Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It
Here's my version of a classic corporate marketing story from the 1980s:
A big dog food company decided to come out with the latest and greatest new dog food. They hired the smartest consultants from the big universities in Boston to advise them. They had their scientists, who know far more about nutrition than any consumers or the dogs, come up with the most nutritious formula they were convinced was good for them. The engineers designed a new and cost effective manufacturing process that capped their overhead. The marketing department allocated enormous amounts of money to the various state sales offices and put together a very expensive and colorful national ad campaign led by a charismatic spokesman. The company trained a newly recruited sales force and signed up the biggest supermarkets for the best shelf space.
It did not sell.
So, the President gathered his senior team in the boardroom and asked each department head, "Why isn't our dog food selling?" The Boston consultants said, "Don't worry the customers just don't understand yet how good this is for them and they will." The scientists were mystified, marketing was completely stumped, the state sales offices said, "It isn't our fault." No one had a clue about what was wrong.
Finally, after a long pause, a new college intern (not from Boston) sitting in the back of the room finally got up enough courage to tell the President, "The dogs don't like it!"
The Washington Post is reporting, "The new health insurance marketplaces appear to be making little headway so far in signing up Americans who lack health insurance, the Affordable Care Act's central goal."
The article cites a February McKinsey & Company survey that found only 27% of people who had bought coverage by early February had been previously uninsured. That is better than McKinsey's last survey which indicated only 11% of of those who enrolled a month earlier were uninsured––likely because the later enrollments don't include so many previously insured people who had their coverage cancelled on January 1.
The article also reports that about half of uninsured adults have looked for information on the online health insurance exchanges.
Last month, the Obama administration reported the following activity both online and through the health insurance exchange call centers:
A big dog food company decided to come out with the latest and greatest new dog food. They hired the smartest consultants from the big universities in Boston to advise them. They had their scientists, who know far more about nutrition than any consumers or the dogs, come up with the most nutritious formula they were convinced was good for them. The engineers designed a new and cost effective manufacturing process that capped their overhead. The marketing department allocated enormous amounts of money to the various state sales offices and put together a very expensive and colorful national ad campaign led by a charismatic spokesman. The company trained a newly recruited sales force and signed up the biggest supermarkets for the best shelf space.
It did not sell.
So, the President gathered his senior team in the boardroom and asked each department head, "Why isn't our dog food selling?" The Boston consultants said, "Don't worry the customers just don't understand yet how good this is for them and they will." The scientists were mystified, marketing was completely stumped, the state sales offices said, "It isn't our fault." No one had a clue about what was wrong.
Finally, after a long pause, a new college intern (not from Boston) sitting in the back of the room finally got up enough courage to tell the President, "The dogs don't like it!"The Washington Post is reporting, "The new health insurance marketplaces appear to be making little headway so far in signing up Americans who lack health insurance, the Affordable Care Act's central goal."
The article cites a February McKinsey & Company survey that found only 27% of people who had bought coverage by early February had been previously uninsured. That is better than McKinsey's last survey which indicated only 11% of of those who enrolled a month earlier were uninsured––likely because the later enrollments don't include so many previously insured people who had their coverage cancelled on January 1.
The article also reports that about half of uninsured adults have looked for information on the online health insurance exchanges.
Last month, the Obama administration reported the following activity both online and through the health insurance exchange call centers:
What Individual Mandate? It is Looking More and More Like the Obama Administration Will Not Enforce the Individual Mandate
It looks to me the Obama administration will claim at least 6 million enrollments by the end of March. But that will mean 75% of subsidy eligible people will not have bought a plan.
Will the 2014 mandate to buy health insurance be enforced come tax time?
It sure doesn't look like it.
To be sure, the administration is not making any major announcements prior to the close of open enrollment on March 31 the better to get as many people to sign-up as possible.
When asked about waiving the individual mandate at a recent Congressional hearing, HHS Secretary Sebelius said, "That's what the law says and that is what will happen."
Well sort of.
A Treasury Department spokesperson (the IRS is charged with enforcing the mandate) said, "the rules are clear and taxpayers should be able to determine whether they had coverage for 2014, or if not, whether they owe a fee." But the spokesperson then pointed out the fee will be imposed only on those who don't have a valid exemption.
What's a valid exemption?
The administration just published a list of 14 valid exemptions with the first 13 including such things as having suffered from a flood or other disasters, the death of a close family member, and not finding an affordable alternative for a cancelled policy.
Then there is the 14th exemption: "Another hardship in obtaining health insurance." That is all number 14 says.
That's pretty broad. But, am I reading too much into this 14th exemption?
