On May 24, 2013 Forbes columnist Rick Ungar wrote an article entitled “Unexpected Health Insurance Rate Shock – California Obamacare Insurance Exchange Announces Premium Rates“. In the article Mr. Ungar refers to a press release made the day earlier by Peter Lee – the Executive Director of Covered California – the new Obamacare exchange in that state. In the announcement Mr. Lee stated that the premium required for health insurance purchased in the new Covered California exchange would be lower than expected, significantly lower. This of course let to a veritable jubilee amongst the political Left. The article went ‘viral’ and was shared widely by those who falsely still believe that Obamacare is the solution for the American health care system’s woes.
The truth however is that on it’s face the article is based on a falsehood. A falsehood perpetrated by Mr. Lee himself. You see, Mr. Lee knew that the prices he released to the public in his press release on May 23, 2013 were based on a falsehood. Here’s how we know. On December 26, 2012 Mr. Lee wrote a letter to HHS secretary Kathleen Sebellius in which he stated the following: “California would like to consider designating a larger number of geographic rating areas in order to minimize rate shock.… We have concerns about the potential rate impact that this may have on younger individuals who are purchasing coverage in the individual market.” So you see, Mr. Lee was concerned about the impact that Community Rating would have on young people in the state of California. Chief amongst his concerns was the fact that because younger people would now be subsidizing the premiums for older people, the cost for young people to obtain health insurance would be dramatically higher.
So, instead of comparing the cost of the individual California Obamacare exchange plans which will be available to individuals in 2014 to the existing individual health insurance plans available to Californians today. He simply compared the rates for individual plans soon to be sold in the California Obamacare exchange to the rates for employer sponsored group health insurance plans available to Californians today. This makes a huge difference because individual health plans sold today do not include the “Essential Health Benefits” that they must include in 2014. Whereas the vast majority of employer sponsored group health insurance plans already include all of the ‘Essential Health Benefits’. Once the ‘Essential Health Benefits’ are added to individual health plans in 2014, the cost will increase substantially.
Less than a week after Mr. Ungar’s article was published, senior fellow at the Manhattan Institute – Avik Roy decided to run the real numbers and respond to Mr. Ungar’s hyperbolic piece in his column also at Forbes. It is a must read. Feeling a bit ‘wonky’ myself. I also felt compelled to post the following comment under Mr. Ungar’s article at Forbes which was picked up by my friends over at IownTheWorld.com. This lead to a one hour debate between Mr. Ungar and myself on the David Webb show on XM Satellite Patriot radio. You can download on MP3 of our debate here.
“This is lunacy. No actuary in the private sector (in their right mind) would publish fixed health insurance premiums 6 months before the release of a health plan. Only a government entity would do something so foolish. Furthermore, these rates assume that Community Rating will work. Community Rating has failed in all 8 states it has been implemented in before. Resulting in doubling, tripling and even quadrupling health insurance premiums in those unfortunate states. California’s HIX – Health Insurance Exchange – rates also assume that people will actually purchase these health plans. Since the ‘fine’ for not purchasing health insurance is only 1% of one’s MAGI – Modified Adjust Gross Income – in 2014. Many will simply pay that miniscule fine instead of purchasing health insurance. Most especially when they can get health insurance on a guaranteed issue basis, regardless of how sick they are during “Open Enrollment”. Once people begin opting out and paying the miniscule fine and waiting until they ‘need’ health insurance (this will happen, it’s human nature). These rates will have to be adjusted UP, significantly UP. It’s just a matter of time. The day of reckoning will come in 2014.
Historical precedent has already been sent. No government health care program has ever remained at or under it’s projected cost. Like the Medicaid special hospital subsidy which was projected to cost $100 million in 1987 and by 1992 costs had soared to $11 billion. That’s more than 100 times more expensive. Or Medicare Part A projected to cost $9 billion in 1965 and soared to $67 billion by 1990. Oh, and then there’s the PPACA – “Obamacare” which had initial cost projections of $960 billion (you know, so Barack Obama could say it cost less than $1 Trillion). Now the PPACA has been reassessed at a cost of $2.5 trillion. But I digress.
Health insurance premiums will continue to rise in 2014. In March of this year, the non partisan, highly respected Society of Actuaries came out with a comprehensive nationwide study on where health insurance premiums will be going post 2014. It does not look good. According to the study, health insurance premiums for individual policies will be increasing dramatically all over the country. Even though president Obama promised that our premiums would decrease under his law. In some states like Wisconsin premiums will increase as high as 80%. It’s important to understand the reason for this.
