will not help the insurance companies pay for the expanded benefits mandated by Obamacare.

So the Obama administration’s numbers are suspect to say the least.  As is the continued existence of the private insurers.  For if they don’t get 7+ million signing up for Obamacare (with a heavy concentration of the young and healthy who will file few claims) the cost of caring for the old and sick will bankrupt them.  Of course if this was the plan all along the Obama administration could at least claim something in Obamacare was working according to plan.

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Cash Piñatas and Obamacare

Posted by PITHOCRATES - October 28th, 2013

Economics 101

Health Insurance provides Financial Protection from Risk unlike Obamacare

A lot of people are talking about Obamacare.  The poor website launch.  People losing the insurance policies and doctors they liked and wanted to keep.  Higher insurance premiums.  And higher deductibles.  All of which conflicts with what President Obama had promised.

So there are problems.  And people are becoming less enamored with Obamacare now that it is personally touching their lives.  But there is a bigger problem.  Obamacare isn’t insurance.  And that’s what a lot of people don’t even understand.  Even some insurance agents.  Who may only see those higher premium prices and think Obamacare is a one-way ticket to easy street.  But if you understand insurance, economics and history you’ll see it’s not.  So what is insurance?  Here’s a definition from Investopedia:  

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

The key word in this definition is ‘risk’.  Insurance provides financial protection from risk.  Obamacare doesn’t do that.  It forces people to pay for things they have no risk exposure to.  For example, an older couple with adult children still needs pediatric coverage on their policy.  Which just increases the cost of their insurance.  While providing no financial protection from this particular risk.  Sick children.

Premiums and Deductibles are Soaring to herd the Young and Healthy into the Government Exchanges

So why is Obamacare raising health insurance premiums?  To pay for people who don’t pay into the insurance pool.  The poor.  And the very sick who can’t afford health care let alone health insurance.  The higher premiums people are paying go to them.  This is a cost transfer.  From a higher income group to a lower income group.  Or in other words, a redistribution of wealth.  From those according to ability to those according to need.

So the president wasn’t exactly telling the truth about keeping your insurance and doctor if you wanted to.  This can’t happen under Obamacare.  Because to redistribute wealth you need to take it away from someone.  And guess who that someone must be to make Obamacare work?  The young and healthy who are buying health insurance.  Those people who pay into the insurance pool for financial protection from risk.  But who are generally healthy and receive no benefits from the insurance pool.  Who President Obama and the Democrats look at as cash piñatas.  Which they can’t whack open if they have private insurance policies.

This is why these people must lose the policies and doctors they like.  And why premiums and deductibles are soaring.  To herd these cash piñatas into the government exchanges.  Where the government can collect their insurance premiums.  And redistribute it.  While those high deductibles keep those premiums going out as benefits to the cash piñatas to a minimum.

The Young and Healthy choosing Medicaid over Obamacare

Of course, there is a flaw in this grand strategy.  Arrogance.  The government believing that young and healthy people will just stand there while the government whacks them open to get their cash.  Which they aren’t.  And it’s just not because the Obamacare website is a disaster.  It’s because a lot of these people are choosing Medicaid.  The health care program for the poor.

Medicaid enrollments are far outpacing Obamacare enrollments.  By a huge number.  Which is a big problem.  Because Medicaid enrollees don’t pay insurance premiums.  And they are not subject to deductibles.  Because they are poor and can’t afford to pay anything out of pocket.  So instead of adding to the insurance pool these cash piñatas will take from the pool.  And that won’t change when they fix the broken website.  Which is why it is a fatal flaw.

Compounding this problem is the President’s economic policies that have given us the worst economic recovery since that following the Great Depression.  Since President Obama assumed office his policies have forced approximately 10 million people from the labor force.  Unemployed, it is unlikely that they will be able to afford health insurance.  And probably will enroll in Medicaid, too.  If they haven’t already.  So Obamacare isn’t going to work as-is.  The question is, what will they do next?  Other than blame the greedy insurance companies?  Whose cooperation in this redistribution of wealth scheme will lead to their own demise.  For as more and more people can’t afford those expensive insurance policies they’ll either turn to Medicaid.  Or demand national health care.  Which people don’t need insurance companies to have.

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Health Insurance Premiums and Deductibles

Posted by PITHOCRATES - October 21st, 2013

Economics 101

The Requirements of Obamacare force Insurers to Cancel their Less Costly Policies

We buy health insurance to protect our financial assets in case of a catastrophic health problem.  Such as a bad accident requiring costly hospitalization and rehabilitation.  Or a costly disease.  Like cancer or a heart attack.  As bad as those things are the good news is that most people don’t suffer from these health problems.  Which allows us to use insurance to protect our financial assets.

