Friday, December 13, 2013

Obamacare--Six Things to Watch for in 2014

We've been following a number of developments in the health insurance arena.  Here are some things to watch for as the Affordable Care Act (aka Obamacare) takes effect in 2014.  Given the delays and political maneuverings surrounding implementation, it's hard to be definitive.

1. Are there more uninsured Americans on January 30, 2014 than on January 1, 2013?

Obamacare imposes "minimum essential benefits" on every insurance policy--benefits that most policies don't have.  There are exceptions for "grandfathered" plans, but those exceptions are so narrow few policies meet them.  That is why we are seeing millions of people in the individual health insurance market lose their insurance.

Couple that phenomena with the chaotic rollout of Obamacare.  Some people have signed up for Medicaid and a few have signed up for Obamacare policies, but nowhere near as many that have lost their coverage.  Government figures are troubling, as they have an unhatched chickens problem--they assume everyone who "enrolls" online will actually buy a policy.  It's very hard to see what's going on. We won't know for sure until we see how many people actually pay for a policy or sign up for Medicaid.

Let's put is mathematically:

If:  Number of People Who Lose their Insurance > Number of People who Sign Up for Insurance

Then: The law is in big trouble.  The biggest selling point for the Affordable Care Act is that more people will have good health insurance.  If that proves false, then the argument to keep the law evaporates.

2. Will doctors and hospitals accept Obamacare policies?

Have you been to an emergency room lately?  The ones I've been in have little signs saying, basically, that the hospital will treat you for an emergency but if you are on Medicaid, you'll be sent somewhere else as soon as possible.  Why?  Because Medicaid work does not pay enough to make it worth it.  Also, few doctors take Medicaid.

If Obamacare policies become stigmatized like Medicaid, you probably won't want to have one if you can help it.  There are reports that 70% of the members of the California Medical Association are not going to accept Obamacare policies.  Hospitals are having trouble figuring out what the Obamacare policies will pay for and what they won't.  Some may just throw up their hands and say we won't deal with this.

Other major, high-end hospitals like Cedars-Sinai in Los Angeles, Memorial Sloan Kettering in Manhattan, and Anderson Cancer Center in Houston are either excluded or severely limited in what care they can provide to Obamacare policy holders.  If you need that high quality care, you might not be able to get it.

Our doctors advised us to check with both the insurance company and the healthcare providers' own staffs to make sure they would be in-network.  That proved good advice, as many doctors and hospitals are not in network.

In Insurancese, the phrase to look for is "narrow networks."  This means the network the policy covers has fewer doctors and hospitals and excludes more doctors and hospitals.  The strategy is twofold.  It's easier to negotiate with fewer doctors and hospitals and force them to make concessions.  Also, insurance companies exclude the most expensive hospitals and doctors to keep costs down.

If you start hearing a lot about narrow networks, that's not a good thing.

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3. Will healthcare.gov work?

At the heart of the crisis is a website that simply does not work.  Users have immense trouble signing in and worse, data transmitted to insurers is riddled with errors.  Indeed, parts of the website have not even been built yet.

If healthcare.gov does not work, and work soon, the whole project will implode.  A website that kind of works is worse for insurance companies than one that does not work at all.  Who is going to wait around for hours and try and try again to get health insurance?  People who really need it--meaning the sick, injured and old.  Who is most likely to try for 15 seconds and give up?  People who are healthy and have better things to do.

A bad insurance pool is far worse for insurance companies than no pool at all.  If insurance companies find themselves about to be wiped out, they will withdraw support for the project and seek to replace Obamacare with something else.

Look for that to start happening in the summer if the website is not fully functional by February or so.

If healthcare.gov fails to work properly, then that brings us to the next thing to watch out for.

4. Will the President suspend the individual mandate?

Obamacare requires that just about every American buy health insurance or pay a fine.  Suppose someone living in a state that does not expand Medicaid and cancels individual policies.  Further suppose that person tries and fails to sign up for insurance through healthcare.gov.  Let's also say this person does not have job-provided health insurance.  I would say that's not an outlandish or rare scenario.

How can the government fine that person for failing to obtain insurance?

My answer--it probably can't.  I suspect a court would find a way not to enforce the mandate.  This President, if he holds to form, would not allow a court to strike down the mandate.  That would just look bad.  He would suspend the mandate by decree, citing fairness and justice, for at least a year.

If I were handicapping whether the individual mandate applies in 2014, I'd say it's about 50-50.

5. Will the "essential benefits" rules wreck the employer-provided health insurance market?

Remember the Bible story where the prophet Nathan confronts King David?  David had knocked up his best general's wife and to cover it up, sent him to the front where he's killed in battle.  Nathan goes to David and tells him a story about a poor man with one little lamb that he loved very much--and a rich man who had everything.  The rich man takes the poor man's lamb and barbecues it.  David says such a man should die.  Nathan replies, "you're the man."

Those of with our little individual health policies, that gave us a bit of security, really liked them.  People with government or union negotiated gold-plated health plans sneered at those plans.  They took what little we had, because they said they weren't good enough.  Not everyone will be able to afford the replacement policies with their high premiums and astronomical deductibles.  Most people can't even go online to order a new policy because the exchanges don't work.

Mr. President--you're the man.

The same rules that made individual plans illegal apply equally to employer provided plans.  Very few employer provided plans meet the requirements.  So expect current plans to become illegal and replaced with vastly more expensive policies.

Remember, the employer mandate only applies to companies with more than 50 employees.  In addition, the President has decreed that the employer mandate won't apply in 2014.  No employer has to comply with the employer mandate in 2014.

Imagine you're a business owner facing vastly increased health insurance costs and no mandate to provide those benefits.  What would you do?  Exactly.

Watch for the government to try to head off loss of coverage for millions of American workers.  I don't know what they will do, but they'll hopefully do something.  It would be nice if they come up with something other than blaming the Republicans.

6. Hobby Lobby Supreme Court Case

The Supreme Court agreed to hear a pair of cases regarding Obamacare's requirement that insurance policies cover contraception, including the controversial morning after pill.  Some employers object to paying for contraception because their religion teaches that any kind of contraception is wrong.  Others object because some of the drugs kill a fertilized egg, which they believe is a human life.

Does an American employer have the right to say "I don't want to be involved with contraception or abortion?"  Does an American employee have the right to health insurance free from moralistic intrusion from the employer?  We're about to find out.

Arguments will likely take place in March.  I'd expect a decision at the end of the term, in late summer.

It seems politically that tying Obamacare to abortion is a recipe for strife in perpetuity.  It's already happening, with some states like Michigan banning abortion coverage in Obamacare policies.  It's just not a good way to get people to accept the law.

2014 is the big year for Obamacare.  We'll see what happens.  Thanks for stopping by.