About that questionable HHS report on ‘Obamacare’ premiums

Last week Flagstaff’s Arizona Daily Sun published this “feature” article and “editor’s pick” from Cronkite News Service. HHS: Arizona premiums under Obamacare almost tripled since 2013:

Health insurance premiums nearly tripled in Arizona between 2013 and 2017, the fourth-biggest increase among the 39 states that participated in healthcare.gov, according to new data from the Department of Health and Human Services.

Arizona’s 190 percent increase meant a monthly premium increase of about $400 to a consumer in the state, to $611, under the Affordable Care Act, or Obamacare. The average monthly increase for all marketplace states was 105 percent, or $244, according to the HHS numbers released this week.

But here’s the tell:

The report does not mention the tax credits that many low- and middle-income consumers received under Obamacare, which made the coverage affordable for many.

“Republicans quickly seized on the HHS numbers to support what they say is the urgent need to replace the Affordable Care Act.”

The editors of the Arizona Daily Sun really owe it to their readers to publish this explainer from the LA Times business columnist Michael Hiltzik, which puts this questionable HHS report into proper perspective. Trump’s team issues a stunningly dishonest study of Obamacare rate increases:

The Department of Health and Human Services seemed mightily pleased with a statistic it issued Tuesday. The agency’s figures showed that premiums on the Affordable Care Act exchanges “doubled” from 2013 through this year.

This might not sound like good news for the people buying their coverage on those exchanges, but to HHS it was vindication. “This report is a sobering reminder of why reforming our healthcare system remains a top priority of the Trump administration,” agency spokesperson Alleigh Marré said.

Actually, it’s a sobering reminder of something completely different: the Trump administration’s stunning dishonesty about the ACA. That’s shown by the HHS statistic in two ways. First, the agency cherry-picked its time frame to make the premium increases under the ACA look much worse than they are. Second, the agency ignored the effect of Obamacare’s subsidies, which for many buyers has reduced the premium increases to zero.

When Marré states that the data show that Americans are “paying nearly $3,000 more for health insurance per year,” that’s deceptive. The HHS report acknowledges that it’s using pre-subsidy prices, but only in a footnote to one chart in the report, in very small print. In other words, it’s deliberately hiding the truth.

Let’s take a closer look at the report, which is based on premiums in the 39 states using the federal government’s healthcare.gov website to enroll residents in ACA plans.

We’ll start with the time frame. HHS artfully compares 2017 premiums with 2013 premiums. But that’s not even comparing apples with oranges—it’s more like comparing apples with gruel. The 2013 market was pre-ACA, the year before the law’s mandates for benefits and protection for pre-existing conditions kicked in.

These were very different markets. In 2013, insurers could reject individual insurance applicants for even trivial glitches in their medical histories, impose steep surcharges on those with pre-existing conditions, or issue policies that excluded those conditions from coverage. Hundreds of conditions made it onto insurers’ rejection or surcharge lists, as this typical guide from Blue Shield of California shows—it runs to 25 pages. Coverage “decisions are based on an applicant’s medical history, [and] the overall risk the applicant poses,” the guide states.

That’s not even to mention conditions that almost no policies covered, such as maternity. Prior to the ACA—that is, in 2013—only 12% of policies in the individual market covered pregnancy and childbirth, surely among the most common medical conditions of women aged 18 to 45. As of 2014, maternity benefits were required of every individual policy by law.

In other words, the 2013 market was profoundly cherry-picked. Premiums were lower because insurers chose the youngest and healthiest customers they could find. In some states as many as one-third of all applicants were rejected, according to the Kaiser Family Foundation. And that’s almost certainly an underestimate, because many people with medical conditions didn’t bother to apply because they knew they’d be rejected.

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The 2013 market also was rife with policies that ACA analyst Charles Gaba rightly labels “effectively garbage”—health plans that were little more than discount cards with limited applicability or plans with so many exclusions they offered buyers virtually no protection.

Starting in 2014, those stratagems were outlawed on the individual market. Insurers in any given region had to accept almost all applicants at the same premium. (They could surcharge smokers and charge older customers slightly more than younger.) Of course average premiums would rise, since insurers no longer could exclude risks. But for millions of Americans, health coverage was obtainable for the first time.

