President Obama on Thursday apologized to Americans
whose existing health insurance was being significantly altered or
cancelled altogether just as enrollment for the Affordable Care Act was
commencing. "I am sorry," the President announced, "that they are
finding themselves in this situation based on assurances they got from
But those Americans waiting for a mea culpa from either their employers
or their insurers shouldn't hold their breath. After all, while their
premiums and deductibles have spiraled upwards, the percentage of
nonelderly Americans covered by workplace insurance has plummeted from
almost 70 percent to 54 percent just since 2001. Meanwhile, even as the evidence is growing
that some carriers are cynically using the launch of the ACA to squeeze
or drop less "desirable" customers, the Obama administration like the Bush White House before it
has had to plead with insurers
to protect their current policyholders.
That shouldn't be too much to ask of an industry forecast by the
nonpartisan Congressional Budget Office (CBO) to gain 7 million new
paying customers in 2014 alone thanks to Obamacare or that had advocated
its own plan
for instituting an individual mandate, ending discrimination based on
pre-existing conditions and subsidizing coverage for lower-income
Americans. Besides, at the March 5, 2009
White House Forum on Health Care Reform, it was Karen Ignani
the president and CEO of America's Health Insurance Plans (AHIP), who
made a very bold promise to President Obama and the American people. The
top lobbyist for the nation's health insurance companies pledged:
"We want to work with you, we want to work with the members
of Congress on a bipartisan basis here. You have our commitment. We hear
the American people about what's not working. We've taken that very
seriously. You have our commitment to play, to contribute, and to help
pass health care reform this year."
Of course, that was just a façade
to cover an all-out blitz to ensure health care reform was dead on arrival. Behind the scenes
Ignani took out the long knives to smother the ACA in its cradle and
stab Obama in the back. That summer, the insurance industry spent $173 million
and deployed 50,000 workers
to kill the public option and other provisions designed to make
coverage more affordable. By the time the ACA was signed into law in
March 2010, AHIP alone had quietly poured over $100 million
into the U.S. Chamber of Commerce campaign to defeat it. But still, they lost.
Now with Obamacare the law of the land, America's health insurance
companies are once again doing what they do best: maximizing profits by
dropping their sickest and costliest customers while selling products
designed not to be used.
With the passage of the Affordable Care Act, insurers were forced to
create a new formula for keeping sicker Americans off their rolls. Prior
to the ACA, insurers rejected one in five applicants
in the individual market of 25 million people
due to pre-existing conditions. The even more pernicious practice of "rescission
enabled the companies to drop hundreds of thousands of policyholders
when they became ill. (As Ezra Klein lamented four years ago, that kind
of cruelty wasn't just business as usual for the insurance industry; it
was its business model
Annual and lifetime benefits caps, limited coverage for preventive care
and emergency care along with other traps helped AHIP's members keep
costs down and the sick away.
But Obamacare ended all that. Its "10 essential" patient protections
mean that insurers—at least theoretically—can no longer cherry-pick
their customers as they have for years. Sadly, America's health insurers
have devised new ways to achieve similar results.
Their tactics start with the policy "cancellations
which may affect from 50 to 80 percent of the 15 million people who buy
coverage for themselves and their families in the individual market.
The AP recently tallied up those whose bare-bones policies
don't meet the minimum requirements under the Affordable Care Act:
In California, about 900,000 people are expected to lose
existing plans, but about a third will be eligible for subsidies through
the state exchange...
About 330,000 Floridians received cancellation notices from the
state's largest insurer, Florida Blue. About 30,000 have plans that were
grandfathered in. Florida insurance officials said they're not tracking
the number of canceled policies related to the new law.
National numbers are similar: 130,000 cancellations in Kentucky,
140,000 in Minnesota and as many as 400,000 in Georgia, according to
officials in those states.
For his part, Blue Cross and Blue Shield of Florida
CEO Patrick Geraghty explained, "We're not cutting people" but instead
"informing folks that their plan doesn't meet the test of the essential
health benefits; therefore, they have a choice of many options that we
make available through the exchange." But other companies are taking a
different approach by either trying to hoodwink subscribers into
purchasing much higher cost policies as soon as possible, or
alternatively forcing them out altogether.
TPM documented the first gambit
which often comes in the form of a "If you're happy with this plan, do
nothing" letter. Looking at cases in Washington and Kentucky involving
LifeWise and Humana, TPM explained:
"If Donna had done nothing, she would have ended up spending
about $1,000 more a month for insurance than she will now that she went
to the marketplace, picked the best plan for her family and accessed
tax credits at the heart of the health care reform law...