People in an insurance pool pay a small premium to pay for a potential loss.  Such as a catastrophic health problem.  Because not everyone in the pool will suffer from a catastrophic health problem the insurance premium can be much smaller than the cost of medical care for the few that do.  A premium small enough that individuals and families can budget this amount and rest comfortably knowing that a catastrophic health problem won’t cost them their home, their kids’ college fund, their retirement savings, etc.  A system that has worked well.  Until we started using insurance to pay for everything under the sun.  Which has caused insurance premiums to soar.  And Obamacare just doubles down on this trend and turns insurance into welfare.

Premiums before and after Obamacare R1

Obamacare raises the coverage requirements for all insurance policies.  To a ridiculous extent.  For example, couples whose children are grown adults still need pediatric coverage.  Obamacare requires a lot of standard coverage like this that is virtually impossible for some people to use.  Thus greatly raising insurance premiums.  In our example our fictitious insurance pool contains 10,000 individuals and 10,000 families.  To include everything the Obama administration wants to include raises individual premiums 240%.  And family premiums 257%.  Which causes a problem with President Obama’s promise to the American people.  That thing about keeping your current insurance if you like your current insurance.  As insurers have no choice but to cancel their less costly policies.

The Affordable Care Act makes Premiums Unaffordable by Requiring Insurers to Cover More

That promise was, of course, a lie.  Because you can’t buy more for less money.  You just can’t get more for less.  So if the policies cover more they cost more.  If they cover a lot more they cost a lot more.  Well, that creates a bit of a problem for the optics of the Affordable Care Act.  When you make the existing health care system ‘affordable’ you really can’t raise the cost of insurance by over 200%.  Even if you are giving more insurance coverage.  Because if it’s just too expensive people won’t have the money available to pay for it.  So they brought the premiums down from what they would need to be to do what they want them to do.  To something a little more affordable.  Like this.

Premiums before and after Obamacare Adjusted R1

Which brings the increases to 80% for an individual policy.  And 129% for a family policy.  These are still steep price hikes.  But with the more these policies cover and subsidies for those who need them they are an easier sell.  Of course, there is another problem.  Selling these policies at these lower prices won’t bring as much money into the insurance pool.  Which will limit what this pool can pay for.  Leading to rationing.  And longer waiting times.  As health care providers will have to tell patients ‘no’ because the insurer denied the treatment or procedure.  Which sort of defeats the purpose of Obamacare.  Affordable health care for everyone.

So what to do?  To cover everything under the sun requires hefty premiums.  But hefty premiums are not affordable.  There appears to be a paradox here.  And that’s because there is.  Because you can’t get more for less.  But Obamacare has a workaround for this paradox.  At least for the optics of Obamacare.

The Ultimate Goal of Obamacare may be to Fail to Clear the Way for Single-Payer National Health Care

There’s another part of health insurance.  The deductible.  The out-of-pocket portion of our health care expenses.  When insurance was truly insurance we paid for our routine health care expenses out-of-pocket.  We took our kids to the doctor for their vaccinations and the doctor billed us.  Then we paid the bill.  Using our insurance only for those catastrophic health problems that we couldn’t plan for.  Or budget for.  And it’s the deductible that makes Obamacare look more affordable than it is.  By making their deductible far exceed their premium.  So a lot of people pay into the pool but never collect from it.

Claims Individual and Family R1

In this example we look at some claims.  The money the insurance pool pays out.  The above numbers are net of the deductible.  So the annual claim per individual and family is money from the pool paying their bills.  Most people get little.  While the breakout with the fewest members have a catastrophic health care problem.  The total claims for this pool for both individuals and families come to $159,750,000.  While premiums total only $123 million at our adjusted premiums.  That’s a $36,750,000 shortfall.  Well, insurers can’t pay out more than they collect so they need to find another $36 million or so without making this affordable health insurance appear unaffordable.  So where can we find another $36 million?

By raising the deductible, of course.  If we raise the deductible for both individuals and families to $7,500 those claims at $7,500 or less are out-of-pocket.  They don’t come from the insurance pool.  If we add up the claims that become out-of-pocket they total $57,250,000.  More than enough to cover the shortfall.  As well as provide subsidies for the poor.  And all those new government jobs to run Obamacare.  With these higher deductibles AND higher premiums people will be paying far more for their health care than they did before.  Perhaps more than they can afford.  Thus making the Affordable Care Act unaffordable.  Which may be the ultimate goal of Obamacare.  To fail.  So the government can blame greedy insurers who the people will hate even more.  And setting the stage to get the people to acquiesce to a single-payer system.  Or national health care.  Which the left wanted all along.

