Saturday, November 16, 2013
Tuesday, October 29, 2013
Obamacare Sticker Shock
by Henry W. Burke
How will 27-year old adults in Virginia react when they find that their healthcare insurance premiums are going up by $5,000 per year under Obamacare?
There is a classic case that is often discussed in marketing courses. A major pet food company spent a large amount of money on research to formulate a new dog food. Everything pointed to a huge success. They launched the new product with a great deal of fanfare and advertising, but sales were absolutely horrible. Much to their dismay, they learned that "The dogs won't eat the dog food."
I think we will have the same situation with Obamacare -- people will not buy Obamacare because it is too expensive!
Barack Obama is a master at diverting the public's attention from the core issue to peripheral items. As long as the media and the politicians are dwelling on the computer problems with the Obamacare website, they are not focusing on the real problems with Obamacare.
The real problem with Obamacare is the high cost of the healthcare coverage! When people actually see the cost of the Obamacare premiums, they experience "sticker shock."
The Obamacare Website
Most of the people are focusing on the "computer problems" involved with the Obamacare website. The Obama Administration called these "glitches" and the Mainstream Media dutifully repeated this talking point. Clearly, the Department of Health and Human Services (HHS) has botched the Obamacare rollout but that is not the biggest problem.
Many information technology (IT) experts have figured out why the Obamacare website (Healthcare.gov) is crashing. The website forces a person to enter a large amount of detailed personal information before that person can start shopping for a plan. This creates a massive traffic bottleneck, as the government verifies the information and decides if the person is eligible for subsidies.
HHS was initially going to let people browse and compare prices before registering. However, HHS is delaying this option because the federal government wants users to be aware of their eligibility for subsidies before they can see the prices for the policies. In other words, the Obama Administration does not want users to see Obamacare's true costs.
According to Compete, a web traffic analysis service, only 0.4 % of the people who visited the Healthcare.gov website during its first week actually signed up for Obamacare (data from Millward Brown Digital, 10.15.13). Out of 9.47 million unique visitors to Healthcare.gov in the first week, only 36,000 completed the Obamacare enrollment!
On 10.23.13, the Obama Administration granted Americans an extra six weeks to obtain coverage before they incur a penalty. The announcement means people will have until March 31 to sign up for a plan, according to an official with HHS.
The Obamacare Cost
The real problem is the cost of the healthcare coverage under Obamacare! Very few people have actually enrolled in an Obamacare insurance plan. A major reason for this low number of sign-ups is the high cost of the insurance coverage. When people see the high premium costs, they are shocked and appalled!
Because of the problems with the Obamacare exchanges, it has been difficult for consumers to get quotes for health insurance. Fortunately, The Heritage Foundation has stepped in to fill this information void. Heritage completed a rigorous study that creates a snapshot of what it looks like to shop for insurance prior to Obamacare implementation. This information is given in the Heritage Foundation article "How Will You Fare in the Obamacare Exchanges?"
The Heritage Health Insurance Microsimulation Model (HHIMM) produced a Table that shows the premiums in each state, "Comparing the Costs of Buying Health Insurance." This comparison is different from the others; those comparisons simply compare the specific plans within Obamacare.
In contrast, the Heritage Foundation study compares what people are paying right now before Obamacare with the Obamacare exchange prices. The former numbers are listed in the "Before" columns of the Heritage Table; the latter figures are listed under the "Exchange" columns of the Table. The Heritage Table shows the average monthly premiums for three categories: Adult Age 27, Adult Age 50, and Family of Four.
The study covers 47 states plus the District of Columbia (48 states). Massachusetts, Hawaii, and Kentucky are omitted because the three states released very little data.
Based on the Heritage Foundation report, I prepared Table 1, Comparison between Existing Insurance and Obamacare Exchange -- Adult Age 27. I omitted the "Adult Age 50" and "Family of Four" categories to simplify the Table; however, I added Annual Premiums and Annual Change Amounts.
Because the younger insured Americans are so important to Obamacare, I will focus only on the Adult Age 27 category.
Table 1 -- Comparison between Existing Insurance and Obamacare Exchange -- Adult Age 27
(- 30 %)
Distr. of Colum.
(- 3 %)
(- 29 %)
(- 2 %)
(- 28 %)
Source: "How Will You Fare in the Obamacare Exchanges?" by Drew Gonshorowski, The Heritage Foundation, Issue Brief #4068, 10.16.13.
Massachusetts, Hawaii, and Kentucky are omitted because the three states released very little data.
In 43 out of the 48 states, the average premium will be more expensive than the existing non-group plan.
For the Adult Age 27 group, the five highest percentage increases are: Virginia 252 %, Arkansas 171 %, Georgia 168 %, Arizona 157 %, and Vermont 144 %.
The five largest Annual Change Amounts are: Virginia $4,999, Vermont $2,592, Arkansas $2,160, Georgia $1,982, and Arizona $1,918.
