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Did Obamacare Cause The Increase In Private Healthcare Insurance Premiums?

Stanley Feld M.D.,FACP, MACE

A reader of my blog received this question from one of his friends.

The reader asked me his friend’s question  “I have a question and I don’t want it to be political (as I stay away from that for many reasons).                                                                                                                                 
Health insurance is so expensive and it does not cover hardly anything. We had to get the worst plan with the worst coverage. But it was not this way 6 years ago. We could afford good coverage.   

 The question is: Did Obamacare cause this change in healthcare insurance and these problems in access to care?

A reader asked:

Which of your blogs would be the best one to show him to answer his question?

The answer to the question is YES!! I will try to explain.

If I sent all the links to your friend would be overwhelmed. There are too many to count.  I will summarize some of the major reasons Obamacare is to blame for some of the increases in private healthcare insurance premiums and the decrease in the access to care. Obamacare has led us into a financial disaster. “Medicare for All” is not the answer.

I believe the goal of Obamacare was to create greater dysfunction in the healthcare system which would lead to huge premium increases for private healthcare coverage. The public would then beg the government to adopt a single party payer system with “Medicare for all.” This has been the progressives”  goal since 1935. Do you remember Barney Frank and John Kerry saying we cannot have a single party payer system yet because we do not have the votes?

https://stanleyfeldmdmace.typepad.com/repairing_the_healthcare_/2018/10/the-main-reason-behind-rising-medical-costs.html

The government has not had a very successful single party payer systems record.  The VA Health Administration, the Indian Health Service, Medicare and Medicaid are all inefficient and financially unsustainable.

“Our federal government already runs three single-payer systems—Medicare, the Veterans Health Administration, and the Indian Health Service—each of which is in a shambles, noted for fraud, waste, and corruption.”

“Why would we want to turn over all of the American medicine to those who have proved themselves incompetent to run large parts of it?”

https://imprimis.hillsdale.edu/short-history-american-medical-insurance/

The federal government depends on healthcare insurance companies to do the administrative services for Medicare, Medicaid and Obamacare. Administrative services include negotiating payments to hospitals, nursing homes, physicians and providers on all levels.

The various healthcare insurance companies are supposed to bid for these service contracts. The insurance companies receive one global fee.  The healthcare insurance company with the contract must pay providers on a fee for service basis. The healthcare insurance companies do not have good enough data to make an accurate bid estimate.  Actuary science is not rocket science. The healthcare insurance company builds in a twenty percent cushion to the bid. If the bid was low and the healthcare insurance company that lost money Obamacare guaranteed through a complicated reinsurance formula reimbursement to the company for its loss.

Recently the government audit discovered an overpayment of $10 billion dollars to the healthcare insurance industry for Medicare Part D.

I believe there is much more overpayment in Medicare Part A, B and D because of the government bureaucracy. The government only had the money to pay 12% of the reinsurance claims of the healthcare insurance company one year. The insurance industry simply raised the premium in the private sector.

http://stanfeld.com/president-obama-somehow-finds-the-money/

http://stanfeld.com/accelerating-the-destruction-of-the-healthcare-system/

http://stanfeld.com/the-deception-and-disinformation-continues/

Nationwide, the Obama administration made $7.3 billion in reinsurance payments to health insurers. The reinsurance program, funded by taxes on health insurers and self-funded employer health plans, has been criticized by Republicans as a “bailout” for insurers.

https://www.ibj.com/blogs/12-the-dose-jk-wall/post/53906-obamacare-shovels-another-122m-to-indiana-insurers

The healthcare insurance industry then once again raised premiums on the private healthcare sector to make up for its losses. to

The government reinsurance payments weren’t enough in all cases. New York-based Assurant Inc. asked for a 26 percent hike in private premiums for 2016, due to high claims in Indiana, before that company decided to exit the Obamacare markets in all states.

This was typical price shifting.

http://stanfeld.com/?s=price+shifting

Healthcare insurance companies projected that Obamacare would result in them losing money because of adverse selection. Obamacare’s increase required benefits for both public and private insurance. Obamacare’s rules included coverage for oral contraceptives for all and coverage of pre-existing illnesses among others. A sixty-year-old male does not need an insurance policy the receives oral contraceptives.

