Consumer Power Report #487
December 30, 2015
Welcome to the Consumer Power Report.
It’s the most wonderful time of the year: Children open their Christmas gifts, families gather together to share memories and create new ones, and there’s a seemingly never-ending smorgasbord of sugar cookies, pies, and turkey leftovers that make an entire nation fat and happy for the final two weeks of December. With all of this fun, it’s no wonder Americans have fully embraced the tradition of the New Year’s resolution, when people take a hard look in the mirror (quite literally) and realize there’s a reason these celebrations come only once a year.
While most Americans’ New Year’s resolution will be to trim waistlines, read more books, or get organized, health insurers, businesses, and pro-liberty Republicans will work to finally end the failed Obamacare debacle that will cause average health insurance premiums to rise by more than 20 percent in 2016.
Much progress has already recently been made toward accomplishing that goal. For instance, UnitedHealthcare, the nation’s largest health insurance provider, announced in November it could leave the Obamacare health insurance exchanges in 2017 due to massive costs and failed promises by the Obama administration.
“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step,” said Stephen J. Hemsley, chief executive officer of UnitedHealth Group, in a November 19 press release.
Rumors have swirled since Hemsley first made the announcement that other significant health insurance providers could join UnitedHealthcare, possibly leading to an Obamacare death spiral.
Multi-billion-dollar health insurance companies, virtually all of which once openly advocated for Obamacare, are now openly rebelling against the program primarily because the Obama administration’s estimates have proven to be wildly incorrect. Too many healthy Americans have been scared away from the Obamacare exchanges because of their high costs, while sicker patients have flooded the marketplace, leaving health insurance companies stuck with ever-larger bills.
Health insurers had been promised that their losses in the early years of the Obamacare program would be offset by the federal government’s imposed “risk corridor,” a complex tax scheme that attempts to divert money away from profitable insurers to cover the losses experienced by other businesses.
Unfortunately for health insurance companies, the risk corridor has been a total disaster because losses have significantly outpaced profits. According to Sean Williams at TheMotleyFool, “Insurers have requested $2.87 billion to help cover excessive losses tied to Obamacare plans, but they’ll be receiving just 12.6% of this amount, or $362 million – a nearly $2.5 billion shortfall.”
Health insurers are losing so much money many are now thinking it may be better for them to simply choose to lose out on the millions of potential customers in the Obamacare exchanges than be forced to take on a disproportionate number of sick customers.
While the nation’s largest insurers consider abandoning the Obamacare exchanges, business associations have been actively lobbying Congress and the Obama administration to delay an Obamacare-created tax on high-priced health insurance plans. The tax, commonly referred to as the “Cadillac tax,” essentially punishes businesses who provide generous health insurance benefits.
Proponents of the Cadillac tax say it will only harm the wealthiest employees of massive corporations who receive expensive and allegedly unnecessary health insurance plans. This, however, isn’t true. With only a modest rate of inflation over the next five years, many health insurance plans that do not currently qualify as Cadillac plans would be considered “too expensive,” forcing businesses to reduce benefits for their employees or pay high taxes.
In a study for the Washington Policy Center, Roger Stark writes, “At only a five percent inflation rate, a current individual health insurance plan costing $850 per month and a family plan costing $2,292 per month would qualify as a ‘Cadillac’ plan in 2018.”
Facing significant pressure from businesses, Congress agreed to defer the Cadillac tax for two years, which some say will cost the federal government $9 billion and will deal a significant blow to Obamacare’s long-term viability.
“RILA welcomes the two-year delay of the ACA’s illogical penalty against employers who offer quality health coverage and benefits, but we will continue to press for its full repeal,” said Christine Pollack, vice president for government affairs at the Retail Industry Leaders Association, in a statement. “The 40 percent excise tax threatens the benefits that retailers provide to millions of retail employees and their families.”
In addition to the efforts made by Republicans in Congress to delay the Cadillac tax, presidential candidate Sen. Marco Rubio (R-FL) successfully led the charge against the Obama administration’s attempt to divert funding to rescue the risk corridor, and every prominent Republican presidential candidate has pledged to eliminate Obamacare and replace it with free-market, pro-growth policies if elected.
For the first time since the Affordable Care Act was passed, health insurers, businesses, and influential politicians are all working together to undermine Obamacare, and if a Republican is elected president in 2016, President Barack Obama’s failed signature legislation could finally be repealed, saving American families thousands of dollars each year and improving the quality of care for millions of people.
— Justin Haskins
IN THIS ISSUE:
COLORADO SINGLE-PAYER PROPONENTS PUSH FOR TAX HIKES
Here are some key features of the [single-payer] proposal: Seniors would stay in the Medicare system, and those in Tricare, the military health system, could keep that insurance. And anybody would be free to buy private coverage from a private insurer, though they would still have to pay for ColoradoCare. It would work like a single-payer plan, in the sense that everybody pays in, and everybody would be automatically covered, one way or another.
