Affordable Care Act - need clarification from the insurance gurus

[ted_kennedys_liver]

This thread is not intended to start a political debate so please dont get it burnt.

I need help clarifying something. It is my understanding that the increase in insurance premiums are not because of the ACA but because more people are using their insurance and insurance companies are not making as much profit (lets face it - insuranbce companies dont lose money, it comes down to how much profit they lose or gain every year. I dont think one insurance company has ever gone out of business even in the worst year of natural disasters).

Others say ACA is causing it to increase. Is it because the companies are losing customers to the ACA pool of companies because they can now shop for better deals?

Can you explain?

[Hammerdown15]

Any answer to this question is likely to be pure speculation. Only time will tell how the ACA will truly affect healthcare.

[Mike D]

My understanding is that the ACA is the cause of it.

You add millions of uninsured to the program and now you can't refuse Pre existing conditions.

Somebody has to pay for that.

[Hammerdown15]

My understanding is that the ACA is the cause of it.

You add millions of uninsured to the program and now you can't refuse Pre existing conditions.

Somebody has to pay for that.

If anything, that will be the biggest challenge to insurance companies. If there are not enough healthy people to offset the costs, the companies will fail.

[gspbrad]

This thread is not intended to start a political debate so please dont get it burnt.

I need help clarifying something. It is my understanding that the increase in insurance premiums are not because of the ACA but because more people are using their insurance and insurance companies are not making as much profit (lets face it - insuranbce companies dont lose money, it comes down to how much profit they lose or gain every year. I dont think one insurance company has ever gone out of business even in the worst year of natural disasters).

Others say ACA is causing it to increase. Is it because the companies are losing customers to the ACA pool of companies because they can now shop for better deals?

Can you explain?

What exactly are you wanting answered? Will premiums go up or what is the root cause for premiums going up?

Pretty complicated all the way around. In the exchange model, there are fewer differentiators between carriers. Essential health benefits baseline coverage types and coinsurance levels creating the metallic categories of coverage. Price (Risk Based) will be the biggest differentiator. The premium amounts may not be lower under exchanges, but depending on where one falls on the federal poverty level they could be subsidy eligible and their monthly out of pocket for premiums could be less.

Insurance carriers have made significant investments to become compliant with the new regs. Some have spent 500-600M over the last 2-3 years to get ready. There are more to the regs than just Exchanges; Admin Simp, MLR to name a few. They aren't charity organizations so it's likely the cost will be passed on to the consumers. The new regs are adding additional expense to the life cycle that don't do anything to treat a condition or illness.

Make sense?

[Burnadell]

This thread is not intended to start a political debate so please dont get it burnt.

I need help clarifying something. It is my understanding that the increase in insurance premiums are not because of the ACA but because more people are using their insurance and insurance companies are not making as much profit (lets face it - insuranbce companies dont lose money, it comes down to how much profit they lose or gain every year. I dont think one insurance company has ever gone out of business even in the worst year of natural disasters).

Others say ACA is causing it to increase. Is it because the companies are losing customers to the ACA pool of companies because they can now shop for better deals?

Can you explain?

Insurance companies DO lose money, and insurance companies DO GO BROKE/BANKRUPT. Conseco is one that comes to mind.

I don't know enough of the details, but Mike D probably nailed it.

[gspbrad]

My understanding is that the ACA is the cause of it.

You add millions of uninsured to the program and now you can't refuse Pre existing conditions.

Somebody has to pay for that.

This is where Guarantee Issue and the Individual Mandate come into play. Need both as a counter balance. The government has taken it a step further to ensure a stable marketplace by defining standards around the 3 Rs; Reinsurance, Risk Corridors, and Risk Adjustment. This protects a carrier with a high brand equity from capturing a higher percentage of sick folks or those with pre-existing conditions. In large, the carrier who is impacted the most negatively is made whole by their competitors who pay into a pool.

[4wheels]

ACA is causing insurance prices to go up because it has 'upgraded' the kind of coverage everyone is supposed to have.

For example you now must insure your self against substance abuse (cocaine, meth and such) Never mind that you don't need that insurance - you must now carry it. Same with abortion insurance. Never mind that you are 60 years old and had a hysterectomy or that your a man - you must now carry abortion insurance.

That is the stuff considered an upgrade. Not all insurance plans covered that kind of stuff - they did not cover that so that the plans were cheaper and more people could afford to purchase their policies.

The idea of forcing coverage is that it puts more money into that kind of care in the hopes that it will lower the cost of that care. (abortions, substance abuse, pre-existing condition)

Texas and other states forced insurance to grant insurance to anyone that wanted to pay for the insurance - regardless of pre-existing. But that no longer matters.

So that is it in a nutshell as far as the increase in cost. As far as putting / forcing more people into insurance that did not have or could not afford - that has some impact. But for the most part their cost is covered with subsidies and they are forced to pay for the insurance.

Remember this is an insurance law - not health care. Obamacare will not lower the cost of healthcare. But will only guarantee a continuous increase in the cost.

