Health Insurance Prices Take Off: Worker Pay Stagnant

Lambert here: Shocker, huh? I remember thinking, when Obama said buying health insurance on the wonderful website would be like buying an airline ticket, “Oh! Price collusion!” So far, that hasn’t panned out (that I know of). But now it turns out that ObamaCare has encouraged another great feature of the airline industry: consolidation. Also too, adverse selection death spiral.

By PEU Report. Originally posted on their blog, Private Equity Report.

PPACA+cost+trend++CMS

PPACA is not bending the health care cost curve downward as promised.  It is sending premiums into the orbit.   NYT reported:

Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected. 

Blue Cross and Blue Shield plans — market leaders in many states — are seeking rate increases that average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota.

The government projected a less than one percent increase for national health expenditures under PPACA.

We estimate that overall national health expenditures under the health reform act would increase by a total of $311 billion (0.9 percent) during calendar years 2010-2019, principally reflecting the net impact of (i) greater utilization of health care services by individuals becoming newly covered (or having more complete coverage), (ii) lower prices paid to health providers for the subset of those individuals who become covered by Medicaid, (but with net Medicaid costs from provisions other than the coverage expansion), and (iii) lower payments and payment updates for Medicare services. Although several provisions would help to reduce health care cost growth, their impact would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions.

Now that coverage is soaring once again, the government remains on the hook:

The PPACA establishes the Exchange premium subsidies during 2014-2018 in such a way that the reduced premiums payable by those with incomes below 400 percent of FPL would maintain the same share of total premiums over time. As a result, the Federal premium subsidies for a qualifying individual would grow at the same pace as per capita health care costs during this period. 

Annual premium growth of 20 to 50% will blow a monster hole in PPACA’s financial footing.  PPACA was a predictable debacle.  People are paying more to be underinsured and face hurdle after hurdle accessing health care services.

What are health insurers doing with their extra cash?  Buying one another.  Forbes stated:

The big are getting bigger: Aetna and Humana, the nation’s number three and number four health insurers by revenue, are merging.  Aetna will pay about $230 per share for Humana, in a $37 billion cash and stock deal, the largest-ever deal in the health insurance industry.

It’s also the latest major merger in an increasingly frantic health care marketplace. On Thursday, Centene  announced that it was buying HealthNet for nearly $7 billion, and CVS last week bought the Target pharmacy business for $2 billion.  (And the other two big health insurers, Anthem and Cigna have also talked about merging.) PPACA “appears to have only helped major insurers, by driving millions of new customers into the market. Aetna and Humana have seen their stock valuations triple in the past five years, since PPACA was signed into law, and the other three major insurers also have seen huge gains.”

If you like America’s consolidated airline industry service which in my experience has consistently provided less for more money, you’ll love PPACA.  Just as the private plane set no longer flies commercial, the people reforming the system, executives, board members, lawmakers and lobbyists/consultants, will have no trouble accessing concierge level healthcare. Most of us will pay an unconscionable amount to be underinsured and still face financial obliteration from one major health care episode.

Pay raises for five years, zero to miniscule.  One year increase in health insurance premiums, 25 to 50%.  That’s bending the cost curve in a way to make PPACA an instant failure.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.