To finance the project, Colorado employers would pay nearly 7 percent in a payroll tax. Employees would pay 3 percent or more of their gross pay toward the health plan. The self-employed would need to pony up 10 percent of their annual net income (to cover the employee’s contribution plus the employer’s contribution – analogous to the formula used to calculate federal self-employment tax). All in all, supporters say, these proposed tax hikes would raise around $25 billion, and save residents money in the long run.
But the tax hike could be a concern for many voters according to Michele Lueck, president and CEO of the Colorado Health Institute, a nonprofit, nonpartisan think tank. “The price tag is just enormous, right?” she says. At $25 billion, “it rivals the state budget.”
For years, Coloradans have shot down tax increases. “I don’t think that there have been many, if any, times when Colorado has bit off something that big,” Lueck says.
SOURCE: By John Daley, NPR.org
PRESIDENTIAL CANDIDATE BERNIE SANDERS PUSHES NATIONAL SINGLE-PAYER PLAN
[At the] Democratic debate [held on December 19], Bernie Sanders was on fire about universal health care.
“We need a Medicare for all – single-pay system,” Sanders said. “It will lower the cost of health care for a middle class family by thousands of dollars a year.”
But he seemed a little flummoxed by the obvious question.
“Can you tell us, specifically, how much people will be expected to pay?” ABC’s Martha Raddatz asked.
He explained that, obviously, taxes would have to go up, however the payoff would be that you’d have no insurance premiums or deductibles to worry about. So the net effect?
“It will lower the cost of health care for a middle class family by thousands of dollars a year,” Sanders said.
“Senator, senator you didn’t really tell us, specifically, how much people will be expected to pay,” Raddatz pointed out.
“They will not be paying, Martha, any private insurance, so it’s unfair to say in total …”
“But you can’t tell us a specific number,” Raddatz said.
“I can tell you that adding up the fact that you are not paying any private insurance, businesses are not paying any private insurance, the average middle class family will be saving thousands of dollars every year,” Sanders said.
I think the trouble with that promise is that it’s been tried before.
“Those cost savings are passed on to you, and we estimate we can cut the average family’s premium by about $2,500 per year,” President Obama explained in the past.
SOURCE: By Dave Ross, MYNorthwest.com
FEDERAL TRADE COMMISSION AIMS TO HALT HIGH-PROFILE HEALTHCARE MERGERS
A Federal Trade Commission challenge of a proposed merger of the largest hospital operators in Chicago could be a problematic sign for the rest of the rapidly consolidating U.S. healthcare industry.
Advocate Health Care and NorthShore University HealthSystem say they will fight a complaint filed by the FTC, which voted 4–0 to issue an administrative complaint and authorize its staff to seek a temporary restraining order. The FTC, which called the case its third recent challenge of a hospital merger, said the combined entity would control more than 50% of the inpatient care in an affluent area north of Chicago. In all, the two health systems combined have 16 hospitals and hundreds of physicians under their control via various employment relationships throughout Chicago and Illinois.
“This merger is likely to significantly increase the combined system’s bargaining power with health plans, which in turn will harm consumers by bringing about higher prices and lower quality,” said Debbie Feinstein, Director of the FTC’s Bureau of Competition.
The challenge of these medical care providers coming together comes as more Americans get health coverage under the Affordable Care Act and health insurance companies, too, are engaged in unprecedented consolidation.
SOURCE: By Bruce Japsen, Forbes
FLORIDA SUPREME COURT ASKED TO DECIDE CERTIFICATE OF NEED DISPUTE
The state Agency for Health Care Administration asked the Florida Supreme Court this week to take up a dispute about whether a Baker County hospital can challenge plans for a new Jacksonville medical center.
The agency and West Jacksonville Medical Center want justices to overturn a 1st District Court of Appeal decision in October that allowed Baker County’s Ed Fraser Memorial Hospital to challenge what is known as a “certificate of need” for the project. Certificates of need are a controversial regulatory process in which the state must approve plans for new and expanded hospitals and other types of health-care facilities.
The Agency for Health Care Administration in 2010 approved a certificate of need for the West Jacksonville hospital. But under a settlement, the certificate would not become effective until mid-2013 and licensure of the new hospital could happen no earlier than December 2016, according to the appeals-court decision.
Ed Fraser, which could face competition from the new hospital, filed a lawsuit arguing that the agency overstepped its authority in delaying the validity of the certificate of need. The 1st District Court of Appeal allowed the challenge to move forward, though it did not decide the merits of the case. That prompted the Agency for Health Care Administration and West Jacksonville Medical Center to file briefs asking the Supreme Court to hear the dispute.
The agency and West Jacksonville argued that Ed Fraser did not take part in the certificate-of-need process and should not be allowed to pursue a lawsuit that was filed in 2013.
SOURCE: News Service of Florida