Here is what President Obama said last week when he was asked about the individual mandate in an interview with WebMD.com, "What I think is important for people to understand is that if, in fact, they still can't afford it, there is a hardship exemption in the law. That means they may not be subject to a penalty. The penalty really applies to folks who clearly can afford health insurance but are choosing not to get it."
Will the 2014 mandate to buy health insurance be enforced come tax time?
It sure doesn't look like it.
To be sure, the administration is not making any major announcements prior to the close of open enrollment on March 31 the better to get as many people to sign-up as possible.
When asked about waiving the individual mandate at a recent Congressional hearing, HHS Secretary Sebelius said, "That's what the law says and that is what will happen."
Well sort of.
A Treasury Department spokesperson (the IRS is charged with enforcing the mandate) said, "the rules are clear and taxpayers should be able to determine whether they had coverage for 2014, or if not, whether they owe a fee." But the spokesperson then pointed out the fee will be imposed only on those who don't have a valid exemption.
What's a valid exemption?
The administration just published a list of 14 valid exemptions with the first 13 including such things as having suffered from a flood or other disasters, the death of a close family member, and not finding an affordable alternative for a cancelled policy.
Then there is the 14th exemption: "Another hardship in obtaining health insurance." That is all number 14 says.
That's pretty broad. But, am I reading too much into this 14th exemption?
Here is what President Obama said last week when he was asked about the individual mandate in an interview with WebMD.com, "What I think is important for people to understand is that if, in fact, they still can't afford it, there is a hardship exemption in the law. That means they may not be subject to a penalty. The penalty really applies to folks who clearly can afford health insurance but are choosing not to get it."
The One Thing That Could Save Obamacare––And The Obama Administration Needs To Do It In the Next Month
To properly price the exchange health insurance business going forward the carriers have to sharply increase the rates. A senior executive for Wellpoint, which sells plans in 14 Obamacare exchanges, is quoted in a Reuters article telling Wall Street analysts there will be big rate increases in 2015, "Looking at the rate increases on a year-over-year basis on our exchanges, and it will vary by carrier, but all of them will probably be double digits."
If the health plans do issue double digit rate increases for 2015, Obamacare is finished.
There are a ton of things that need to be fixed in Obamacare. But, I will suggest there is one thing that could save it.
The health insurance companies have to submit their new health insurance plans and rates between May 27 and June 27 for the 2015 Obamacare open-enrollment period beginning on November 15th. Any major modifications to the current Obamacare regulations need to be issued in the next month to give the carriers time to adjust and develop new products.
If the administration goes into the next open enrollment with the same unattractive plan offerings costing a lot more than they do today, they will not be able to reboot Obamacare.
Simply, health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won't buy them any more enthusiastically next fall than they already have. See: Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It
Doubling the fines for not buying in 2015 will only give the Democrats more political problems––and it doesn't look to me like they are going to enforce the fines anyway.
Health insurance plan executives are now faced with a daunting decision. How do they price the 2015 Obamacare exchange plans?
Even if the administration announces they have signed-up about 6 million people by March 31, the number of people enrolling would be well below expectations––only about 25% of those subsidy eligible will have signed up by the deadline. An enrollment that small guarantees the risk pool is sicker and more expensive than it needs to be in order to be sustainable.
But dramatically increasing the rates will only assure even fewer healthy people will sign up for 2015 and some of those who signed up for 2014 will back out over the higher rates. This is what a "death spiral" looks like.
To properly price the exchange health insurance business going forward the carriers have to sharply increase the rates. A senior executive for Wellpoint, which sells plans in 14 Obamacare exchanges, is quoted in a Reuters article telling Wall Street analysts there will be big rate increases in 2015, "Looking at the rate increases on a year-over-year basis on our exchanges, and it will vary by carrier, but all of them will probably be double digits."
If the health plans do issue double digit rate increases for 2015, Obamacare is finished.
There are a ton of things that need to be fixed in Obamacare. But, I will suggest there is one thing that could save it.
The health insurance companies have to submit their new health insurance plans and rates between May 27 and June 27 for the 2015 Obamacare open-enrollment period beginning on November 15th. Any major modifications to the current Obamacare regulations need to be issued in the next month to give the carriers time to adjust and develop new products.
If the administration goes into the next open enrollment with the same unattractive plan offerings costing a lot more than they do today, they will not be able to reboot Obamacare.
Simply, health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won't buy them any more enthusiastically next fall than they already have. See: Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It
Doubling the fines for not buying in 2015 will only give the Democrats more political problems––and it doesn't look to me like they are going to enforce the fines anyway.
