The following column (by me) originally appeared at the MacIver Institute.
The mainstream media seems fixated on the insider politics surrounding repealing and replacing Obamacare, but the average person couldn’t care less about parliamentary procedures and intra-party squabbling. They’re faced with an inescapable reality: healthcare is unaffordable and inaccessible thanks to Obamacare. The question they want answered is: What is the point of having insurance if you can’t afford to use it?
The out-of-touch media coverage reminds me of the apocryphal tale about elite passengers on the Titanic arguing over the bar tab as the ship takes on water. Meanwhile, the people in steerage are stuck behind those gates trying to escape before the water reaches their heads.
The water is rising fast. In 2017, the average premium increase on the individual market in Wisconsin was 16 percent. One of the most egregiously expensive plans was in western Wisconsin, costing $51,000 per year in premiums for a couple unfortunate enough to be in their 50s with three children.
The cost of Obamacare plans is staggering. In a report last year that scoured the federal database of 2017 premiums in Wisconsin, the MacIver Institute found that a family of four would fork over an average monthly premium of $1,609.11 for a platinum plan – $19,309.32 per year – while a mid-level silver plan would cost them $1,297.02 in average monthly premiums, or $15,564.24 per year
Deductibles – the out of pocket cost of using your health insurance – also keep spiraling upward. For a top-tier platinum plan in Wisconsin, we found the average deductible is $900 for a family and $450 for an individual.
However, for a mid-level silver plan, the average deductible is $7,015.71 for a family and $3,491.92 for an individual. The average catastrophic plan deductible will be $14,300 for a family and $7,150 for an individual. That’s not cut-back-on-Starbucks money, that’s bankruptcy court, even for those earning a decent salary.
Obamacare proponents constantly point to the number of people they claim are insured because of Obamacare. But conflating health insurance with access to actual health care is looking through rose-colored glasses. In the real world, Obamacare decimates household budgets, especially middle class families who don’t receive federal subsidies and are whipsawed by the full cost of both premiums and deductibles.
Despite the double digit price spikes and astronomical deductibles in Wisconsin, we drew the long stick compared with our neighbor across the Mississippi River. Minnesotans on the individual exchanges got stuck with premium hikes as high as 67 percent in 2017.
In response, Minnesota Governor Mark Dayton and the Legislature were forced to bail out 123,000 middle class families to the tune of an additional $313 million in taxpayer money.
“If you like your plan, you can keep your plan,” President Obama said in PolitiFact’s 2013 Lie of the Year. In Minnesota, that lie came with the added asterisk that taxpayers have to come to your rescue after finding out your state’s politicians fell for a federal “free money” scam.
Fortunately, Gov. Walker and Wisconsin’s fiscally conservative legislature were more skeptical of Obama’s P.T. Barnum routine, saving us from a similar fiscal calamity.
The Minnesota example highlights an important and all-too-often overlooked point. If you’re unfortunate enough to make too much money to receive a federal subsidy – like most middle class families in America – you’re on the hook for the entire inflated premiums plus exploding deductibles for your Obamacare plan.
Middle class families stuck with Obamacare are drowning in the exorbitant costs, while poorer families who do receive subsidies can’t even afford to see their doctor because their deductibles are so high that the coverage is little more than a piece of paper. Worse, if you’re so cash-strapped that you choose to go without coverage, the IRS slaps you with a fine.
I recently heard the story of one low-income Wisconsin family of five – a husband, a wife, and three kids under the age of 10. Their punishment for going without insurance for three months last year was more than $800.
Only a nanny-state bureaucrat in a Washington, D.C. corner office would be so divorced from reality that they’d think such punitive policies are somehow fair, right, or just. They should get out of their plush enclaves and see how their policies really affect people. Or better yet, if Congress can get its act together, Obamacare bureaucrats should be standing in an unemployment line.
Obamacare cheerleaders can go on cable news and pen all the columns they want touting the expansion of health insurance coverage, but what good is having health insurance if the deductible alone will send your family into bankruptcy?
Obamacare’s continuing price spiral is caused in part by declining competition across the nation. One-third of counties in the United States have only one insurer this year, according to the Kaiser Family Foundation. Residents in these counties will have only one choice – in other words, no choice at all.
