News: CJ Exclusives

Insurer: Obamacare Premiums About To Surge

At Raleigh forum, underwriter anticipates 60-percent increase within two years

RALEIGH — A sizable number of North Carolina residents are learning they are no longer eligible for Obamacare, and some health policy premiums could jump 60 percent within two years, an insurance official says.

Rufus Langley, an Apex insurance agent and state leader of the North Carolina Association of Health Underwriters, said Coventry Health Care of the Carolinas CEO Tracy Baker recently told his group that substantially higher consumer costs are anticipated.

“He can see in 2016 this thing shooting up anywhere from 30 to 60 percent in costs” as delayed taxes start to kick in this year and next year, and medical care costs still rising, Langley said Monday at a Raleigh panel discussion.

He said many of the small businesses his agency specializes in are giving up group insurance and sending employees to the subsidized exchange because of escalating costs.

Health Purchasers and Consumers Together, an organization seeking expanded health care access, enhanced quality, and reduced costs, hosted the event.

While North Carolina has been touted by supporters of the Affordable Care Act, as Obamacare is formally known, as one of the nation’s top success stories in recruiting uninsured people to sign up on the HealthCare.gov exchange, Langley sounded a sour note.

“Termination letters are going out this month,” he said. “A fair amount [of consumers] didn’t qualify” for coverage, though he had no specific numbers. “There will be people who are going to be flushed out, and not eligible for subsidies, because they didn’t provide the right information, or they didn’t verify whether or not they were U.S. citizens,” Langley said.

Some never paid their premiums, Langley said. “You’ve got to pay to stay.”

North Carolina ranked fifth nationally in exchange marketplace enrollment, with 357,584 registrants, or about one-third of the eligible uninsured population. But, as with other states and nationally, questions have remained unanswered about how many of those were legitimate sign-ups.

Langley and Chris Conover, a research scholar at Duke University’s Center for Health Policy & Inequalities Research, said of the 7.3 million people who purchased plans nationally — a number the federal government recently scaled back from the original estimate of 8 million — many will end up owing the IRS money at the end of the year.

That is because Obamacare requires participants to estimate their annual income at the beginning of the year. Subsidies are awarded based on those numbers. If an Obamacare participant earns more than expected, thus receiving a higher subsidy than allowed, the IRS could seize that overpayment at income tax return time.

“I would think it’s probably going to be a minimum of 10 percent” of Obamacare participants who will fall into that situation, Langley said.

“I would guess that the number is going to be in the millions,” Conover said. “At least 1 million will end up having to pay the government back, and that’s going to create a lot of chaos.”

Most of Monday’s panel debate dealt with dueling views of the national health insurance landscape.

Conover advanced a proposal to replace Obamacare with a market-driven reform. Jonathan Kotch, a research professor at UNC-Chapel Hill’s Gillings School of Global Public Health, spoke as president of Health Care for All of North Carolina, which advocates a government single-payer national health insurance system.

“I disagree that single-payer requires that health care delivery remain in private hands,” Kotch said. “Some single-payer systems such as those in socialist countries utilize both public financing and public delivery of care.”

His organization models its proposal after the Canadian medical care system in which private providers negotiate reimbursement contracts with the federal government. Keeping delivery private challenges the claim that single-payer is socialized medicine, he said, though doctors and hospitals would be nonprofit providers.

“It is only the power of corporate interests that is preventing us from getting it right” in the United States, Kotch said. “They’ll do whatever they can to maximize profit.” He opposes individuals or companies profiting from the delivery of health care.

While Kotch believes some elements of Obamacare are positive steps, he says it did not go far enough.

“The Affordable Care Act is a good example of how political compromise for its own sake can lead to a bad outcome,” Kotch said. “The Affordable Care Act, while expanding access to care, is little more than a life preserver for insurance companies, which, if left to their own devices, probably would have cost themselves out of business.”

Conover said the Canadian style price controls don’t work. U.S. Medicare has had price controls for 50 years, and they haven’t improved that program, he said. Instead, they led to the drain of available primary care physicians.

Medicare is a system “rampant with political cronyism” whose price controls are “biased towards specialists,” he said. By allowing politics to get in the way of business decisions, “it’s not going to lead to an efficient allocation of resources. It’s going to create all sorts of distortions.”

By fixing budgets and prices for providers, the Canadian government creates perverse incentives, Conover said. Hospitals fill beds with patients suffering minor ailments, allowing them to refuse treatment to more seriously ill patients that cost hospitals more.

A Rand Corporation study found that Canadians used more medical care than they needed, with 30 percent of “free care” wasted on unnecessary services, Conover said. Former Centers for Medicare and Medicaid Services CEO Don Berwick said about 30 percent of U.S. Medicare spending is similarly wasted.

Langley said in his business he has seen the waste and fraud, and likened the overuse of unnecessary services in Medicaid and Medicare to an expression he learned: “My name is Jimmy. I’ll take all you gimme.”

Among Obamacare’s more objectionable flaws is that its costs reduce wages of low-paid workers in large firms “by at least $1 an hour,” while subsidizing workers who earn the same wage at small firms $9 an hour, he said. Subsidies are not available to employees at large firms.

“In a sensible system, the government shouldn’t be tilting the playing field in either direction,” Conover said.

Obamacare increases costs for the millennial generation, people in their 20s, by about 18 percent over their lifetime, Conover said, while using their higher payments to subsidize older people who typically have more income and wealth, and more health care needs. “It’s a regressive tax.”

Obamacare will divert tens of billions of dollars from Medicare “to fund a new entitlement, and that’s going to jeopardize access to care for seniors, and it’s also going to worsen Medicare’s fiscal future,” Conover said.

Because low government reimbursement rates have led many doctors to stop accepting Medicaid patients, “the probability of ending up in the emergency room is higher for Medicaid patients” than uninsured people, he said. Yet Obamacare wants to expand Medicaid by 30 percent. “That’s crazy.”

Obamacare will cover less than half of the nation’s uninsured while adding $2 trillion to the national debt in its first two decades, and $6.2 trillion over a longer period, Conover said. It will cost 2.5 million jobs, and 10 million workers will be switched from full-time to part-time status, according to projections by the nonpartisan Congressional Budget Office.

Conover supports a system of universal catastrophic coverage with an actuarial value covering 40 percent of expenses for the average individual, paid for with universal tax credits.

The remaining 60 percent of costs would be paid by individuals purchasing a Roth Health Savings Account, similar to a Roth IRA. After-tax dollars would be put into an account from which funds could be drawn down as medical needs arise, with consumers deciding how to spend their money.

“Tens of millions of Americans have these accounts now. They work fine,” Conover said. Low-income people would have more money to put into their health savings accounts to help pay for out-of-pocket expenses.

His proposal of universal private health coverage “works in Switzerland and in Singapore,” he said. In Switzerland about 20 percent of the population gets subsidized, while in the United States, 70 percent get some form of government subsidy.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.