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Insurance Pools, Premiums and Obamacare

Posted by PITHOCRATES - October 7th, 2013

Economics 101

For Health Insurance to work More People need to Pay Into the Pool than Collect from the Pool

It’s here.  Obamacare.  Which promises to give more people health insurance.  With health insurance policies paying for more than policies do now.  More tests.  More procedures.  Even birth control.  Obamacare will also provide coverage for people with preexisting conditions.  Remove caps on benefits and forbid insurance companies from cancelling insurance coverage.  Forcing insurance companies to give policy holders a lot more benefits.  All while reducing insurance premiums.  Which seems to defy common sense.  Getting more while paying less.  To better understand this let’s look at a sample insurance pool.

Obamacare Impact on Insurance Premiums - Before

Insurance pools are larger than 10 policy holders but this will suffice for this example.  In this example there are 5 individual policy holders with a monthly insurance premium averaging $118.  There are 4 family policies with a monthly insurance premium averaging $400.  And one policy holder with a chronic health condition who pays a premium that people with preexisting conditions pay.  In this example paying $1,200 a month.  It’s that high because this person requires medical care in excess of $30,000 each year.  The average of all premiums is $339.

Now, this is how insurance works.  There is a pool.  People in the pool each pay a small premium compared to the medical costs they MIGHT incur.  The word ‘MIGHT’ is key here.  For insurance to work more people need to pay into the pool than collect from the pool.  This allows the pool to pay the few who have a large unexpected medical expense.  If the insurance company’s actuaries get their premiums right the total of premiums paid into the pool approximately equals the total of expenses paid by the pool.  So premiums in basically equal payments out.  Premiums in can exceed payments out.  But payments out cannot exceed premiums in or else the insurance company will go bankrupt.

Obamacare will Increase the Price of Health Insurance for Men because Insurers can’t Charge more for Women

Obamacare’s individual mandate is an attempt to make sure premiums in exceed payments out.  By forcing more young and healthy people who will not use health insurance pay into the pool.  Young and healthy, see, is the key.  Because that’s money they can spend on other people.  So the young and healthy are the answer to the high cost of the old and sick.  So Obamacare, then, is basically a cost transfer from the old and sick to the young and healthy.  And it will work to lower the cost of health insurance.  If the young and healthy buy health insurance and never use it.

Obamacare Impact on Insurance Premiums - Adding Young and Healthy

If we add 12 young and healthy people to the pool who will not use the insurance the premiums become more affordable.  When there were only 10 people in the pool the total premiums added up to $3,390.  By adding these 12 young and healthy to the pool the total premiums paid in increases to $4,000.  An increase of 26.3%.  So if we discount all premiums by 26.9% we still get a total of $3,390 paid in.  Which is how Obamacare is supposed to lower the cost of health insurance.  By forcing people who won’t use it to buy it.  So they can pay for the people who do use it.  Thus lowering the average premium to $154.09.  And bringing down the premiums for single, family and preexisting conditions to $78.03, $294.78 and $884.35, respectively.  Lowering price across the board.  Making everyone happy.  Except, of course, those forced to buy something they won’t use.  So this part can lower insurance costs.  But it won’t.  Because Obamacare complicates things.

Obamacare Impact on Insurance Premiums - Adding Coverage Requirements

Obamacare will raise premiums because it requires insurers to cover more.  In addition to the things already noted there are some other costly requirements.  Such as the ban on price discrimination based on sex.  Meaning insurers can no longer charge women more for health insurance.  Even though women are more costly to insure.  Primarily due to their reproductive systems.  And other biological differences.  If they can’t charge more for women then they must charge women what they charge men.  And to cover the higher costs of insuring women they must charge men a higher premium.  So when they charge women that premium it will cover birth control, breast exams, pap smears, etc.   In our example we assume singles and families will pay twice as much.  While those paying preexisting conditions premiums will pay 50% more.  Bringing the average premium to $288.08.  While bringing the premiums for single, family and preexisting conditions to $156.06, $589.57 and $1,326.52, respectively.

The Key to Obamacare is to get more Young and Healthy People to buy Insurance that they will Not Use

But premiums will cost even more.  Because insurers cannot deny coverage for people with preexisting conditions.  And they can’t cancel coverage for people if they come down with a very costly chronic health problem.  Basically meaning there is no cap to what an insurer may pay on an individual.  Which makes the insurance equation more difficult to balance.  Making sure that payments out do not exceed premiums in.  Which is more difficult to do when there is no limit to what those payments out can be.  So insurers will have little choice but to charge people for the worst case scenario.  That a large percentage in the pool will have long-term chronic illnesses.  And that some people will be buying insurance for the first time after being diagnosed with a long-term chronic illness.

