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Belmont Club

Kinda Funny But Kinda Sad

December 30th, 2013 - 5:21 pm

Perhaps the saddest and funniest story in recent days comes from Forbes. Merrill Matthews, himself an insurance industry leader, writes about how  his industry was led on by the golden visions of Obamacare only to find itself in a waterless desert.  While being courted by the president they were shown fleeting glimpses of gold and jewels.  But what they got instead was a website that wouldn’t accept payments and a set of rules that forced them to accept non-paying customers, retroactively.

Much of the “credit” for health insurers’ initial embrace of Obamacare has to go to the head of the industry’s leading trade association, Karen Ignagni, the president and CEO of America’s Health Insurance Plans (AHIP). Ignagni is a registered Democrat and former director of the AFL-CIO’s Department of Employee Benefits….

As the ACA was being written and debated, I spent some time talking to the CEOs of some of the member companies. One explained to me how he thought Obamacare would be very good for the industry, another was convinced the Democrats crafting the law were taking their suggestions. They may have been smart businessmen, but they were woefully naive about politics …

They decided early on they wanted a “seat at the table,” only to discover that the most dishonest presidential administration pulled the chair out from under them.

He concludes that “health insurers are being battered by Obamacare and they deserve it.”  And while he feels sorry for them he’s looking for a violin small enough to do justice to the suffering they are experiencing.

Maybe he can find an even smaller one for Pajama Boy. After he finishes his chocolate he might try his Obamacare policy on for size. Running a close second for the story of tragi-comic news of the year is an article in the Huffington Post which is somewhat jarringly headlined: ”Doctor Shortage Looming As Obamacare Rolls Out”. Signing up hard as it was and paying your premium, difficult as it may be, turns out to be the easy part.

The really dicey part, lots of health policy experts have always feared, will come on Jan.1.

That is when Americans who have enrolled in health insurance for the first time under the ACA are likely to discover that having coverage doesn’t guarantee them easy access to a primary care doctor, dentist or mental health professional.

Some changes in the works, such as the use of new technologies and allowing mid-level medical providers to perform some functions usually reserved for doctors and dentists, should improve health care access in the long run. “In the meantime,” said Linda Rosenberg, president of the National Council for Behavioral Health, “people are going to suffer.”

My favorite line in that story is: “lots of health policy experts have always feared”, which sounds suspiciously like “and they knew all along”.

They knew all along that enrollees would take a number and wait.  But now that everyone is here, or will soon be cajoled and hornswoggled inside,  listen to a recorded message from a mid-level professional on work-life balance while u-wait or until someone sees you “eventually”.

But they’ll get quality care. Did you know for example, that among the essential features built into some Obamacare policies is acupuncture?  Bet you didn’t have that in your old bare-bones policy.

According to the New York Times, special interest lobbyists succeeded in getting acupuncture considered “essential” in California, Maryland, New Mexico, and Washington. Also, “insurance plans will have to cover weight-loss surgery in New York and California, for example, but not in Minnesota or Connecticut. Infertility treatment will be a required benefit in Massachusetts, but not in Arizona.” Under such a system, the winners will be those with the most political “pull.”

The Voice of San Diego helpfully tells us that “according to a spokesman for the state-run health exchange, Covered California, chiropractic services and massage therapy are not considered essential, but acupuncture is if it’s used for pain and nausea management. This applies to Medi-Cal patients, as well.”  But the lawyers are suing and soon they too may be included. Acupuncture, massage therapy, mid-level professionals, all at your beck and call.  Doctors not so much.

The article in the Huffington Post goes on to say that one minor problem with Obamacare that you might be interested in by the way is that it has done nothing to create more medical resources to treat all the people who now expect to be treated.

According to the Association of American Medical Colleges (AAMC), unless something changes rapidly, there will be a shortage of 45,000 primary care doctors in the United States (as well as a shortfall of 46,000 specialists) by 2020.

In some ways, the shortage of providers is worse than the numbers indicate. Many primary care doctors and dentists do not accept Medicaid patients because of low reimbursement rates, and many of the newly insured will be covered through Medicaid. Many psychiatrists refuse to accept insurance at all.

