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Screwed by Obamacare, or by Your Private Insurer Again?

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November 11, 2013 – Comments (7)

Right now and for the last two months, health insurers have been sending letters out their customers telling them that because of Obamacare they can no longer keep their insurance, so instead if those customers sign up before Dec 6th or in some cases before the health insurance exchange even opened they could take advantage of a "similar plan to what they have" for only a ridiculously high premium increase!

But you have to sign up now. 

The letter the Private Insurers are sending out take advantage of three widely reported pieces of information from our insurers which have been delivered as news, by our news media.

The first piece of information and now widely held belief is that better coverage costs more. And it does, but it does not cost more than you are already paying for crappy coverage. The evidence of that is the better quality care and lower costs enjoyed by people whose Governments help their citizens defend themselves from but private insurers. According to PNHP your high costs are mostly driven by wasting yur premiums on investor dividends and executive pay.

The second piece of information and now widely held belief is that your canceled coverage is being canceled because of Obamacare mandated improvements in the coverage. It is true that Obamacare mandated improvements in coverage, but it is not necessarily true that is why your insurance policy was canceled. The most significant mandated change this year is the lifting of the $2,000,000 annual spending cap and replacing it with no annual limit.

The limit has been lifted every year since Obamacare was passed in 2010, and yet there are no news stories of people who were not impoverished because of the federally madated increased spending limit. And that is a good thing that fewer and fewer people found out they were paying exorbitant premiums for inadequate coverage. 

Before Obamacare was passed in 2010 people could find out they had reached their annual coverage limit buying aspirin at the hospital. In 2011 the minimum annual limit was raised to $750,000, in 2012 it went up to $1,250,000 and in 2013 it was $2,000,000. In 2014 there will be no annual limit allowed. If you are disastrously sick, you will be covered. It is coverage that is exactly what private insurers promised you in the sales pitch, and screw you out of in the fine print.

It is also easy for private insurers to say, and for us to intuitively believe that having an unlimited spending liability will drive up costs. However, very few people actually exceed the 2010 minimum, much less last years $2,000,000 limit. According to NIHCM :  "For instance, the average expenditure for each of the approximately 3 million people comprising the top 1 percent of spenders was more than $90,000 in 2009 (Figure 2). The top 5 percent of spenders were responsible for $623 billion in expenditures or nearly $41,000 per patient. In contrast, mean annual spending for the bottom half of distribution was just $236 per person, totaling only $36 billion for the entire group of more than 150 million people."

That is one idea that makes it easy for us to believe that better Obamacare coverage drove up prices, even though it is not a significant impact on insurance spending. The vast majority of the high spending segment is done by public insurance on people over aged 75 anyway, not the private insurers.

The third piece of information we all know and love is that we will now have to pay the costs of formerly uninsured sick people. I have heard that cost is already baked in to the system as these people have driving up our costs when they go to the hospital for free anyway and those costs het passed on to the rest of us through higher hospital costs when we have to go. True or not, it is not any different than it was last week or last year, except that through Obamacare these people have a means and a mandate to contribute to their own care.

When your insurance company sends you a letter that says they have ended your policy due to Obamacare, and they can put you in a similar policy for twice as much money, ask yourself what is going on.

Since they say the new policy is similar to last years, and it has to be because insurer liability and coverage requirements have not changed very significantly from last year to this year, the cost should be similar too, not double or triple or anything else but similar.

Maybe what is going on is simply Private Insurers are taking advantage of three widely held beliefs to gouge their customers one more time. Hurry up and take what we offer, but don't look at those insurance exchanges first.

Remember Private Insurance has a long history of overcharging and under providing. That is why we now have Obamacare. Had Private Insurers been doing a good job and treating customers well when Obama proposed changing health insurance, the whole country would have asked why change what is working so well. It was simply not working so well.

links :   http://www.dailykos.com/story/2013/11/04/1252957/-How-ObamaCare-Cancelled-Your-Plan-is-really-an-Insurance-Co-Scam-to-Rip-You-Off   

http://www.nihcm.org/pdf/DataBrief3%20Final.pdf 

Best wishes,

Steven 

7 Comments – Post Your Own

#1) On November 11, 2013 at 8:37 AM, drgroup (69.27) wrote:

Steven... you can't be the only person in the USA who can't see what is happening here. You must be writing for the regime....

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#2) On November 11, 2013 at 11:17 AM, Mary953 (73.63) wrote:

Steven -

Hey, I finally have a real name to call you.  That is so great.  It makes me think I am discussing with a friend and not a faceless entity.  I have a few thoughts if you are willing to give me your ideas.  You and I are almost always on opposite sides of this, so I am interested in your take on these.  (Not seeking an argument but truly curious as to your thoughts.)