Obamacare Impact on Insurance Premiums - Pre-Existing Conditions

Insurers will have to make assumptions.  With no limit to their high-end exposure they will have to charge everyone more across the board.  So they will have to take their greatest risk—the exposure to preexisting conditions and long-term chronic illnesses—and factor that into all premiums.  In our example we charged singles 25% of the greatest risk.  And we charged families 50% of the greatest risk (the more people on the policy the greater the risk of long-term chronic illnesses on that policy).  Raising the average premium to $437.  And raising the premiums for single, family and preexisting conditions to $331.63, $663.26 and $1,326.52, respectively.  Or an increase of 181%, 66% and 11%, respectively from before the implementation of Obamacare.

Obamacare seems like a windfall to the insurance companies.  Which is why some of them supported Obamacare.  But the key to Obamacare was to get more young and healthy people to pay into the insurance pool while not using that insurance.  The young and the healthy.  Individuals.  Who don’t have families.  Those who will see a substantial rise in their insurance premiums.  As much as 181%?  Perhaps.  But if the increase is too great for these young and healthy individuals to afford they will not buy health insurance.  And they can’t get a subsidy.  Because it’s the young and healthy—those who are supposed to pay into the insurance pool without using their insurance—who are to provide the money for the subsidies.  So they won’t increase the amount of premiums going into the pool.  While the additional requirements of Obamacare will increase the payments going out of the pool.  Causing the insurance equation to go out of balance.  Putting the private health insurance business out of business.  The ultimate goal of Obamacare.  So the left can get what they wanted all along.  National health care.

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Medicare Fraud is only a Prelude to Obamacare Fraud

Posted by PITHOCRATES - October 5th, 2013

Week in Review

It is remarkable how so many people believe the government can do things better.  That somehow fraud just doesn’t happen with government people involved.  This despite those hundred dollar toilet seats the government bought.  Which is a lot for a toilet seat if you’ve never bought one.  I mean, you can buy one for less than $10.  But because the government is so large and handles so much money they attract fraud like fresh dog poop attracts flies.  There are just too many people.  And too much money.  Making it too easy for someone to slip in a bill for hundred dollar toilet seats.  Which is why fraud is rampant in government programs.  Like Medicare (see ‘Death doctor’ accused of misdiagnosing cancer patients to scam millions out of Medicare a ‘serious risk’ to flee the country posted 10/2/2013 on Mail Online).

A Michigan oncologist charged with intentionally misdiagnosing patients with cancer as part of a major Medicare fraud operation will remain in prison until trial, with court officials scared he will flee to the Middle East.

It is alleged Fata received about $35 million from Medicare via his insurance scam over a two year period.

So what’s the difference between private health insurers and the federal government?  People hate the private insurers for refusing to pay for their medical bills.  To prevent fraud.  Someone concealing a pre-existing condition when buying health insurance is committing an act of fraud.  The whole idea of Obamacare is to prevent this kind of fraud.  By forcing everyone to buy health insurance.  Instead of living their lives without ever contributing to the insurance pool until the day they find out that they have a catastrophic health problem.  And then lie to an insurance company to conceal that catastrophic health problem.  So they can get the health insurance pool to pay for their medical care.  Even though they never contributed to that insurance pool when they were healthy.

This is why people hate private insurance companies.  For preventing fraud.  Which is why you don’t see fraud in the private health insurance companies on the scale you see in Medicare.  Because Medicare uses taxpayers’ money.  So the people in charge of Medicare don’t suffer a loss in any fraud.  Unlike the private health insurers.  So the private health insurers are more aggressive in preventing fraud.  While the federal government just raises taxes to pay for the fraud committed on their watch.  That’s the difference between private health insurers and the federal government.

And if you think the Medicare fraud was bad you ain’t seen anything yet.  Thanks to Obamacare.  With the federal government taking over one-sixth of the national economy we will see fraud like we’ve never seen before.  More money.  More people.  An organization so big the left hand won’t know what the right hand is doing.  Making Obamacare a fraud paradise.  Not to mention a gift for hackers and identity thieves.  Who can find out everything on everyone from one location.  Making that $35 million Medicare fraud seem like child’s play.

Don’t think so?  You’re willing to trust the harden defenses of the government’s computer system?  If so, ask yourself this.  How well did the rollout of Obamacare go this past week?  How well did those computer systems do in collecting the data upfront?  Not well.  And knowing how poorly the rollout was are you any more confident that once they have all of your personal information that their system will work any better?  Or do you think it will just make it easier for people like this doctor in Michigan?

Every bad thing that happened in Medicare will be worse in Obamacare.  Because Obamacare is bigger than Medicare.  And as this fraud takes a bigger bite out of the Obamacare cash-flow there will be less money for treating patients.  Meaning longer wait times.  And rationing.  As well as higher taxes to pay for the fraud.  So we will end up paying more for less under Obamacare.  Just like with Medicare.  Only worse.

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