Thursday, June 11, 2015

Obamacare, the Full Monty

Obamacare, "Full Monty" version, is just over 17 months old and it isn't pretty.

2014 rates were mostly uneducated guesses without any real data. Look at it this way:

Government Mandated Food Program

Suppose the government created (and mandated) a new market for food. You can no longer buy what you want to eat, only the approved list of food.

Something like the new school lunch programs that are a total failure.

Under the new program you can forget about hot dogs, anything fried, anything canned, nothing with added sugar. Grocery stores and restaurants must only serve food that is permitted under the new rules. If they fail to follow the mandate they will pay a penalty tax.

Grocery stores and restaurants will no longer be able to turn people away because they can't afford the prices.

And these food establishments will now have new competitors funded with taxpayer dollars. The government will also use your tax dollars to establish a food distribution channel and will heavily promote this new distribution system.

Buying food will now be as easy as ordering on Amazon.

New Ways to Buy Food

If you owned a grocery store or restaurant before the change, how would you price your product and how would you promote it? Maybe you were buying advertising before but now the government is telling consumers they can get their food at a reduced price through the new Market Place.

Even your regular customers are confused and now think the only way they can afford to eat is to order through the Market Place.

Grocery stores and restaurants had to redesign food aisles and menu's.

Had to find new vendors that would sell them approved foods.

They would need to estimate how many customers would show up and how many would pay. Under the new system, if you cannot afford to pay the government will pay a portion of your bill but will only do so months after they receive proof that you have bought or eaten from the prescribed list and paid your fair share.

Grocery stores and restaurants must serve you and only collect what you can afford to pay at the time. They must file a report with the government, proving you bought food from them and how much you paid.

Once the government has verified the purchase they will reimburse the restaurant or grocery store for the balance due.

Sounds far-fetched doesn't it?

But this is exactly what has happened with health insurance carriers.

Health Insurance Carriers Meet the New World Order

They had to completely redesign their product line.

New products must be approved by the government.

The government also approved pricing. No more free market rates. Carriers have to guess how much it will cost to operate.

Health insurance carriers had to estimate how many customers would buy from them and how many they would lose to the Market Place.

Would these customers pay their bill in full or only a portion? How long would the carrier have to wait before collecting the outstanding premium balance from the government?

Would these new customers eat a "normal" amount or would they treat it like an all-you-can-eat buffet?

It takes about a year and a half for the carriers to see actual data. How many people bought? How quickly were the premiums paid? How many sick people will buy and how many healthy people will take a pass?

So here we are. A little over 17 months into Obamacare (Full Monty version) and it isn't pretty.

Preview of Coming Attractions

Double digit rate increases are just around the corner.

Robert Laszewski has penned a very detailed preview of coming attractions. Here is a snippet.

  • after two years the Obamacare enrollment is coming up way short of what it needs for us to be assured that we have a sustainable risk pool
  • Texas Blue Cross lost $400 million in their first year
  • CareFirst Blue Cross of Maryland is asking for a 34% rate increase 
  • Blue Cross Blue Shield of Tennessee is asking for a 36.3% increase
  • In Iowa the biggest Obamacare insurer went broke last December
  • But wait, there's more! When the new plans become public expect to see bigger deductibles and co-pays as well for 2016.
And it get's worse.
Health plans are still dealing with incomplete data. Really, they are looking at just one year of claims experience (early 2014 to early 2015) for a brand new book of business in which the enrollment has not been stable.
If you want to read the full article you can find it here.

First, a warning. 

You might want to have an adult beverage (or three) handy while reading it. Just don't let anyone know. Consumption of alcohol is not allowed under the new government rules.

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