Two months ago,
we outlined why the CPI-boosting Affordable Care
Act is on the verge of bankrupting that all important driver of the US economic
growth engine — the American consumer.
Put simply, inflation in medical care
services costs hadn’t yet reared its ugly head because many insurers were as
yet unable to gauge the full base-effect impact of Obamacare on their P&L.
That, we said, was about to change: “After
finally digesting the true cost of Obamacare, any recent insurance prime hikes
will seem like a walk in the park compared to what is coming.
Sure enough, insurers have now taken a
close look at exactly how much socialized medicine is costing them.
Not surprisingly, the picture isn’t
pretty.
In some cases, forecasters grossly
underestimated the number of claims they would likely receive, and indeed, even
a PhD economist can tell you that when the amount going out for claims is
greater than the amount coming in via premiums, there’s a problem with the
model and because staunching the outflow is effectively now forbidden,
something has to give on the receivables side of the equation which means
dramatically higher premiums.
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. Federal officials say they
are determined to see that the requests are scaled back.
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, according to documents posted online by
the federal government and state insurance commissioners and interviews with
insurance executives.
The Oregon insurance commissioner, Laura N.
Cali, has just approved 2016 rate increases for companies that cover more than
220,000 people. Moda Health Plan, which has the largest enrollment in the
state, received a 25 percent increase, and the second-largest plan, LifeWise,
received a 33 percent increase.
Jesse Ellis O’Brien, a
health advocate at the Oregon State Public Interest Research Group, said: “Rate
increases will be bigger in 2016 than they have been for years and years and
will have a profound effect on consumers here. Some may
start wondering if insurance is affordable or if it’s worth the money.”
The rate requests, from some of the more popular
health plans, suggest that insurance markets are still adjusting to shock waves
set off by the Affordable Care Act.
Blue Cross and Blue Shield of New Mexico has
requested rate increases averaging 51 percent for its 33,000 members. The
proposal elicited tart online comments from consumers.
“This rate increase is ridiculous,” one
subscriber wrote on the website of the New Mexico insurance superintendent.
In their submissions
to federal and state regulators, insurers cite several reasons for big rate
increases. These include the needs of consumers, some of whom were previously
uninsured; the high cost of specialty drugs; and a policy adopted by the Obama
administration in late 2013 that allowed some people to keep insurance that did
not meet new federal standards.
“Our enrollees generated 24 percent more claims
than we thought they would when we set our 2014 rates,” said Nathan T. Johns,
the chief financial officer of Arches Health Plan, which covers about
one-fourth of the people who bought insurance through the federal exchange in
Utah. As a result, the company said, it
collected premiums of $39.7 million and had claims of $56.3 million in 2014. It
has requested rate increases averaging 45 percent for 2016.
The rate
requests are the first to reflect a full year of experience with the new
insurance exchanges and federal standards that require insurers to accept all
applicants, without charging higher prices because of a person’s illness or
disability.
There you go. Precisely as we said, the
ACA and of course the ballooning cost of new drugs proxied by Janet Yellen's
"stretched" biotech sector mean mandatorily insured Americans will
now be charged more. Much more.
But do not despair because where
there's an Obama there's always "hope". And on that note, we'll leave
you with the following, from the President:
If insurance
regulators “do their job, my expectation is that rates hikes will come in
significantly lower than what’s being requested.”
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