And since many new Obamacare patients are in fact being put on expanded Medicaid they will soon learn there’s a difference between getting a health card and actually being treated — by a doctor. Supply and demand rears is ugly head again. Reforming America’s health care system was always going to be hard.  But any real solution was sure to involving increasing competition, removing excessive legals burdens and technological advance. But the cure in this case is witchcraft.

If there’s a moral in here anywhere it is probably that you never get something for nothing. And my New Year’s resolution is to constantly remember that if something looks too good to be true, it probably is.


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Top Rated Comments   
It's not hard to understand why insurance companies would sign onto Obamacare. It essentially converts their entire industry - which was highly competitive and relatively low margin - into a regulated utility.

The structure of Obamacare creates a cap and a floor on insurance company returns. The cap is the result of a lower limit on the medical loss ratio (MLR) an insurance company can have. An MLR of 100% means that the insurance company pays out in claims and administrative costs 100% of the what it takes in from premiums; in other words, no profit. The lower the MLR, the more the profit. Obamacare restricts an insurance company to an MLR of no less than 80-85%, thus limiting their profit.

On the other hand, the biggest risk for an insurance company is if it insures people who make lots of claims (i.e. really sick people). Fortunately for the insurance companies, this risk is mitigated by Obamacare's "risk corridor" program. This program basically reimburses insurance companies if they end up with too many sick people. So the downside of insurance companies is protected by the federal (and state) governments through the risk corridor reinsurance program.

What does this mean? Simply that the game for insurance companies is to focus on negotiating the definitions around these two provisions (MLR and risk corridor). It's analogous to the way regulated utilities focus so much money and energy on negotiating what was in the "rate base" of their price. Once you get that right, your return is virtually guaranteed at very low risk.

Of course, regulating the insurance companies in this way has tremendous political benefits. First, a steady stream of political money will now flow from that industry to impact politicians and regulators. Second, a steady stream of regulators will flow to industry as part of "regulatory capture" and "cashing-in" operations in Washington DC. Third, focus on innovation and improvement will wither, as the ROI will be largely determined by regulatory negotiations, rather than value to customers as determined through a price mechanism.

And it's not so bad for the company executives, either. I once visited a friend whose office was formerly the office of the CEO of a regulated utility. He laughed as he showed me the executive workout facilities (large and well-equipped), and then, on the same floor not 100 feet away, the CEO's personal workout facility (also large and well-equipped). All of which was, no doubt, included in the rate base of the company's product, which then generated a guaranteed return to shareholders. (My friend, who worked in a competitive business, got rid of all of that garbage. Haha)

In short, the insurance companies are in the process of becoming arms of the state, and their executives and trade association leaders part of the political class. They will be the fungible receptacles for blame used by politicians and regulators to a) justify further regulations, and b) provide lifestyle enhancement (while in government) and lucrative sinecures (after government service).

But don't worry. It's only 1/6th of the economy, and a direct influence on your health and well being. What could go wrong? ;-)

Happy New Year to Wretchard and the rest of the Belmont Club. It will be a year of consequence, to be sure. Keep the faith!

L3
34 weeks ago
34 weeks ago Link To Comment
Ah--pity the poor insurance companies. They received a letter from a Nigerian (Kenyan?) crook who was scheming to steal a fortune and needed an accomplice to do so--one who was seemingly chosen by a fairy godmother for the crook on account of their integrity and honesty --- to receive vast riches for being a mere intermediary in the scheme. And all they wanted in return were the keys to your bank account.

What possibly could go wrong?
34 weeks ago
34 weeks ago Link To Comment
I know a few libs who are about to discover what a "deductible" is. I would pay to see their expression when they have to pull out the checkbook before they are treated. They'll figure out at some juncture that they'll never have enough "scratch" to make it to the "free stuff." Eat it suckers!
34 weeks ago
34 weeks ago Link To Comment
All Comments   (97)
All Comments   (97)
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...and none of these insurance companies, some at least 100 years old or more would realize that the business model they have has weathered storms and hashed out trials and 'models' of failure suddenly all thought that Obama & his legion had a 'new' way they'd overlooked within his cloak? Snake Oil is what they bit down on. SUCKERS!
32 weeks ago
32 weeks ago Link To Comment
We live in a time when no one but the law-abiding and honorable suffer the consequences of their decisions. Call them "risk corridors" but they are simply "grants" or "licenses" to avoid compliance with written law. All you need is the correct intention-the government, the media and the courts will carry you to the goal.