Not only that, policies in 2014 and beyond were much more useful than their predecessors. They could no longer include annual or lifetime benefit caps, and they had to cover maternity and nine other categories of benefits—“significantly richer coverage,” in the view of Loren Adler and Paul Ginsburg of the Brookings Institution. Some buyers, notably younger people and those with no adverse medical history, had to pay more on average, but for many more the change was a boon. “There’s simply no reasonable way to compare the premiums of the average individual market policies before the Affordable Care Act regulations kicked in to those sold since then,” Gaba observes.

The agency’s report acknowledges this too, but very quietly, noting that its analysis “does not account for the fact that the overall populations enrolling in the individual market in 2017 are different from those enrolling in 2013”—among other things, they’re older and less healthy.

The HHS’s own figures show that the bulk of the premium increases took place in the changeover from 2013 to 2014, when the entire market was revolutionized. For 2014, average premiums jumped about 24.5%, according to HHS figures. Recalculating the premium change under Obamacare alone—that is, from 2014 to 2017—one finds that average premiums rose a total of 39.5%. That’s comparing apples to apples, and it gives the lie to the Trump administration claim that Obamacare premiums doubled.

During that time frame, in fact, individual market premiums rose at roughly the same rate as they did during some periods in the pre-ACA era. In 2008-2010, for example, individual market premiums rose at a compounded rate of 36% (following annual increases of 9.9%, 10.8%, and 11.7%).

That brings us to the second deception in the administration’s report—the subsidy effect. An average of 85% of customers in the 39 healthcare.gov states are eligible for subsidies, which shelter them from the premium increases, reduce the effective increases to zero, or in some cases even yield lower rates. That’s because the subsidies are designed to rise in tandem with premiums.

Sometimes the subsidies even outpace premiums, especially if buyers shop around each year to find cheaper plans. In Arizona, for instance—a state whose eye-popping 116% premium increase for 2017 is regularly hauled out by Obamacare critics as a marker of the law’s failure—the subsidy increased 428% for low-income buyers in their 20s and 270% for families of four.

HHS acknowledges in a footnote to a chart in its report that the data “do not take into account premium tax credits.” One might ask, Why not? since the subsidies are an inextricable part of Obamacare.

The reason, plainly, is that including the subsidies would destroy the administration’s argument for repealing the law.

It’s proper to note that treating the revolutionary change from 2013 to 2014 as an apples-to-apples comparison was a favorite stunt of Obamacare detractors from the inception of the exchange market. The HHS report even links to some of their work from 2014, even though the methodology has been thoroughly debunked.

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All that underscores how little the figures coming out of this White House can be trusted. The only question is whether they’re being shameless, showing incompetence, or lying. We’ll leave that for you to judge.

Walter Cronkite must be turning over in his grave that such sloppy reporting based on government propaganda — which this particular HHS report is — is being done in his name. The editors of the Arizona Daily Sun should have checked out the data before publishing it.

And about the 2018 premium rate hikes? “The easiest prediction to make about the healthcare business was that the efforts by Congress and the Trump administration to sabotage the Affordable Care Act would produce a flood of rate hikes by insurers for 2018.” The costs of Trump’s sabotage of Obamacare already are showing up in rate hikes:

Early rate requests have come in from insurers in five states, according to ace ACA-tracker Charles Gaba, who calculates the weighted average rate request increase in those states at about 30% (that is, weighted for the enrollment of each insurer).

Many are blaming the doubt and confusion sown by Congress and the White House for one-third or more of their requested increases over 2017 rates.

“Uncertainty is already clearly leading to significantly higher rate hike requests than would otherwise be asked for,” Gaba observes.

It’s proper to note that some insurers, as well as Standard & Poor’s and the Congressional Budget Office, were seeing signs of stabilization in the individual market for 2018. Those projections are now getting reversed.

The “Trump effect” includes continued uncertainty about whether the government will continue to make cost sharing reduction payments, a decision on which has been delayed for 90 days to encourage these rate hikes during the plan submission phase so the GOP can claim that “Obamacare is collapsing under its own weight” (it is from GOP sabotage), which I have addressed in previous posts.

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