Tuesday, August 12, 2014

Artificial Stimulation

The federal government has assumed the role of Adam Smith's "invisible hand" by picking
winners and losers in the economy. Through a series of regulations and "stimulus" money (most of it created out of thin air but that is an entirely different discussion) the folks in DC are like the Wizard of Oz. Standing behind a curtain in the marbled halls of Congress, the White House and various regulatory agencies, elected and appointed officials (who are accountable to no one) pull levers and strings in an attempt to move the economy along a path pre-determined by those who have never run a business or signed a paycheck.

Comes now Obamacare. The crown jewel of this administration. At least that is the way it is billed although others would argue it barely qualifies as cubic zirconium.

Obamacare was sold as:

  • a way to bend the health care cost curve down
  • provide health insurance for everyone at a lower cost
  • allow you to keep your doctor and your plan
  • and eliminate discrimination by health insurance carriers
Instead we have:
  • higher total health care spending
  • much higher gross health insurance premiums
  • you lose your plan but you can keep your doctor only if they are in the new network
  • government discrimination has supplanted health insurance discrimination
And the $1 billion government website STILL doesn't work.

But other than that ............

Tulip Lim, a Standard & Poor analyst weighs in on the after effects of Obamacare and has this observation.

For-profit health insurers say major medical claims seem to be in line with expectations this year.
For-profit hospital companies say the level of admissions, and the severity of the incoming patients' problems, seem to be increasing.

According to Lim, they can't both be right.

In other words, you can't have increased hospital admissions while health insurance claims are "on target" and coming in as expected.

Why not?

Is it not possible for health insurance claims to rise but still come in at expected levels?

For Lim to be correct in his assumption he would need to know that carriers expected claims were for 2014.

It would appear he also fails to account for at least some of the hospital claims to fall under Medicaid which would not be reflected in insurance carrier tally's.
Lim has not come to any firm conclusions about whether the insurers or hospitals will prove to be right about use of care, but, in an analysis of PPACA effects, he says health insurers seem to be saying one thing with words and another thing with their prices. "They continue to price their products for more of an uptick," Lim says.
Of course they are anticipating the need for higher premiums.
  • newly insured individuals will continue to be sicker than the norm
  • some carriers are expecting 30% shrinkage caused by people who fail to pay their premiums
  • the same (or higher) claim levels offset by declining premium revenue = higher than expected loss ratios = need for higher premium rates
  • eventually the government will stop printing Obamacare reinsurance bucks and the carriers will sink or swim on their own merit
Then we have the CMS invisible hand that will require carriers to expand provider networks and Rx formularies which will put even more upward pressure on claims and premiums.

Higher premiums, fewer choices, Obamacare.
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