Don't sign up on time?-here's a further deadline.
Don't sign up correctly?-we'll "deem" you signed up.
Sign up but don't pay?-We'll "deem" you covered.
Sign up, pay one premium, then quit paying? Great effort! You'll be "deemed" covered for the entire term.
Policy doesn't cover the procedure? We'll "deem" that it does.

Folks, we are not headed for single-payer. We are essentially there.
34 weeks ago
34 weeks ago Link To Comment
NEW YEAR 2014

What can we make of this New Year that has not been made for every New Year from time immemorial? Every culture that ever lived had a turning of the page, a turning that promised a better year than the last, despite all evidence to the contrary. Still, we celebrate the turning of the page at the beginning of each new year, convinced that this new year will be different.

The New Year comes upon us one more time
And revelers with alcoholic cheer
Reduced to wishing all in pantomime
A glorious outcome to the new year
Forgetting for the moment twelve months past
They wished the same and saw dreams unfulfilled
Believing though misfortune cannot last
They offer up the lilies they will gild
The baby in the top hat smiled and waved
And promised them a mountain full of gold
In coming year for every road they paved
But knowing that in twelve months he’d be old
And turn into the old man with the scythe
The hour glass declaring it is done
The revelers so casually blithe
Cried cheer up guys it’s January one

A happy and prosperous New Year to all Belmont Clubbers
34 weeks ago
34 weeks ago Link To Comment
I think that it has been more than amply demonstrated what Obamacare eventually is going to do to all of us.

The only question I have now is this: why haven't the people risen up in open revolt?

I am afraid that the answer, in the long run, will turn out to be that we are on our way to becoming a nation of slaves.
34 weeks ago
34 weeks ago Link To Comment
So far it's just threats and fear.
Wait for the PAIN to hit....
34 weeks ago
34 weeks ago Link To Comment
I agree: why haven't they? My best hope/guess is that most regular people haven't personally felt much damage, if any, and/or are still not aware despite all the publicity. Most of us here tend to assume that we're typical in paying attention to current affairs but it ain't so.

Wasn't it some Japanese before WW II who warned that Americans are ''slow to anger'' and called us a ''sleeping giant''?

John Dryden: ''Beware the fury of a patient man.'' May our patience end soon!!!
34 weeks ago
34 weeks ago Link To Comment
Re: L3
As a construction contractor, I will sign a cost plus contract with 0% fee tomorrow (today being a holiday) IF I get to define costs.

I will even sign up to build a bridge from Halifax NS to England via Greenland, Iceland and Ireland, though I haven't the first clue how. I will begin by hiring smart guys. And will work hard. As.Long.As.You.Pay.


34 weeks ago
34 weeks ago Link To Comment
You have of course described the California Bullet Train project. The state democrats support it because the $100b project comes with $1b or so "free" federal startup money they are just too pleased to hand to local construction unions, construction companies, and miscellaneous consultants, and wits like Pelosi and Krugman think spending the money helps the economy - even if the overall project could never succeed.

Unfortunately the enabling legislation requires the state to find private money to fund some large percentage BEFORE they spend the federal money, and no private money has yet volunteered. This is now in the courts and the project in limbo.

Construction boondoggles now predominate public money spending in California, it seems to me, giant swooping HOV-only transfer lanes that are impressive engineering, take years to build, and help maybe one Prius per hour to save ten seconds in switching freeways. Calculate the ROI on that.
34 weeks ago
34 weeks ago Link To Comment
"mid level practitioners will now perform more procedures". Give it a year, Obama's second cousin JuJu from the hills of Kenya will be dancing around cancer patients shaking a couple gourds.
34 weeks ago
34 weeks ago Link To Comment
My father was a hospital adminstrator for a small non-profit community hospital. He was constantly looking for docs willing to be small town GPs.