Wisconsin’s Obamacare market lost an average of 1.39 insurers per county from 2016-2017 according to our analysis. Fourteen counties have just one or two insurance companies offering Obamacare plans in 2017.
Competition – which inevitably “bends the cost curve down,” to parody another failed Obama promise – is drying up by the week. Just this month, Aetna announced it would stop selling Obamacare policies entirely next year, citing $381 million in losses in the first quarter of 2017 and $700 million in total losses.
Aetna joins insurance giants Humana and UnitedHealth in completely withdrawing from Obamacare in the wake of massive, unsustainable losses. A network of other non-profit health insurance co-ops established by Obamacare have also folded, taking billions of taxpayer dollars down with them. Out of 23 co-ops, only 4 remain, including Wisconsin’s imperiled Common Ground Co-op, which survived only after a secret infusion of cash.
Insurers’ inability to simply break even on Obamacare plans is the result of far more older, sicker enrollees and far too few younger, healthier enrollees to balance the actuarial tables. Obama should’ve been honest with the American people and said the law depends on younger and healthier people paying exorbitant rates for coverage they don’t need in order to prop up the rickety system he and Democrats rammed through Congress.
Obamacare is in a death spiral. Though the House’s version of repeal and replace narrowly passed – certainly a cause for celebration – Congress remains mired in inaction and Americans remain stuck in quicksand. Reporters wringing their hands over CBO scores and telenovela theatrics should remember that few outside the beltway ultimately care about any of that.
There is no bailing out or patching up Obamacare. It will eventually sink to the bottom of the abyss. When it does, nobody in real America will thank the media for keeping them up to date with irrelevant process stories as they go down with the ship.
The following column originally appeared at the MacIver Institute.
At long last, the Legislature’s Joint Finance Committee will have to make a decision on whether to adopt a self-funded insurance system for state employees’ health insurance. The bad news is that Governor Walker’s proposal to make the switch and save $60 million is all but dead in the state Legislature.
On Monday, the Group Insurance Board submitted contracts with third-party administrators for a self-insurance system. Those contracts spell out in black and white at least $60 million in savings over the biennium – that’s on top of $22 million in possible savings if Obamacare and its obscene tax burden is not repealed. With the contracts in hand, JFC now has about three weeks to convene a meeting and make a decision.
“Since taking office, we have sought to reform government to make it more accountable and cost effective to the hard-working taxpayers,” Walker said in a statement on Monday. “Moving to self-insurance is one of these reforms and we urge the Joint Committee on Finance to approve these contracts and invest these savings into the classroom.”
Unfortunately, it appears that JFC is prepared to leave this windfall for taxpayers on the table. Why? We’ve heard a carousel of arguments against self-insurance that have all stalled, but the final stand for self-insurance naysayers might boil down to pure politics.
Early arguments by opponents of self-insurance breathlessly claimed that the move would gut state workers’ health insurance plans. Ignoring how out of step these lavish plans are compared with their private sector counterparts, it quickly became clear this doom-and-gloom claim had no basis in reality – especially after the actual proposals were received.
Next, the self-insurance doom-mongers portrayed the switch as a journey down a long, dark tunnel. The fact is that there’s nothing mysterious or scary about self-insurance; Wisconsin already partly self-insures its dental plan and its pharmacy plan.
At least 20 states completely self-fund their state employee health plans, including Minnesota, which moved to 100 percent self-funded insurance in 2002. Also, 46 states use self-insurance in some way.
In the upper Midwest, no states are fully-insured, meaning none completely rely on private insurance and all are self-funded at least in part.
More than 90 percent of all large employers, companies that employ 5,000 or more employees, also use self-funded insurance. To say adopting this system would be risky and experimental is diametrically untrue. In fact, it would be routine and economical.
Critics then moved on to prophesizing that the switch could pose a potentially catastrophic financial risk to the state. True, the state would be directly assuming the risk rather than putting insurance companies in the middle. But barring an unprecedented epidemic sweeping state office buildings, the risk factor has been greatly hyped.
The risk would actually be low because of the sheer size of the state’s workforce, which means total annual payouts would be predictable and fluctuations minimal, according to insurance expert Dean Hoffman, who recommended the switch to the Governor’s Commission on Government Reform last May.
