The Day Your Healthcare Died - Obamacare's Implosion in 2017
If "The Day the Music Died" as sung by Don McLean was when Buddy Holly crashed in a chartered airplane in 1959, we will be able to sing about a similar death of your health insurance that started in January of 2016. Unfortunately, our healthcare system's death isn't one that will suddenly end in just one terrible event, our system's death will probably last several long and painful years. The beginning of the end can be marked by Blue Cross Blue Shield's decision to terminate all PPO coverage for individual plans in Texas and replace it with a managed care HMO network. Competitors of Blue Cross quickly followed suit, leaving Texans grasping at straws and hoping to find anything that could cover them with a large doctor and hospital network. Unfortunately, many still don't understand how limited options are and won't until they need emergency health care.
Since the passage of the Affordable Care Act we've been writing that the law did nothing to control health care costs and thus was a waste of time and truthfully an effort to take people's money and subsidize others. Oddly, things would have been better if the country would have simply offered free coverage to the poor rather than destroying the system that was actually working for many. Now, we have a health insurance system that is offering small networks, higher deductibles, lower material benefits, and premiums that are almost 200% greater than just a few short years ago. The worst part is that the pain is not over. 2017 will usher in a new set of significant actions that will further reduce choice, cost more, and result in an actual reduction in the number of insureds.
Get Them Covered - At All Cost
When Obamacare was passed, we were told that the real goal was to have everyone insured in the nation. At the time, almost 35 million people were without insurance. The CBO (Congressional Budget Office) in collusion with CMS stated that they predicted that nearly 20 million people would sign up for health insurance by 2016. Unfortunately only 11 million new people have signed up for the expensive plans. The biggest problem with the 11 million that have signed up is that they are the poor and very sick, those that cost the insurance companies lots. Additionally, those that have signed up are the ones that the US taxpayer provides significant subsidies to. The entire ACA was predicated on a redistribution system where older and sicker insureds were to be subsidized by young healthy folks. In other words, young people would be expected to pay 100% to 300% more than they would have in the old system in order to make the costs affordable for older and sicker enrollees. The ACA was simply the manifestation of socialism. While the idea of coverage for everyone sounded great to many young millennials, they quickly have figured out that socialism isn't great if you are the one paying for it! Young Americans have made very logical decisions and determined that they would rather pay the 2.5% penalty than pay hundreds more per month than what they think is fair for coverage. Because of their rational thoughts, the Affordable Care Act has failed and 2017 will be the year that it completely unravels.
Losing Money - Rising Premiums and Getting Out of Dodge
Carriers have been trying to deal with huge claim losses from really sick people. The losses we are talking about are astronomical. There are patients that cost the insurance companies $20,000 to $30,000 a month. When a patient is costing $2MM per year, there is almost no way a carrier can remain solvent if they are exposed to more than a couple. Unfortunately, many of these companies were exposed to lots of these patients and thus they have lost hundreds of millions of dollars annually since 2015. While you may not have any sympathy for the insurance companies, you must be concerned about this as it is everyone's problem. If the insurance company continues to face these losses, they really only have two choices in the current system. First, the insurance companies can raise your premiums. This has been the first approach all the carriers used. Most plans in Texas in 2016 saw an increase of 20%. Yes, if you read the documentation from CMS you'll see that they said that premiums were only going up between 8% and 11%, but that was for subsidized people, the truth is that the premiums were artificially held down AND pressured to maintain the appearance that they system was containing costs. This was just a mirage. The truth is that the subsidized marketplace enrollee may have only faced a 11% increase, but the taxpayer is getting soaked by having to pay significantly higher premiums in the long run. In 2017 we have been notified that Blue Cross Blue Shield is requesting a rate increase in Texas ranging from 50% to 60%! Once again, there is no cost control mechanism in Obamacare. As we've predicted for a long time, we've ushered in runaway pricing in healthcare.
Second, carriers that can't push through significant premium increases (I don't think there is any price increase that will stop the bleeding) will simply leave. Who in their right mind would continue to lose hundreds of millions of dollars a year? Not many. This is why Humana, Aetna, and United Health are basically pulling their offerings from the market. Memorial Hermann is stating they will only offer 1 PPO next year and Scott and White also is pulling its PPO from the market. The resulting disaster gives us very expensive HMO coverage offered by very few carriers in Texas. Smaller regional health insurance companies like Scott & White, Community Health, and Memorial Hermann will pick up the patients that will be dropped from Aetna, UHC, and Humana, BUT, if they receive all the really sick folks that have crushed the larger carriers, how can a smaller insurance provider make it? I am going to guess that they won't be able to survive for long. Thus, 2017 will be the year that we witness the Death Spiral of our health insurance system. Costs for premiums will rise, driving out all the healthy, non-subsidized, and rational insureds, leaving only the poor and subsidized really sick individuals. The collapse is coming, you can almost see it.
2016 - The Highest Insured Levels We'll Ever See
As a result of all of the coming fallout, we'll be able to mark 2016 as the high-mark for the number of insureds in the United States. With premiums increasing by 50%, smart folks will simply decide to go uninsured. Let me give you an example. A 60 year-old couple that needs to buy insurance can buy a high deductible HMO for anywhere between $1000 to 1500 a month. This is about $12,0000 to $18,000 a year in premiums. Since it is a high deductible plan each will need to pay $6,000 before receiving any benefits. If one of them gets sick and needs to use the insurance, they will pay a total of $18,000 to $24,000 out of pocket BEFORE the insurance has to pay a dime (except for a free annual physical). Even folks that are rich will look at this an think it is insanity. Consider what a family in this situation will do if they have been laid off. In 2017 we will witness many more Americans simply opting out and "risking it". Yes, they will be not have health coverage and be forced to pay a penalty, but clearly $18,000 to $24,000 out of pocket before the insurance company helps out is insanity. As a result, many middle class folks that would normally buy insurance in the individual market will drop off the roles of the insureds.
Finally, we are seeing that in many areas of Texas, Blue Cross will be the only insurance company that will offer a product. While Blue Cross states they are committed to offering coverage in every county in our state, it is scary to think that Obamacare's main objective was to increase competition and choice, yet we are seeing just the opposite. We are now faced with extremely expensive coverage and one insurance company choice in many areas in Texas!
What Can We Do?
Brace yourself for impact! I'm not sure there is much we can do as we watching the slow motion train wreck happening right before our eyes. Just like Don McLean, we'll be singing about the death of our health insurance market, we are witnessing history. As a shopper, you can continue to compare the options that are available and starting November 1st we'll begin sending out quotes that include the universe of all the options available to use in Texas. We'll include all the carriers and plans that we can purchase. Open Enrollment starts November 1st and you must sign up by December 15th to ensure that you have coverage beginning January 1st of 2017. If you are a current client of Texas Health Design you will get an email containing quotes as soon as we've put them together and we'll ask to set up a time to review your current coverage and new choices. If you are not a current client and want to be added to our list so that you receive an email in early November, please call us at 713-422-2935 or click on the link to CONTACT US.
The death of our health insurance system is nothing to laugh about, in fact, it is terrible. I find myself talking with potential clients and making every effort not to sell them the offerings being sold by the insurance companies as I find that they are extremely expensive and offer poor physician and hospital networks. I analyze their options through work or through their former employer's COBRA and provide an honest appraisal of the best course of action. If you need truthful guidance from a leading health insurance professional, please call, we'd be honored to help.
Texas Health Design