His problem with foreign docs, even Europeans, was that virtually none of them could pass the medical board exams in the United States...almost all needed at least a year and usually 18 months of additional training to get to the level of skill expected here. (A notable exception are Canadians. They, like their US peers, routinely passed their boards, no muss no fuss.)

And it wasn't only language, in that medical terms are universal and even the Brits have the problem.

My son's father in law is a Belgian doc who couldn't afford the time so he went home.

Now of course, he could be a PA.

Yet another flaw in the comparisons between health care in various countries. Quality. Quality. Quality. and, oh yes, Skill.
34 weeks ago
34 weeks ago Link To Comment
Not only that, lookee here (from Investor's Business Daily; redaction mine)--


Section 1311(h)(1)(B) of the health law gives the secretary of Health and Human Services, a presidential appointee, blanket authority to dictate how doctors treat patients.

Not just patients in government programs like Medicare and Medicaid, but also patients with private plans they pay for themselves.

On Dec. 2 in the Federal Register, it was disclosed that the rules are in process of being written.

Starting in 2015, insurance companies will be barred from doing business with doctors who fail to comply. Supposedly the rules are in the name of "quality," but that could mean everything in medicine.

"The powers given to the secretary are so broad he or she could literally dictate how all physicians nationwide practice medicine," warns Congressman Phil Gingrey, R-Ga., himself a physician.

Gingrey is sponsoring a bill to repeal Section 1311(h)(1)(B)....

... the president's key health adviser when the Affordable Care Act was written, Dr. Ezekiel Emanuel, early on discussed what government intervention was needed.

Emanuel said doctors take the Hippocratic Oath too seriously "as an imperative to do everything for the patient regardless of the cost or effects on others."

As long as doctors are in charge, cost control would not be possible.

"Vague promises of savings from cutting waste, enhancing prevention and wellness, installing electronic medical records and improving quality of care are merely 'lipstick' cost control, more for show and public relations than for true change," he said.

Emanuel advocated top-down federal rules to allocate resources based on what he called "social justice."

Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials-on-the-right/123113-684704-biggest-obama-whopper-of-them-all-has-yet-to-be-revealed.htm#ixzz2pACRnqjV
34 weeks ago
34 weeks ago Link To Comment
Superb analysis L3,

Basically what you are saying is that the Insurance Companies have a good chance of surviving in the near future at the expense of breaking the American People.

What the Middle Class has been sold is a Health Insurance policy system that if it doesn't break them with high cost of premiums, it will break them if have the bad luck to actually need that coverage when they go to the hospital with all the uncovered charges ( up to 40% of the bill).

Seems like the insurance execs have joined a growing list of people who if there was any justice in the world would have lamp posts in their future.
34 weeks ago
34 weeks ago Link To Comment
This is reminiscent of the Chinese government "opening" the economy for permitted entrants at a hefty price. My uncle worked there in the early to mid-90s and they allowed a major company (and firm Obacker) to build a plant. The PLA then proceeded to build an identical plant right next to it from the same plans. The PLA enterprise of course put them out of business and the PLA then had two plants for the price of less than one.

Anytime you think you have leverage, you will lose UNLESS THERE IS A THIRD PARTY PREVENTING THE FULCRUM FROM BEING MOVED! This is the essense of the rule of law, and these insurance idiots are finding out that if you make a deal with the mob, the terms are subject to change.
34 weeks ago
34 weeks ago Link To Comment
They may have been smart businessmen, but they were woefully naive about politics

I don't buy this excuse at all.

These smart businessmen people went into negotiation table knowing full well (at least pretty good idea) about the ACA. But they foolishly believed that THEY ARE the special Obama people (with the Obama nod and winks). Rest of the populace, and their policy holders be damned.

Horror of all horrors, they found out they are NOT special at all. "Useful Idiots" came to mind.
34 weeks ago
34 weeks ago Link To Comment
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