[gspbrad]

Insurance companies DO lose money, and insurance companies DO GO BROKE/BANKRUPT. Conseco is one that comes to mind.

I don't know enough of the details, but Mike D probably nailed it.

In addition to what Burnadell said, its important to know MLR standards (regs) limit profitability. In many cases, the MLR standard is placed on a carriers most profitable market segments. Most health insurance companies operate on margins between 2-3%. They might make 1B + in annual profits, but they were on 2.4% margins. Pretty lean way to run a business. Add 500M in investment to become compliant for ACA and it paints a clear picture - there WILL BE a consolidation of carriers in the marketplace and many will go out of business entirely.

[gspbrad]

ACA is causing insurance prices to go up because it has 'upgraded' the kind of coverage everyone is supposed to have.

For example you now must insure your self against substance abuse (cocaine, meth and such) Never mind that you don't need that insurance - you must now carry it. Same with abortion insurance. Never mind that you are 60 years old and had a hysterectomy or that your a man - you must now carry abortion insurance.

That is the stuff considered an upgrade. Not all insurance plans covered that kind of stuff - they did not cover that so that the plans were cheaper and more people could afford to purchase their policies.

The idea of forcing coverage is that it puts more money into that kind of care in the hopes that it will lower the cost of that care. (abortions, substance abuse, pre-existing condition)

Texas and other states forced insurance to grant insurance to anyone that wanted to pay for the insurance - regardless of pre-existing. But that no longer matters.

So that is it in a nutshell as far as the increase in cost. As far as putting / forcing more people into insurance that did not have or could not afford - that has some impact. But for the most part their cost is covered with subsidies and they are forced to pay for the insurance.

Remember this is an insurance law - not health care. Obamacare will not lower the cost of healthcare. But will only guarantee a continuous increase in the cost.

Yep, you're referring to the Essential Health Benefits. Carriers are mandated to offer the minimum essential health benefits in order to sell on the exchange.

[Shane]

It costs more because the ACA requires insurance policies to pay for things that were not previously covered by just about all health insurance policies, most of which aren't needed or wanted by most people. Insurance companies of any type (health, homeowners, etc.) can not cover pre-existing conditions and remain in business, but Obamacare requires pre-existing conditions to be covered. The reason pre-existing conditions can't be covered is because if they were, then people could wait until their house was on fire before going out and buying a homeowners policy. We could wait until we were diagnosed with cancer before buying health insurance. If insurance covers pre-existing conditions, then nobody would waste money paying premiums until they actually needed to file a claim. The only way insurance works is when people chip in and pay premiums when there is a CHANCE they could have a loss. But if the only people paying premiums are the people who are CERTAIN to have a loss, then it all falls apart. There would not be enough people chipping in to help pay for other people's losses, so nobody could afford it.

That's what the ACA requires. BUT.....that's where the individual mandate comes in. The unconstitutional law requires us to buy a product, whether we want it or not. And we don't have any control over the price of it either. Because the ACA requires insurance policies to cover pre-existing conditions with NO LIFETIME LIMIT, the premiums have to be a lot higher in order for it to work. There are also requirements that policies have to provide maternity coverage and things like that for EVERYBODY, even people who have no need for that type of coverage.

It gets even better for younger people. These are the healthy people that rarely even go to the doctor. Many of them previously have chosen to not buy health insurance. But now they MUST buy a policy whether they want it or not. Insurance premiums are typically set based on rate classes or pools of people in similar circumstances that have similar things happening to them that might trigger insurance payments. So, before the ACA came along anyway, young healthy people that bought health insurance had premium costs that were far cheaper than the premiums for older, less healthy people that get sick and go to the doctor a lot more. This way, people are paying their own way more fairly. But under the ACA requirements, younger people are paying their normal premiums PLUS a bunch extra in order to pay for all the extra costs of insuring the older people's pre-existing conditions on an unlimited basis. Premiums for older people are still going to be much higher than they used to be, but they would be astronomically higher if the younger people weren't paying for a big part of it.

It all hinges on the individual mandate though. It should have been ruled unconstitutional, but it wasn't. But now the big worry is that the fine for not buying the unbelievably expensive insurance that people don't want is pretty cheap. Old and sick people who know they're gonna be going to lots of doctors' offices and hospitals are going to sign up. Young and healthy people are just going to pay the fine and do without insurance. That will mean that there won't be enough healthy people that never file a claim signing up to pay premiums to cover the expenses of the folks who need to go to the doctor. That's when insurance companies will start going broke, and guess who will bail them out because they're "too big to fail". Before long, most of them will be out of business and the few that remain will be basically government-owned enterprises. We'll pretty much end up with a single payer government health insurance system that the federal government will be in complete control of.

Won't that be fun? (It's almost as if somebody planned it to crash the system, huh?)