First are the dual concerns that I have here.  The government and insurance companies should NOT be practicing medicine without a license.  Their main interest is NOT the best healthcare, so how can we get them out of the process?  I would say how can we remove them completely but even I am not that naive.  Every non-medical  bureaucratic layer, every non-medical for-profit entity adds cost and complexity. Why could we not simply either expand Medicaid/Medicare or extend an Obamacare type policy to those who are "un-insurable due to medical conditions?"  I look at the VA hospitals and see the future of healthcare.

Next, aren't we simply asking the youngest adult generation to shoulder the health care for the rest of us at the same time that they are shouldering Social Security, Medicaid, etc?  They are already fighting under massive college debt, the costs of raising their children, and, in some cases, dealing with aging parents.  How can we ask, in good conscience,  that they take on this burden as well?

Last, as an investor, I read that businesses could choose not to provide health insurance but instead to pay a fine.  The fines listed were less than the cost of continuing employee health coverage.  Would it not make good business sense in this situation to pay the fine and let the government pick up the healthcare bill?  After all, taxes (business taxes included) would be paying for government-funded healthcare, so businesses would "pay twice" if they supply health insurance.  At least this seems to make sense to me.  Businesses are only successful when they turn a profit, after all.

And perhaps a clarification:  I deplore the practice of cutting hours so that people are locked out of benefits.  Also, when I say that the younger generations are paying for Social Security, I do not ignore that we each pay for the generations ahead of us.  This is not the way the system was supposed to work, but it is the way things are nonetheless.  It is the same with all entitlements.  Governments never met a pot of money that they didn't want to spend.

Looking forward to your thoughts,

Mary 

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#3) On November 11, 2013 at 12:51 PM, ValueInvestor747 (80.75) wrote:

While I do think private insurers have been involved in some unscrupulous practices in the past, and still today, I would argue that the cancelations and skyrocketing premiums are a direct result of the ACA. I'm not going to make a moral argument, but looking strictly at the economics of the situation, it is rather clear. The new regulations that directly affect private insurers are as follows:

1. Impose an across the board annual "fee" of $8 BILLION on the insurer sector, increased subsequently until reaching $14B in 2018. 

2. Require plans to spend at least 85% of premium dollars on medical care (if less, money is refunded to consumers)

3. Lift lifetime limits

4. Cap out of pocket expenses at the current HSA limit ($6,000)

5. Cap deductibles at $2,000/$4,000

6. Insure anyone, regardless of past credible coverage or pre-existing conditions. In other words, I could forgo coverage until I get really really sick, enroll in a private plan right before my treatment, get treatment which costs hundreds of thousands but only pay a few hundred in premiums, then cancel, and they could not refuse me

7.  Cover "essential benefits" with $0 cost sharing (annual physicals, OBGYN visits, birth control, cancer screenings, etc. etc.).

I find it very difficult to make the argument that this is not impacting your premiums and causing the cancelations. Also, regarding the misconception out there that insurers are rolling in cash, the margins are razor thin as it is (i.e. before these regulations take effect). An example: UNH, the largest insurer in the market, made $110B in Revenue last year and netted $5B, a profit margin of about 4.5%. So it's simply a falsity to buy into the administration's argument that these "fat cat" insurance companies are screwing everyone over to return huge profits. $5B is a big number...but it's all relative, it's not that big on $110B in revenue. 

Just my 2 cents

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#4) On November 11, 2013 at 1:03 PM, Mary953 (73.63) wrote:

ValueInvestor747, all of this is not only new information to me, it is extremely pertinent.  Would you consider a copy-paste to create a new blog post so that I can follow any comments on your "2 cents?" 

I want to learn as much as possible about this issue and how it is impacting us.  The actual roll out of any government program is always vastly different from anticipated plans of how that program is expected to work.

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#5) On November 11, 2013 at 7:50 PM, devoish (98.57) wrote:

Hi Mary,

My post was mostly concerned with warning folks of the deplorable practice of Private Insurers trying to use mis-information about Obamacare to charge their good paying customers three times more than they would have paid on the exchanges, for the same coverage.

Best wishes,

Steven 

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#6) On November 11, 2013 at 11:18 PM, Mary953 (73.63) wrote:

Thanks for the reply, Steven.  You were writing about private insurers and I was asking you about governmental policies.  Classic disconnect - my bad.

Thanks for answering anyway.  (I truly need to redevelop my ability to edit things down, don't I?)

Mary 

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#7) On November 13, 2013 at 8:46 AM, devoish (98.57) wrote:

Valueinvestor,

Thank you for the reply, For the reasons I cited, I think that when your private insurer sends you a letter that cancels your policy and offers "similar" coverage at two to three times your previous premium, it an opportunistic attempt to play on ignorance and fear, stoked by the innaccurate information provided to the news media by private insurers.

Best wishes,

Steven 

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