Popular Health Care Plan Will Soon Be Extinct in Obamacare Marketplace

Justin Haskins Heartland Institute
Published February 2, 2016

Consumer Power Report #490

According to PolitiFact, the Obama administration, in at least 37 separate instances, promised Americans they would be able to stay enrolled in a health care plan if they enjoyed the coverage they were receiving prior to the passage of the Affordable Care Act (ACA) on March 23, 2010. But since the law has gone into effect, millions of Americans, including this writer, have lost access to pre-Obamacare health insurance policies and have been forced into an Obamacare exchange, where prices have steadily been rising.

Sean Williams, writing for The Motley Fool financial website, reports a new analysis by Freedom Partners (FP) indicates the average health insurance premium for consumers in the Obamacare exchanges rose by much more than expected. Kaiser Family Foundation reports the average Obamacare premium in 50 major U.S. cities across 49 states was expected to rise by 10.1 percent in 2016, compared to 2015 rates, but the FP study found, “17 states are expecting average premium costs to rise by at least 20% in 2016, with residents in four states bracing for at least a 30% average premium increase. Just one state—Mississippi—will see its average premiums fall in 2016 per Freedom Partners,” according to Williams.

Perhaps more damaging than higher premium prices increasing is the decline in the number of quality health insurance policies now available to consumers. Preferred provider organizations (PPOs), which have traditionally been thought of as superior to alternative policy plans, such as health maintenance organizations (HMOs) or exclusive provider organizations (EPOs), now appear to be disappearing so quickly it’s possible they could be virtually extinct within the next few years.

PPOs are favored over other widely available plan types because they provide greater flexibility for consumers and a wider network of medical professionals to draw from. Under most PPO plans, patients are not required to have a primary care doctor, unlike in many HMOs; appointments with specialists can be attained without a referral; and in-network and many out-of-network health care providers and services are covered that are typically not covered in traditional HMO and EPO plans.

The Robert Wood Johnson Foundation (RWJF) reports only one-third of the nearly 800 PPO plans offered in 48 states by 93 separate health insurance carriers in 2015 are available in 2016, with 28 percent of the 790 PPO plans being dropped entirely. This has led to a sharp rise in inferior plan types, including HMOs and EPOs, leaving many consumers with worse options than they had before the Obamacare exchanges started operating.

Some of the decline of PPO plans can be attributed to a greater number of young, healthy Americans who previously did not purchase health insurance now entering the health care insurance marketplace. These consumers tend to be less interested in purchasing high-quality plans and more interested in obtaining insurance that is affordable and is primarily designed to cover catastrophes. PPOs are less expensive than HMOs and EPOs, so it is true fewer young consumers would find these options desirable, but the real cause of the decline of PPOs is that insurance companies are now losing millions of dollars on the PPO plans offered in Obamacare exchanges.

For instance, in New Mexico, Blue Cross Blue Shield announced in August 2015 it would not offer any individual plans on the state’s health insurance exchange in 2016, causing 22,000 New Mexicans to lose the PPO plans they were enrolled in. Blue Cross Blue Shield of New Mexico (BCBS-NM) cited the cost of PPOs as the primary reason for the decision. As reported by the Albuquerque Journal, New Mexico State Insurance Superintendent John Franchini says PPO plans cost health insurance companies 20 percent more than HMO plans, due to the greater flexibility offered by PPO plans.  

BCBS-NM requested to increase premium rates by an incredible 51 percent prior to choosing to drop individual plans, but Franchini rejected the proposal.

PPO plans were always more expensive for insurance companies to offer, compared to HMOs and EPOs, even before the ACA was passed, but the ACA’s provisions have made the plans fiscally unsustainable for many insurance companies.

The foundation of the ACA’s mission to provide health insurance for Americans who would otherwise be unable to afford to insurance policies is the creation of tax credits, determined based on household income; the mandate that requires all Americans to purchase health insurance plans that meet the law’s specific qualifications; and the regulation that prevents insurance companies from denying coverage or significantly raising rates based on a pre-existing condition. The combination of these three provisions has caused significant premium price increases for healthy people who don’t use insurance very often and made insurance a bargain for sicker patients. As a result, many healthy people look for the cheapest policies possible, while many of the sickest patients enroll the best policies they can.

The risk to insurance companies has gone up significantly as a result of these policies, because they are now being asked to cover a higher proportion of costs for the nation’s sickest patients without getting enough additional revenue from new consumers who would have chosen to forgo having insurance prior to the ACA.

