09.28.2011 1

Obamacare regs grind on as courts debate

By John Vinci — Last Friday marked one and a half years since the passage of Obamacare. The more the Obama Administration implements Obamacare and the more Americans discover what it actually contains, the more we realize how disastrous it is.

Just this week Milliman, Inc. issued a report for the Ohio Department of Insurance that estimates Obamacare will cause individual health insurance premiums in Ohio to increase by 55 to 85 percent. Milliman also calculates that Ohio’s health insurance exchange (now called “Affordable Insurance Exchanges” by the Obama Administration) will cost between $19 million and $34 million per year.

A health insurance exchange is an online marketplace for health insurance — just like Expedia and Orbitz are online marketplaces for the airline and hotel industries. Every state must be on track to have their own exchange set up by 2014 otherwise the federal government will be required to run an exchange for that state. As running an exchange is a substantial undertaking, the Obama Administration is working very hard and somewhat unsuccessfully to encourage states to start their own health insurance exchanges. With only 13 states having passed exchange legislation into law, there’s a good chance the federal government will have to run a significant number of state exchanges.

Obamacare gives the State exchanges the authority to issue subsidies to assist some people with paying for their health insurance. But a federally-run exchange, due to a glitch in the Obamacare statute reported by Investor’s Business Daily, does not have the statutory authority to issue such subsidies. Perhaps unsurprisingly, the administration has ignored the plain text of the statute and is proceeding as if both state and federal exchanges can offer subsidies. If the federal government continues to go beyond the congressionally approved law and provides people with health care subsidies it will mean tens of millions of additional taxpayer dollar expenditures.

Then there’s the High Risk Pools. Due to pre-existing conditions many individuals find it difficult to find health insurance. A high risk pool is an insurance plan for people who can’t get health insurance elsewhere because of their pre-existing conditions. Obamacare sets aside $5 billion to subsidize high risk pools called “Pre-Existing Condition Plans” in every state. While early estimates predicted that the program would quickly run out of money, the program has instead been unsuccessful in attracting people who were presumed to be the most in need.

According to a July 2011 Government Accounting Office report, through April 2011 a mere 21,454 people (far fewer than was estimated at the outset of the program) have applied for the high risk pool at a cost of $104 million. This raises the obvious question of whether there actually was a great need for the federal government to intervene by creating high risk pools? If this need was so acute, then why have so few participated?

States continue to petition the Obama Administration for waivers from Obamacare’s Medical Loss Ratio (MLR). The MLR requires insurers to spend a predetermined percentage of premiums, typically 80-85 percent, on “health benefits.” This harms consumers in two ways.

First, it jeopardizes not only the livelihoods of health insurance agents but also their ability to help their clients navigate the complex and confusing arena of health insurance. The Medical Loss Ratio is calculated in a way that has forced insurance companies to drastically cut commissions it pays to insurance agents and brokers. In some cases by as much as 20-50 percent. Where agents are able to remain in business, they are not able to provide the education to their customers about the health insurance options available to them. This leaves consumers without the necessary knowledge to effectively choose the right health insurance policy for them.

Second, it increases costs by reducing competition. For instance, the state of Maine, asked the Obama Administration for a waiver from the Medical Loss Ratio. It said that without a waiver the MLR would force one of its two health insurers who offer individual health insurance policies out of the market — thus creating a virtual monopoly. Maine’s waiver was granted, demonstrating that the Obama Administration itself agreed that the impact of Obamacare would be to create a health insurance monopoly in the state.

Ironically, Nevada, home state of Obamacare proponent Senator Harry Reid, also asked for a waiver which was granted, in part, because it also expected insurance carriers to withdraw from the market place. In order for a state to get a waiver from the Medical Loss Ratio, a state must certify that the MLR would destabilize their individual health insurance market. So, far 16 other states have asked for a waiver. Of those, five requests have been approved (ME, NH, IA, KY, NV).

Think about it this way, to date nearly one-third of the states believe that Obamacare (particularly its MLR requirement) will destabilize their individual health insurance market making it more difficult or more expensive for consumers to get health insurance. So far, the Obama Administration has agreed with 5 of those states.

What’s Next?

Just on the horizon we’re expecting a regulation that will determine how the Department of Health and Human Services will define “Essential Benefits.” The Administration has been waiting for a report from the Institute of Medicine which is expected by the end of the week. Once insurance companies know what benefits are considered “Essential” we’ll have a much better idea of how much the socialist experiment called the “Affordable Care Act” will really cost.

At ObamacareWatcher.org, we’re monitoring how the Obama administration is implementing Obamacare with these and other regulations. Visit ObamacareWatcher.org and submit your own comments on Obamacare regulations.

John Vinci is a staff attorney with Americans for Limited Government who specializes in health care policy.

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