Across the country, insurance companies have sent misleading letters
to consumers, trying to lock them into the companies' own, sometimes
more expensive health insurance plans rather than let them shop for
insurance and tax credits on the Obamacare marketplaces—which could lead
to people like Donna spending thousands more for insurance than the law
intended. In some cases, mentions of the marketplace in those letters
are relegated to a mere footnote, which can be easily overlooked."
In other cases, insurers aren't racing to retain their current customers, but to shed them as quickly as possible. As Sarah Kliff
pointed out in the Washington Post
"Employers have responded by increasing premiums by less than 3
percent, on average, to make up for the cost of these new benefits." But
in the individual market, insurers are using the opportunity presented
by the ACA's new coverage requirements to dump their costliest
customers. Cancer survivor Edie Littlefield Sundby is losing her policy
not due to Obamacare, but because her insurer UnitedHealthcare is abandoning
the California non-group market. And as Kaiser Health News
documented two weeks ago:
Both Independence and Highmark are cancelling so-called
"guaranteed issue" policies, which had been sold to customers who had
pre-existing medical conditions when they signed up.
regular policies because they did not have health problems will be given
an option to extend their coverage through next year.
Consumer advocates say such cancellations raise concerns that companies may be targeting their most costly enrollees.
They may be "doing this as an opportunity to push their populations
into the exchange and purge their systems" of policyholders they no
longer want, said Jerry Flanagan, an attorney with the advocacy group
Consumer Watchdog in California.
In practice, the end result of the much larger than expected price hikes
and cancellations is similar to the pre-Obamacare insurance scheme of "purging
." As Ezra Klein explained it in 2009:
This is where insurers rid themselves of unprofitable
accounts by slapping them with "intentionally unrealistic rate
increases." One famous example came when Cigna decided to drive the
Entertainment Industry Group Insurance Trust in California and New
Jersey off of its books. It hit them with a rate increase that would
have left some family plans costing more than $44,000 a year, and it
gave them three months to come up with the cash.
With Obamacare, none of this should pose a problem for consumers, who
can simply shop on the exchanges for a better deal. Unless, that is, the
major insurers refuse to sell policies there. Sadly, that is exactly
what has happened so far.
The health insurance exchanges (16 run by the states themselves and
34 for them by the federal government) are where consumers go to compare
plans and pricing from different vendors and, just as important,
receive any federal subsidies they may qualify for. But in May, Regence BlueCross BlueShield of Oregon
largest insurer in the state—announced it was withdrawing from the
exchange there. As the Lund Report described the shocking decision:
Onlookers came away stunned. Regence had been at the table
all along, testifying in favor of the exchange during legislative
hearings and had staff attending work sessions organized by Cover
Oregon. Its top executives, including Mark Ganz, Jim Walton and Don
Antonucci had appeared in numerous public speaking forums touting their
support, giving all indications they'd be a strong player in the
exchange. The Oregon Insurance Division had even scheduled a hearing in
early June to review Regence's plans.
"Regence is just trying to game the system and play politics in the
hopes that the exchange goes down; it's quite obvious that they're
setting themselves up to compete by not participating in the exchange
and not gamble on a risky population that they can't predict," according
to people familiar with the marketplace.
That was just a hint of things to come. Despite their strong earnings, high stock prices and the prospect of seven million new customers
in 2013 alone, America's major health insurers are choosing to avoid the exchanges for now. As USA Today
recently reported ("Big insurers avoid many state exchanges
About a third of insurance companies opted out of
participating in the exchanges in states where they were already doing
business, according to a report by McKinsey & Co.
made the same point in a recent segment:
In 23 states plus the District of Columbia, there are fewer
than four carriers in the individual exchange market. "You don't have
Aetna, you don't have UnitedHealthcare, you don't have Cigna. Those are
all national carriers who are not playing in the Illinois-federal
Why are they not? "They didn't want to take the risk." The risk of not knowing how many customers they will have."
Of course, the current financial performance and future forecasts of
the big carriers would suggest they are very well positioned to take
precisely that risk for more market share. As the New York Times
Because they face new regulations intended to broaden
coverage and limit profit-taking, some analysts have been concerned that
profits will suffer. But in the run-up to the Affordable Care Act,
stock market prices have told a different story.