Legislative Republicans are also uncertain about the future of Obamacare, which imposes a variety of taxes and fees on the insurance marketplace that would be absorbed by taxpayers in Wisconsin.
JFC co-chair Sen. Alberta Darling cited Wisconsin’s relatively low premium increases at a Tuesday press conference. “Why would we want to shift out of that and into uncertainty at this point?” she asked.
Caution isn’t unreasonable, but moving to self-insurance would actually protect Wisconsin taxpayers from uncertainty. Taxpayers should be the focus, not protecting the platinum health insurance of government employees.
Obamacare hits the insurance market, and thus taxpayers, in two big ways. The reviled Obamacare Cadillac Tax applies an exorbitant 40 percent tax on all employee benefits exceeding $10,200 annually for an individual, $27,500 for a family.
Sadly, the AHCA healthcare bill that passed the House last week retains the Cadillac Tax, although it pushes off the starting date of the Cadillac tax until 2026. Self-insurance would help mitigate that cost by eliminating the middle man in the current setup.
Then there’s the insurer tax, a special levy charged to private insurance companies that’s tied to the insurer’s premiums collected in the previous year. In 2016, the insurer tax ranged from 1.5 to 3.5 percent, with future rates yet to be decided. As the state’s deputy commissioner of Employee Trust Funds, Lisa Ellinger, pointed out last year, the state pays out about $1.4 billion annually in premiums.
Self-funded insurance systems are exempt from this tax. Quick cocktail-napkin math shows that switching to self-insurance would conservatively save tens of millions on top of the $60 million outlined in the contracts.
Despite ongoing uncertainty about Obamacare, keeping the status quo is precisely the wrong decision. Assuming Obamacare’s taxes are here to stay, seizing the $60 million moment would be responsible management of taxpayer dollars. Keeping the status quo and hoping Washington politicians do the right thing would not.
Instead, legislative leaders are considering “finding” $60 million in savings within the existing system. “We’re not saying no to savings. If we do that we’re going to find a similar amount of savings in some way, shape or form,” said JFC co-chair Rep. John Nygren on Tuesday.
If that’s actually possible, it begs the obvious question: how much taxpayer money has been wasted by not finding these supposed savings years ago?
With most of the arguments against self-insurance out of gas, opponents’ final stand may betray the truth: self-insurance is good policy, but protecting the status quo is even better politics. Or protecting the status quo is better politics for any politician worried more about the next election and less about taxpayers. Unfortunately for taxpayers, just about every politician in Wisconsin fits in that category.
The fact that self-insurance is good policy is evident from how many states and large employers use it successfully.
The likely end result is that Wisconsin taxpayers will get a watered-down half-measure that goes through the motions of saving taxpayer money while keeping the bloated and expensive existing system in place. That’s bad public policy.
The following commentary was originally posted at the MacIver Institute.
So, the House GOP’s attempt to repeal and replace Obamacare was unsuccessful. After months of political theater and seven years of opposition to the disastrous healthcare law, their American Health Care Act (AHCA) failed to garner enough votes from the far right and moderate wings of the Republican party to pass with the needed 216 votes.
Lost in all the drama and theatrics, however, is the big picture: Americans are suffering under Obamacare and will continue to suffer “for the foreseeable future,” as Speaker Paul Ryan lamented in a press conference after it became clear AHCA did not have enough votes to get through the House.
Congressional Republicans, President Trump, the House Freedom Caucus – all will come away with political wounds. But the tarnished image and lost political capital that the failure to pass AHCA will inflict on Washington politicians pales in comparison to the actual harm that Obamacare will continue to inflict on average Americans just trying to stay afloat.
One thing is certain: Obamacare is still an unmitigated disaster. Premiums are still spiraling out of control. Sky-high deductibles still make Obamacare insurance plans practically useless. And competition and choice are still on the decline.
In 2017, the average premium increase on the individual market in Wisconsin was 16 percent. In fact, one plan in western Wisconsin costs $51,000 per year in premiums for a couple unfortunate enough to be in their 50s with three children.
Sure, Obamacare subsidizes premiums for those at the lower end of the income scale. But if you happen to occupy the vast swath of America known as the middle class, you’re likely on the hook for the full bill – plus deductibles.