Beginning in October of this year, the first national “Open Enrollment” period will begin. During this “Open Enrollment” period Americans can purchase health insurance on a guaranteed issue basis without regard to their medical history. This means that many who have ongoing medical conditions will be heavily incentivized to purchase health insurance. Most especially with a federal mandate to do so in place. Whereas the young invincibles, who statistically have very few claims will most likely not purchase health insurance even with the mandate in place because the fine for not doing so is only 1% of their MAGI – Modified Adjusted Gross Income. This amount is so small compared to the high cost of health insurance in the exchanges that many of the young invincibles will simply pay the miniscule fine instead. Even when the fine graduates to a maximum of 2.5% in 2016 many will still pay that small fine instead of purchasing far more expensive insurance. This will lead to an unhealthy risk pool and will force the carriers to raise premiums to compensate for these losses. It’s just a matter of numbers and human nature. It is the nature of man to look out for his own best interests. Paying a miniscule fine instead of expensive health insurance just makes more sense.
The cost to taxpayers will be staggering. Many Americans have heard about the 2.5% tax on medical devices. The capital gains taxes and other taxes imposed under Obamacare but the most costly tax by far is the “Advance Premium Tax Credit”. If you visit the Kaiser Family Institute’s website you will find a Health Insurance Exchange calculator. Using this tool, you can determine right now what you will pay for health insurance in 2014. All you have to do is enter your income, age and the age of your dependents. The calculator accurately displays the premium required for health insurance in the exchange. For a family of four it will cost roughly $15,000 annually. However, if that family’s income falls below 400% of the Federal Poverty level (less than $94,200 annually) they will receive a gift from the taxpayers of more than $10,600 each and every year to artificially lower the high cost of Obamacare approved health insurance. That’s almost $11,000 a year for one family. Now, consider this. According to the Congressional Budget Office 20 million Americans will receive an Advance Premium Tax Credit. Where that money is coming from, I have no idea. Most especially when we are printing $85 billion a month and borrowing .46 cents of every dollar. This is precisely why the projected cost of Obamacare has soared from the initial projections of $960 billion to more than $2.5 trillion.
But that cost is going to be even higher. Once employers with 50 or more full time employees realize that they can reduce their fixed cost for health insurance down to $2,000 per employee (since that is the fine for not purchasing Obamacare approved health insurance). They will simply dump their employees onto the exchanges as a cost saving measure. Watch the CBO’s projections of 20 million receiving Advance Premium Tax Credits to more than double as we enter 2015. Millions and millions more Americans will lose their employer sponsored health insurance coverage. Again, it’s just a matter of numbers and human nature. It is the nature of man, to look out for his own self interest. Paying the $2,000 fine and saving hundreds of thousands of dollars in health insurance premiums is just human nature for the average employer. And frankly, it makes good business sense. Keeping your costs low is crucial for survival in this competitive marketplace. Obamacare is designed to fail. Period.” – C. Steven Tucker
During our debate Mr. Ungar stated that I wrote in this article that I penned for Jeremy Segal at Rebel Pundit.com that “seniors over 70 will be denied care next year”. The truth is I did not write that. I simply quoted the Neurosurgeon who called into the Mark Levin show. Nice try though Rick.
Also for the record, Rick stated that he tried to enroll in the California High Risk health insurance pool (MRMIB) for 5 years and was unable to do so because of ‘waiting periods’. I attempted to educate him to the fact that there are no waiting periods for HIPAA qualified applicants. Meaning one of 2 things:
1.) You are HIPAA qualified (meaning you have maintained employer sponsored health insurance for at least 18 months) and then you lose that coverage to no fault of your own and your employer does not offer you COBRA continuation coverage.
2.) You are HIPAA qualified and lose your employer sponsored coverage, elect COBRA continuation coverage and exhaust that coverage. At the end of that 18 month period the California MRMIB risk pool MUST insure you and cover your preexisting conditions from day one. Providing of course that they are a covered expense on the policy.
The only applicants who wait (and waiting periods are now gone as of 1/1/14) are uninsured applicants who are not HIPAA qualified and attempt to purchase a policy in the individual market and are denied due to one or more preexisting conditions. For proof of this FACT read page 6 of the MRMIB application.
Lastly, Rick attempted to criticize me for not having any friends on the Left of the political spectrum. To clarify, I will use Webster’s definition of the word “friend”. Friend – Noun: a person you know well and regard with affection and trust.
I do not trust the Left. So I do not have any ‘friends’ on the Left. For it is the Left who support Barack Obama. It is the Left who supported and voted for Obamacare. Not one Republican did. It is the institutional Left, of which Rick is a proud member and defender who still support a president who has no regard for the rule of law, our Constitution or individual Liberty.
I do have a few acquaintances on the Left. They are not my friends, but they are learning the meaning of Liberty. When they fully understand individual Liberty and agree to embrace our Constitution and the rule of law and agree to fight for and protect the civil society. I will indeed consider them my friends. But friendship is earned and no matter what battle ground you are fighting on, a Patriot does not befriend the enemy.
P.S. Rick, per your request, I did indeed call the MRMIP program today and they verified precisely what I stated above.