On an annual basis, the health insurance premium for an Adult Age 27 in Virginia will go from $1,980 to $6,979, an increase of $4,999. This means a 27-year old adult in Virginia will have to deal with a $5,000 jump in annual premiums under Obamacare!
How many young people will sign up for Obamacare when the increase is a whopping $5,000?
[Most people will opt to pay the penalty and carry no health insurance, particularly when it is unclear whether the IRS will actually be given the legal authority to collect the penalty unless a person is due a tax refund. How will the IRS locate and then collect what could be fees from millions of "penalty dodgers"?]
Healthcare Increases and Cancellations
During the 2008 presidential campaign, Barack Obama declared:
I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family's premium by up to $2,500 a year.
The reality is that Obamacare leaves 26 million Americans without insurance and drives the cost up substantially.
The secret is out about Obamacare. It is becoming clear why the Obama Administration postponed the implementation of Obamacare until after the 2012 presidential election. As Americans open their health insurance envelopes, they are finding that their insurance premiums are going up by large amounts; and many people are wondering how they can afford healthcare insurance. Other Americans are receiving cancellation letters.
Barack Obama constantly repeated these promises:
If you like your doctor, you can keep your doctor, period.
If you like your health care plan, you can keep your health care plan, period.
These are more of his broken promises. Under Obamacare, many people will have to change doctors. Due to Obamacare, health insurance companies are cancelling hundreds of thousands of people from their health plans.
For example, Florida Blue is terminating 300,000 policies (about 80 % of its individual policies in the state); Kaiser Permanente in California is terminating 160,000 people (about half of its individual business). Highmark in Pittsburgh is dropping 20 % of its individual customers; and Independence Blue Cross in Philadelphia is dropping 45 % of its customers. Additional examples are coming out almost every day.
Financial Viability of Obamacare
Obviously, Obamacare will make health insurance more expensive for many people. This raises an important question. If 50 million people are uninsured today, mainly because insurance is too expensive, why is it better to make insurance coverage even more expensive?
The answer is political! Obamacare is not designed to help healthy people with average incomes get health insurance; it is designed to force those people to pay more for coverage. This subsidizes the insurance for people near the poverty line. Obamacare is income redistribution, plain and simple!
Two groups are crucial to Obamacare's success -- employers and young adults. As these two groups begin to see the high costs of Obamacare, they are determining that the costs far outweigh the benefits.
Participation by employers is critical to making the healthcare law work; Obamacare counts on employers to continue offering coverage to their workers. Accordingly, the employer mandate was included in the law to keep employers in the game. What if employers drop 7 million people (or more) from their healthcare plans?
According to updated numbers from the Congressional Budget Office (CBO), by 2023:
1. Obamacare will add 13 million people to Medicaid.
2. Obamacare will cause 24 million people to get their coverage through the law's exchanges; 19 million of these will be subsidized by the government.
3. Due to Obamacare, 7 million people will lose their employer-sponsored coverage.
Is it wise to make 32 million more people dependent on the government for their healthcare? With our national debt at $17 trillion, the answer is rather obvious!
[13 million + 19 million = 32 million]
Young adults are needed to keep the costs down in Obamacare. Because they are less costly to cover, young adults will play a key role in the law's success. The Obama Administration expects that 7 million people will enroll in the Obamacare exchanges next year; the administration needs 2.7 million of them to be young, healthy adults.
The authors of Obamacare established rules to charge young adults more than the real cost for their age group; this is supposed to offset the expenses of insuring older and sicker people. To force young adults to sign up, they included a penalty with the individual mandate.
The penalties start out quite low but increase in later years. In 2014, the fine for remaining uninsured is $95 (up to a family maximum of $285) or 1 % of family income. The penalties rapidly increase in the next two years. By 2016, the fine will run $695 per person (or a family maximum of $2,085) or 2.5 % of family income, whichever is greater.
When the young adults see the high premium costs, they will simply pay the penalty rather than choosing to purchase an expensive healthcare plan – at least for the near future.
However, after 2014, the higher Obamacare penalties might force them into the Obamacare exchanges. This would move our country into Obama's real agenda, which is to put everyone ultimately into the single-payer plan whereby the government decides who lives and who dies.
Obamacare sorely needs millions of young people to sign up in order to make the new healthcare program viable. Will young people enroll in a program that costs $2,000 more than their existing insurance? What will happen when the Obamacare premiums are $5,000 more? (That is the case for Age 27 people in Virginia.)
Obamacare will be remembered as the most expensive new social program in history! Obamacare will fail because it is unbelievably complex and horrendously expensive!
Barack Obama's signature healthcare legislation was inappropriately labeled the Affordable Care Act (ACA). Obamacare is anything but affordable; a better label would be the "Unaffordable Care Act."
The Obamacare "sticker shock" will not wear off until this costly healthcare measure is repealed!
In this report, I have focused mainly on the Obamacare premium spikes and Obamacare's financial viability.
When Americans actually experience the high deductibles and the constraining nature of Obamacare, they will demand the full and complete repeal of this horrible healthcare law! Congress will finally take the decisive action demanded by the American people!
Henry W. Burke