[gspbrad]

It costs more because the ACA requires insurance policies to pay for things that were not previously covered by just about all health insurance policies, most of which aren't needed or wanted by most people. Insurance companies of any type (health, homeowners, etc.) can not cover pre-existing conditions and remain in business, but Obamacare requires pre-existing conditions to be covered. The reason pre-existing conditions can't be covered is because if they were, then people could wait until their house was on fire before going out and buying a homeowners policy. We could wait until we were diagnosed with cancer before buying health insurance. If insurance covers pre-existing conditions, then nobody would waste money paying premiums until they actually needed to file a claim. The only way insurance works is when people chip in and pay premiums when there is a CHANCE they could have a loss. But if the only people paying premiums are the people who are CERTAIN to have a loss, then it all falls apart. There would not be enough people chipping in to help pay for other people's losses, so nobody could afford it.

That's what the ACA requires. BUT.....that's where the individual mandate comes in. The unconstitutional law requires us to buy a product, whether we want it or not. And we don't have any control over the price of it either. Because the ACA requires insurance policies to cover pre-existing conditions with NO LIFETIME LIMIT, the premiums have to be a lot higher in order for it to work. There are also requirements that policies have to provide maternity coverage and things like that for EVERYBODY, even people who have no need for that type of coverage.

It gets even better for younger people. These are the healthy people that rarely even go to the doctor. Many of them previously have chosen to not buy health insurance. But now they MUST buy a policy whether they want it or not. Insurance premiums are typically set based on rate classes or pools of people in similar circumstances that have similar things happening to them that might trigger insurance payments. So, before the ACA came along anyway, young healthy people that bought health insurance had premium costs that were far cheaper than the premiums for older, less healthy people that get sick and go to the doctor a lot more. This way, people are paying their own way more fairly. But under the ACA requirements, younger people are paying their normal premiums PLUS a bunch extra in order to pay for all the extra costs of insuring the older people's pre-existing conditions on an unlimited basis. Premiums for older people are still going to be much higher than they used to be, but they would be astronomically higher if the younger people weren't paying for a big part of it.

It all hinges on the individual mandate though. It should have been ruled unconstitutional, but it wasn't. But now the big worry is that the fine for not buying the unbelievably expensive insurance that people don't want is pretty cheap. Old and sick people who know they're gonna be going to lots of doctors' offices and hospitals are going to sign up. Young and healthy people are just going to pay the fine and do without insurance. That will mean that there won't be enough healthy people that never file a claim signing up to pay premiums to cover the expenses of the folks who need to go to the doctor. That's when insurance companies will start going broke, and guess who will bail them out because they're "too big to fail". Before long, most of them will be out of business and the few that remain will be basically government-owned enterprises. We'll pretty much end up with a single payer government health insurance system that the federal government will be in complete control of.

Won't that be fun? (It's almost as if somebody planned it to crash the system, huh?)

Not exactly true, the Individual Mandate doesn't force people to buy Essential Health Benefits they won't use, its intended to force the healthy people into the system who don't participate today to help offset those with pre-existing conditions (Guaranteed Issue) I don't believe we will end up with a single payer system (anti-trust laws come into play) nor do I think the government wants a single payer system. Every major market segment in our economy is controlled by 2-4 players. I think it's more likely in 10-15 years, 3-4 payers insure 85-90% of Americans.

[Shane]

Not exactly true, the Individual Mandate doesn't force people to buy Essential Health Benefits they won't use, its intended to force the healthy people into the system who don't participate today to help offset those with pre-existing conditions (Guaranteed Issue) I don't believe we will end up with a single payer system (anti-trust laws come into play) nor do I think the government wants a single payer system. Every major market segment in our economy is controlled by 2-4 players. I think it's more likely in 10-15 years, 3-4 payers insure 85-90% of Americans.

I think I said pretty much the same thing, just with more and different (and maybe less clear) words.

The couple of surviving insurance companies will be private companies, but they'll have been bailed out by and controlled by the government. They'll be able to claim that it's still "private" insurance, but if the government calls all of the shots, what difference does it make if there are shareholders or not?

[gspbrad]

I think I said pretty much the same thing, just with more and different (and maybe less clear) words.

The couple of surviving insurance companies will be private companies, but they'll have been bailed out by and controlled by the government. They'll be able to claim that it's still "private" insurance, but if the government calls all of the shots, what difference does it make if there are shareholders or not?

How's is working for AT&T, Boeing, Lockhead, Raytheon, etc. Full maturity and transformation should yield a similar market dynamic for health plans. Its going to take 15-20 years similar trajectory as Ma Bell, Baby Bells, etc.

Trust me, the last thing the government wants to do is operationalize or own delivery of health insurance; Sell, Enroll, Bill, Service.

[Shane]

[ame="http://www.youtube.com/watch?v=BKkTRMEyAhs"]Barack Obama Promotes Single-Payer Universal Healthcare - YouTube[/ame]

[ame="http://www.youtube.com/watch?v=CngVHudV_WY"]Democrats Push for a 'Single-Payer' Health Care System - Katie Pavlich - Charles Payne - 8-12-13 - YouTube[/ame]

[ame="http://www.youtube.com/watch?v=ndStT6c93rc"]Proof Positive the Public Option Will Lead to Single Payer - YouTube[/ame]