In a report last year that scoured the federal database of 2017 premiums in Wisconsin, the MacIver Institute found that an average family of four would fork over an average monthly premium of $1,609.11 for a platinum plan – $19,309.32 per year – while a mid-level silver plan would cost them $1,297.02 in average monthly premiums, or $15,564.24 per year.
While proponents of Obamacare like to point to premium subsidies for the poor, they leave out a key concern that Americans grapple with: sky-high deductibles. For a top-tier platinum plan in Wisconsin the average deductible is $900 for a family and $450 for an individual.
However, for a mid-level silver plan, the average deductible is $7,015.71 for a family and $3,491.92 for an individual. The average catastrophic plan deductible will be $14,300 for a family and $7,150 for an individual.
Obamacare’s downward death spiral is also forcing insurers out of the market. One-third of counties nationwide have just one insurance provider in the individual market. Last year, two major insurers left Wisconsin altogether.
Economics 101 teaches that robust competition drives down prices. Giving consumers a choice is also a matter of basic fairness.
However, proponents of Obamacare continue their efforts to prop up the law with scare tactics aimed at vulnerable populations.
One “report” put out by Citizen Action of Wisconsin claimed the GOP proposal would cost older premium payers thousands more per year, but it’s a two dimensional analysis in a three dimensional world. The liberal group’s so-called report hinges on cocktail napkin math, simply subtracting the AHCA’s refundable tax credits from Obamacare premium subsidies.
The group also claims out-of-pocket costs would increase, but fail to mention that the AHCA would’ve expanded health savings accounts (HSAs), tax-free accounts from which health expenses can be paid. Healthcare tax credits under the AHCA would’ve gone into HSAs – which an individual would then use to pay for out-of-pocket costs like deductibles. HSAs coupled with the AHCA’s tax credits would have made insurance portable from job to job and accessible to the self-employed and independent contractors.
Obamacare actually put a cap on how much pre-tax money individuals could contribute to an HSA, compounding the problem of the law’s astronomical deductibles. What good is having insurance – even if it’s provided for free at taxpayer expense – if you can’t afford to use it? Why have insurance when the deductible alone will bankrupt you? Perhaps that’s why some Wisconsin hospitals started waiving out-of-pocket fees for lower income patients last year to stem the tide of increasing ER visits by Obamacare recipients.
Let’s also not forget that Obamacare activists like CAW have constantly pushed Wisconsin to follow in the footsteps of Minnesota, which gave Obamacare a big hug, and is now paying the price. The Minnesota Mistake was brought into focus last year when the state was forced to shovel more than $300 million – in one year alone – into a rescue plan to help middle class Minnesotans absorb a 60 percent Obamacare premium increase. Minnesota practically begged insurers to stay in their market to stave off a complete collapse of the market.
The giant folly of the healthcare debate is that prognosticators like CAW and Obama himself constantly conflate health insurance coverage with actual health care. Conservative health reform, of which the AHCA was supposed to be just the first of several phases – introduces market forces into healthcare. When there’s price transparency, someone seeking care is actually able to shop around for better prices.
A healthcare system where providers actually compete over price conscious customers would have the same effect as any other competitive marketplace – rapid innovation, increased efficiency, and reduced costs. As Speaker Ryan points out, that very phenomenon is demonstrable in the cost of elective LASIK eye surgery, the price of which has actually dropped over the past 15 or so years – as has the price of flat screen TVs, smartphones, and anything else sold in an actual free market.
The GOP’s failure to pass AHCA is a setback. But, it is not a political setback like all the talking heads want you to believe. It is a setback because the death spiral that is Obamacare continues unabated and the American people continue to suffer because President Obama lied to them. If you like your health insurance, you will be able to keep it, and the ACA will bend the cost curve. Obama’s lies live on.
But it’s important for lawmakers to keep their eye on what’s important – Obamacare is a disastrous big government boondoggle that will cost taxpayers a trillion dollars in new taxes and threatens to collapse entire individual insurance markets.
As President Trump said on Friday after the AHCA was pulled, Obamacare will inevitably “explode.” But lawmakers can’t wait around for that to happen and then try to blame the Democrats. A solution that can pass the House and Senate and be signed by the president must be found.
Read the original post at the MacIver Institute.