Health insurance plan executives are now faced with a daunting decision. How do they price the 2015 Obamacare exchange plans?
Even if the administration announces they have signed-up about 6 million people by March 31, the number of people enrolling would be well below expectations––only about 25% of those subsidy eligible will have signed up by the deadline. An enrollment that small guarantees the risk pool is sicker and more expensive than it needs to be in order to be sustainable.
But dramatically increasing the rates will only assure even fewer healthy people will sign up for 2015 and some of those who signed up for 2014 will back out over the higher rates. This is what a "death spiral" looks like.
If the health plans do issue double digit rate increases for 2015, Obamacare is finished.
There are a ton of things that need to be fixed in Obamacare. But, I will suggest there is one thing that could save it.
The health insurance companies have to submit their new health insurance plans and rates between May 27 and June 27 for the 2015 Obamacare open-enrollment period beginning on November 15th. Any major modifications to the current Obamacare regulations need to be issued in the next month to give the carriers time to adjust and develop new products.
If the administration goes into the next open enrollment with the same unattractive plan offerings costing a lot more than they do today, they will not be able to reboot Obamacare.
Simply, health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won't buy them any more enthusiastically next fall than they already have. See: Obamacare: The Uninsured Are Not Signing Up Because the Dogs Don't Like It
Doubling the fines for not buying in 2015 will only give the Democrats more political problems––and it doesn't look to me like they are going to enforce the fines anyway.
Health insurance plan executives are now faced with a daunting decision. How do they price the 2015 Obamacare exchange plans?
Even if the administration announces they have signed-up about 6 million people by March 31, the number of people enrolling would be well below expectations––only about 25% of those subsidy eligible will have signed up by the deadline. An enrollment that small guarantees the risk pool is sicker and more expensive than it needs to be in order to be sustainable.
But dramatically increasing the rates will only assure even fewer healthy people will sign up for 2015 and some of those who signed up for 2014 will back out over the higher rates. This is what a "death spiral" looks like.
Insurers see double-digit Obamacare price rises in many states next year
Posted March 23, 2014, at 3:39 p.m.
U.S. consumers eligible for Obamacare health plans could see double-digit price hikes next year in states that fail to draw large numbers of enrollees for 2014, including some states that have been hostile to the health care law, according to insurance industry officials and analysts.
The early estimates come as insurance companies set out to design plans they intend to sell in 2015 through the state-based health insurance marketplaces that are a centerpiece of the Affordable Care Act, President Barack Obama’s signature domestic policy achievement that is widely referred to as Obamacare.
WellPoint Inc., which sells plans on 14 Obamacare exchanges, expects health insurance rates nationwide to be higher. Increases for the Obamacare market that has signed up about 5 million people to date are expected to outpace those in the employer-sponsored market, which serves about 170 million people.
“Looking at the rate increases on a year-over-year basis on our exchanges, and it will vary by carrier, but all of them will probably be in double digit plus,” Ken Goulet, president of WellPoint’s commercial business, told investors in New York on Friday.
The cost of health insurance is already a political hot potato in this year’s election campaign for control of Congress, with Republicans warning of the potential for skyrocketing rates in their attempt to turn the ballot into a referendum on Obamacare.
Insurers have noted the difficulty of building and pricing plans for 2015, which will mark the second year of the Obamacare exchanges. Enrollment for 2014 closes on March 31, giving them very little time to review the costs of covering their new members before submitting proposed rates to insurance regulators in May and June.
Industry officials and independent analysts say the lack of hard data will mean huge variations in premiums, with increases ranging from the high single-digit percentages in some states to as much as 30 percent in others.
Slow enrollment is a potential harbinger of big price hikes in over a dozen states, where technology failures or political opposition to Obamacare may have deterred younger and healthier residents from signing up.
Because the healthcare law prevents insurers from charging sick people higher premiums, the participation of healthy young people is needed to offset the cost of covering policyholders with pre-existing conditions. Government data so far have shown about 25 percent of new Obamacare enrollees are in the younger demographic of adults aged 18 to 34, well below the White House’s 38 percent target before last October’s botched rollout.
Government actuaries predict an 8 percent increase in overall net insurance costs next year. Last week, U.S. Health and Human Services Secretary Kathleen Sebelius told a congressional committee: “I think premiums are likely to go up, but go up at a slower pace than what we’ve seen since 2010.”
Some analysts say the more dire industry expectations reflect companies’ uncertainty rather than the true costs of the market.
“I think it’ll be the exception. But there will be some sections of the country with significantly higher insurance premiums,” said Larry Levitt, a policy expert at the nonpartisan Kaiser Family Foundation, which tracks health care trends.
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