The healthcare insurance industry asked for double-digit increases in private healthcare insurance in every state. The logic was that these enrollees would pay for the loses that would occur from the Obamacare enrollees.

http://stanfeld.com/managing-points-of-view-and-healthcare/

The government’s argument is all should pay for everyone ’s healthcare needs. These healthcare needs have increased as the population has gotten more obese and has had a rise in drug addiction. These increased healthcare risks resulted in increased actuary estimates of healthcare cost. It does not put a burden on consumers who do not act responsibly.

The increased healthcare premiums caused many employers to drop healthcare coverage for their employees. The decrease in healthcare insurance coverage added to the pressure of healthcare premium increases.

The healthcare insurance industry also plays games with the Medical Loss ratio. The result is an increase in healthcare premiums and deductibles while decreasing services. The Obamacare issued regulations that the insurance industry must dedicate 80% of the healthcare premium to direct medical care and 20 % can be used for administrative expenses for both the public government insurance and private insurance. It is the state insurance regulators responsibility to enforce the regulation.

The expenses the industry wanted to be included are;

Expenses to be included in direct medical care are:

  1. The cost of verifying the credentials of doctors in its networks.
  2. The cost of ferreting out fraud such as catching physicians over testing patients or doing unnecessary operations.
  3. The cost of programs that keep people who have diabetes out of emergency rooms.
  4. The sales commissions paid to insurance agents.
  5. Taxes paid on investments.
  6. Taxes paid on premium income.

All these expenses are administrative expenses in my view and not medical expenses. If these expenses are permitted as benefit expenses, premium money available for direct medical care would decrease. The eighty percent required for direct medical care would be markedly reduced. The result would be an increase in healthcare insurance premiums.

http://stanfeld.com/medical-loss-ratio-how-did-the-healthcare-insurance-industry-do/

http://stanfeld.com/what-is-the-medical-loss-ratio/

The calculation for direct medical care helps the healthcare insurance company prove it lost money. The insurance company then applies to state regulators for a premium increase. The state regulators permit the premium increases.  If the premium increase is refused by the regulators the insurance company threatens to leave the state. The other option the healthcare insurance company uses is to decrease the insurance services and/or increase the insurance deductibles.

Another problem has developed in the healthcare insurance industry that is causing it to raise premiums and reduce services and access to care as a result of Obamacare.

Hospital systems are buying out physicians’ practices. Obamacare has put many restrictions on physician practices. It has increased practices overhead. Obamacare has decreased the ability for physicians to use their medical or surgical judgment that they have become happy to sell their practices to hospital systems. The hospital systems now have to deal with the problems of medical practice. The cost of electronic medical records, which have not added to the quality of medical care, increased many physicians’ willingness to sell their practices to hospital systems. At the moment the percentages of hospital-owned practices are up to 65% from only 17% ten years ago.

http://stanfeld.com/physicians-barriers-to-practice-their-profession/

https://www.wsj.com/articles/SB10001424052748704122904575315213525018390

As premiums have gone up physicians have not experienced an increase in reimbursement. They have been forced to see more patients quickly to earn almost as much as before Obamacare. Obamacare has destroyed the patient-physician relationship which in my view is essential in medical care. Physicians simply do not have time to talk to patients.

Hospital systems have taken over physician populations in many communities. This gives the hospital leverage over the healthcare insurance industry. The hospital system can demand higher reimbursement because it provides all the physicians.

The large hospital systems can demand that the insurance company only use the physicians in its hospital system even if there are lower cost of care options in a community.

The result is an increase in healthcare premiums and decreased the quality of care.

All of this is the result of Obamacare. There are about ten more reasons why Obamacare has increased premiums and decreased access to care. I have left link exposed. You are encouraged to look at them to see the full explanation for some of the point I have made.

I hope this blog answers your friend’s question. :  Did Obamacare cause this change in healthcare insurance and these problems in access to care? 

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.



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