Put simply, the ACA causes greater cost increases to insurance companies than it does provide additional revenue, so insurance companies are now desperately looking for ways to cut costs, and dropping PPOs is one of the easiest ways to accomplish this without violating regulations in the ACA.

At a town hall meeting in Green Bay, Wisconsin in 2009, President Barack Obama said, “No matter how we reform health care, I intend to keep this promise:  If you like your doctor, you’ll be able to keep your doctor; if you like your health care plan, you’ll be able to keep your health care plan.”

I guess Obama forgot to mention PPO health insurance plans were just one item on the growing list of exceptions to his often-repeated promise to the American people. 

— Justin Haskins

Also published by Forbes. Click here for more.




UnitedHealth Group’s first foray with the health insurance exchanges turned out to be worse than expected. UnitedHealth lost $720 million on its individual-market health plans in 2015, the company said Tuesday, nearly $300 million above estimates made a few months ago.

The massive deficit on Affordable Care Act plans consequently ate away at UnitedHealth’s fourth-quarter profit, which dropped 19% to $1.22 billion. The company also booked $95 million in expected losses from a managed Medicaid contract. However, UnitedHealth’s full-year profit still increased 3.5% year over year, totaling $5.81 billion.

Last November, UnitedHealth forecast a $425 million net loss on its ACA policies, including a $275 million shortfall that was written off for its 2016 plans. The final loss came in at $720 million, including $245 million set aside for 2016 losses, UnitedHealth said.

The health insurer and services conglomerate said the poor experience in the ACA exchanges was due to sicker-than-average consumers enrolling in its health plans and a surplus of people signing up outside of the open-enrollment window. UnitedHealth may exit the ACA marketplaces as a result and will make a decision in the first half of this year.

SOURCE: By Bob Kerman, Modern Healthcare


Bernie Sanders told TIME on Sunday that he would be willing to raise taxes on the middle class in order to guarantee universal healthcare, after months of weathering attacks from Hillary Clinton.

When asked in an interview in Charleston, South Carolina, on Sunday which of his big-ticket proposals would cost the middle class more in taxes, the insurgent presidential candidate said “I think if we can guarantee healthcare to all people comprehensive healthcare, no deductibles, and if we can cut people’s healthcare bill substantially.”

Sanders disputed to TIME it was a middle-class tax hike, saying it would ultimately save taxpayers money by cutting out private health insurers.

He added that Clinton’s attacks over the bills were a “distortion of reality.”

“What media sometimes does, what my opponent does, what Republicans do, is they really try to take a cheap shot. If you were paying $10,000 in private health insurance and I said to you, guess what, you ain’t going to pay that $10,000 and more but you’re going to pay $5,000 more in healthcare premiums, you’d be jumping up and down for joy. You save $5,000 on your healthcare bills,” Sanders told TIME.

SOURCE: By Sam Frizell, Time


After three failed attempts to expand Medicaid under the federal health care law, Nebraska lawmakers will unveil a new proposal this week that would offer private coverage to thousands of low-income residents.

The newest bill is modeled after the so-called private option adopted by Arkansas, which received a federal waiver to spend Medicaid dollars on private insurance.

The proposal is expected to face opposition from Gov. Pete Ricketts and conservative lawmakers, who argue it’s not sustainable. Ricketts spoke fervently against Medicaid expansion in his State of the State address last week, calling it “an unreasonable risk to Nebraska taxpayers.”

Nebraska is one of 19 primarily conservative states that have rejected efforts to expand Medicaid, the health care program for the poor and disabled. Thirty-one states and the District of Columbia have agreed to the expansion, and governors of three non-expansion states – South Dakota, Virginia and Wyoming – are now advocating it in their latest budget proposals.

SOURCE: By Grant Schulte Associated Press


Connecticut’s Medicaid program is projected to cost the state and federal governments more than $6 billion this year, and it covers close to one in five state residents, a dramatic growth from a decade ago. But underneath the rising cost and enrollment trends, something else has been happening:

The average per-person costs have been falling – particularly among those newly eligible for coverage under the federal health law.

State Department of Social Services officials who oversee the Medicaid program said in recent interviews that it’s too early to tell exactly what’s causing the decline in per-person costs among those who became eligible under Obamacare – a group that, like its counterparts in other states, has drawn particular attention as people try to determine the financial consequences of expanding coverage.

SOURCE: By Arielle Levin Becker, The Connecticut Mirror