Over the last 12 months, shares of the top five publicly traded
health insurance companies—Aetna, WellPoint, UnitedHealth Group, Humana
and Cigna—have increased by an average of 32 percent, while the Standard
& Poor's 500-stock index has risen by just 24 percent.
As USA Today
noted, Aetna and the Coventry plans it recently
acquired will be available on a statewide basis in 10 state exchanges
and in limited geographic areas in seven state exchanges." Spokesman
Matthew Wiggin says the company "narrowed in on those states where we
had the right cost structure and network arrangements to meet the
specific demographic needs of exchange consumers." The result, he says,
is the company's presence will deliver "long-term profitable growth."
Especially if customers can't use the products they're paying for.
Americans going to their state's insurance exchange may not only be
surprised to find their current insurer is not there. As it turns out,
their preferred doctors and nearby hospitals may not be offered either.
For insurers new to some markets, that quandary may just reflect the
time it takes to build to construct a provider network from scratch. But
for many others selling policies on the exchanges, that flaw is a
feature, not a bug.
Take, for example, the situation in New Hampshire
Right now, almost all of the 40,000 people buying individual policies
in the Live Free or Die state purchase them from Anthem BlueCross
BlueShield. Anthem also happens to be the only insurer selling coverage
in the New Hampshire exchange. And none of those plans pay for care at
Concord Hospital, the largest in the state. As the Concord Monitor
reported last month:
The president of Anthem Blue Cross Blue Shield in New
Hampshire faced an unhappy audience of state senators yesterday as she
defended the insurer's plan to exclude 10 of New Hampshire's hospitals
from the limited network of health care providers available for people
who purchase insurance through the new exchange.
As the Monitor explained, "Anthem built the so-called narrow network
in an effort to keep costs down for the plans it will sell on the new
state insurance marketplace."
That "narrowing" is underway in other states as well. In Oregon, only
one insurer in the CoverOregon exchange includes the Oregon Health
Sciences University (OHSU) and its doctors in its network of hospitals
and physicians. Across the border, the University of Washington Medical
Center—the premier provider in the state—is similarly missing from most
insurance plans on the exchange. As Seattle King5 TV
told viewers, that is no accident:
Teresa wrote, "...the following hospitals are OUT OF NETWORK
providers for Premera's Exchange plans: Swedish Hospital, University of
Washington Medical Center, Providence Hospital, Harborview
and Seattle Cancer Care Alliance..."
Other shoppers on the exchange say even if they stay with the same
insurance company they have now, they would be forced to switch doctors.
Washington State Insurance Commissioner Mike Kreidler described how
insurers are keeping their costs down and profits up by making it less
likely customers will actually use the health care they thought they
were paying for:
"We are seeing some of the health insurers now, narrowing
down their network, of who are their 'in network' doctors and hospitals.
One of the ways they work in the exchange to hold down costs is to
have narrower networks. Most of the carriers wound up doing that,
meaning that they were much limited as to which hospitals and doctors
would be participating in the 'inside the exchange' plan."
Many insurers will let their customers keep their doctors, but only if
they purchase more expensive plans directly. To do that, they'll have to
pay more and forego federal subsidies for which they are qualified.
In late 2008, AHIP published its own proposal
for the health care reform its CEO Karen Ignani knew the incoming
president would be pushing. It included an individual mandate, ending
the ability of insurers to discriminate against those with pre-existing
conditions and financial assistance for Americans earning up to 400
percent of the federal poverty purchasing coverage and many other
provisions of what would become the Affordable Care Act. When AHIP's
Karen Ignani made her since forgotten pledge in March 2009, an excited
and obviously satisfied President Obama told his White House audience:
Good, thank you. Karen, that's good news. That's America's Health Insurance Plans. (Applause.)
But just six months later, President Obama used an October 2009 address
to call out the insurance industry for its betrayal:
This is the unsustainable path we're on, and it's the path
the insurers want to keep us on. In fact, the insurance industry is
rolling out the big guns and breaking open their massive war chest - to
marshal their forces for one last fight to save the status quo. They're
filling the airwaves with deceptive and dishonest ads. They're flooding
Capitol Hill with lobbyists and campaign contributions. And they're
funding studies designed to mislead the American people.
Four years later, the health insurers are still misleading the American
people. With Obamacare now the law of the land, AHIP is still getting
its profits—and its revenge
—at their expense.
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