Treasury Source: the Real Reason for the One Year Delay in the ObamaCare Mandate
In case you missed it, yesterday Blue Cross Blue Shield of Iowa and South Dakota announced they will not enter into their state exchange until 2015, citing their desire to provide an “exceptional level of service,” which would be impossible during the first year of the exchange: “Given what we know today, we do not believe during the first year of the public exchange we could ensure the exceptional level of service our members have come to expect from Wellmark,” said the company’s statement. “For this reason, we have decided it is in our members’ best interest to delay our participation in the public exchange until 2015.”
The Blues did not say they would be in the exchange in 2015, they said they “imagine” they would be in the exchange: “We expect Blue Cross Blue Shield plans will have a strong, reliable presence in the new exchanges,” Alissa Fox, a senior vice president at the Blue Cross and Blue Shield Association, recently told KHN. “We’ve been in this market for more than 80 years, and we’ve been providing coverage in every zip code to everybody. We imagine we will continue to do that.”
Of course, the spat of stories last week that the healthy will see large increases in their premiums, up double or three times what they are paying now, which will likely keep many healthy from complying with the mandate and out of the exchanges, had nothing to do with this announcement.
Or that UnitedHealth announced yesterday it was exiting the individual insurance market in California.
If the healthy do not sign up, but the sick do, the insurers will have to pay for the less healthy and the pent up health care demands of the uninsured, without the needed healthy uninsureds to balance out the cost.
Plain and simple, the insurers will lose tens of millions of dollars. It’s better to just not be in, right off the bat.
Now comes an interesting leak from a U.S. Department of Treasury source, who will likely has the electronic data spooks tracking him or her down right now:
“the extra year will give the White House an extra year to persuade health insurers to participate in the exchanges that make up the backbone of the Affordable Care Act.”
It sounds like providing “exceptional level of service” is the new “I’m resigning to spend more time with my family.”
Actually, the insurers are acting in the financial interest of their company, and the it’s the ObamaCare design that has forced them to act.
In state after state when guaranteed issue and community rating have been imposed on the market, insurers lose so much money in the first years, they exit the market, leaving very, very, very high prices for the brave insurers who stayed in those states, so they can break even on the sick who remain insured, and are willing to pay those very, very, very high prices.
But the ObamaCare limit of a ten percent premium increase limit per year on insurers has likely persuaded the insurers to simply stay out in the first place, since they know they will be footing the bill for the swarm of less healthy who will sign up, and will have too few healthy to offset the cost, forcing them to take huge losses.
As James Capretta says, this one year delay in the mandate has “created real and present risks for the viability of the entire law.”