Don’t look now, but there’s more wrong with Obamacare than a glitchy $500 million health exchange website. Spoiler alert: You’d better start saving for your premiums. Oh, and the likely tax hikes that will be needed to keep it afloat.
First, some background about the site itself and its abysmal launch.
The disastrous roll-out of Healthcare.gov was foreseen months in advance, but despite warnings from technicians, programmers, contractors and government officials, the president insisted that the launch would go forward on time Oct. 1, come hell or high water, despite being untested and riddled with glitches, because heck, we can’t hand the political opposition any anti-Obamacare ammo.
As reported by The New York Times today:
In March, Henry Chao, the chief digital architect for the Obama administration’s new online insurance marketplace, told industry executives that he was deeply worried about the Web site’s debut. “Let’s just make sure it’s not a third-world experience,” he told them. …
But Mr. Chao’s superiors at the Department of Health and Human Services told him, in effect, that failure was not an option, according to people who have spoken with him. Nor was rolling out the system in stages or on a smaller scale, as companies like Google typically do so that problems can more easily and quietly be fixed. Former government officials say the White House, which was calling the shots, feared that any backtracking would further embolden Republican critics who were trying to repeal the health care law.
Okay, that President Obama would want to avoid any political fallout should surprise no one. And IT issues will eventually be fixed. This just shows, once again, the purely ideological machinations of Obama’s very existence. The “fundamental transformation” must continue unabated.
But there are other, more serious systemic problems with this law – and most Americans either don’t yet see them coming or simply won’t believe what’s being reported because they share Obama’s ideology.
Richard F. Graboyes, a senior research fellow with the Mercatus Center at George Mason University and professor of health economics at Virginia Commonwealth University, the University of Virginia, George Mason University and the George Washington University, writes in Investors Business Daily that under Obamacare’s subsidy provisions, insurance companies are set to make a killing, along with doctors, hospitals and clinics, thanks to the forced generosity of the American taxpayer:
The Affordable Care Act may give health insurance companies a virtually limitless power to tap the U.S. Treasury, thereby lifting insurers’ profits to undreamt-of heights. This power derives from the mathematical formula for calculating individual subsidies. …
The subsidy formula promises, for example, that a family of four with $30,000 in income will pay no more than 2% of that income (or $600) for its health insurance.
If an insurer charges $10,000 for a family policy, then, the family will pay $600 to the exchange, and the federal government will pay the remaining $9,400.
Under the medical-loss-ratio (MLR) rules, the insurer is entitled to retain 20% of the $10,000 (or $2,000) for overhead and profits.
Now here’s the trick: If the insurer raises the premium to $20,000, the family still pays only $600. However, the U.S. Treasury will now pay the insurer a subsidy of $19,400 — and now, the insurer is entitled to retain 20% of $20,000 (or $4,000) for overhead and profits.
Insurers will be humming the chewing gum jingle, “Double your pleasure, double your fun.”
As rates go up, he notes, so too will the amount of taxpayer-paid subsidies.
But wait? Aren’t there incentives built into Obamacare to prevent this sort of taxpayer gouging? Graboyes explains:
The subsidies are limited to the cost of the second-lowest silver plan available on the exchange.
So if insurers A and B charge $10,000 and $12,000 for exchange-based policies, insurer C is effectively blocked from charging $60,000, because subsidies would only pay up to the $12,000 policy.
Yet, given these contorted rules, why would A and B actually sell policies in the exchange for so little? They, too, would know that raising their premiums will hit only the U.S. Treasury, not the actual people purchasing their policies.
Where prices would eventually settle is, at this point, anybody’s guess.
Avik Roy, who has been covering Obamacare for Forbes, says the glitch-prone Healthcare.gov may have been a trade-off by officials within the Department of Health and Human Services, which oversaw the development of software for the site, so that consumers wouldn’t be able to see how much their plans will actually cost:
A growing consensus of IT experts, outside and inside the government, have figured out a principal reason why the website for Obamacare’s federally-sponsored insurance exchange is crashing. Healthcare.gov forces you to create an account and enter detailed personal information before you can start shopping. This, in turn, creates a massive traffic bottleneck, as the government verifies your information and decides whether or not you’re eligible for subsidies. HHS bureaucrats knew this would make the website run more slowly. But they were more afraid that letting people see the underlying cost of Obamacare’s insurance plans would scare people away.
“Healthcare.gov was initially going to include an option to browse before registering,” report Christopher Weaver and Louise Radnofsky in The Wall Street Journal. “But that tool was delayed, people familiar with the situation said.” Why was it delayed? “An HHS spokeswoman said the agency wanted to ensure that users were aware of their eligibility for subsidies that could help pay for coverage, before they started seeing the prices of policies.” (Emphasis added.)
Roy says the healthcare law’s “bevy of mandates, regulations, taxes, and fees” are what will dramatically raise the cost of plans in the government exchanges. An analysis he helped conduct with the Manhattan Institute found that, “on average, the cheapest plan offered in a given state, under Obamacare, will be 99 percent more expensive for men, and 62 percent more expensive for women, than the cheapest plan offered under the old system.” The disparities will be even greater for healthy people.
So there you have it – two additional analyses of Obamacare’s unintended (or intended) consequences, both of which will result in higher costs for taxpayers on the back end or consumers on the front end – or, more likely, both.
In the end, the president and Democrats will no doubt blame insurance company “greed” (and Republicans in general) for rising costs and prices. And given the mainstream media’s continuing love affair with Obama and his brand of Big Government statism, none of the guilty will be taken to task as to why the law didn’t “fix” rising insurance and medical costs, as it was supposed to do.
And virtually no one will mention that said insurance/health industry “greed” was actually by design. It will be interesting to see how many campaign contributions the law’s enrichment of the “industry” will generate.
Now, about that movement to defund…