Dylan Scott in Vox yesterday looked at what the health insurance lobby got from not actively fighting against the BCRA/AHCA in the Senate:
The major health insurance companies made a tactical decision to work with Republicans on their plan to repeal and replace Obamacare rather than lobby to stop it….
For insurers, at least for now, there is a lot to like in the Senate plan. It repeals Obamacare’s tax on health plans, a $144 billion tax cut over 10 years, per an analysis of the House bill. It provides $50 billion in federal funding in the short term to shore up the private insurance market and $62 billion over the longer term for state programs that help stabilize their insurance markets.
I don’t grok this.
I’m looking at things through the lens of profitability not total revenue.
The individual market so far has been a break even at best business for most insurers. 2017 is looking better with very low MLR in quite a few states for a wide variety of providers. But it is not boringly profitable. Medicaid managed care is boringly profitable. A barely competent MCO should scrape out a consistent 1% or 2% per year. When I worked at UPMC Health Plan, we budgeted for 2% profits and as I was leaving we were looking at 5%+ profitability for FY17. Medicaid is getting whacked. One of the first things states will do to compensate for less federal funding is squeeze MCO profit margins by reducing rates while mandating a year to hold providers harmless. Medicaid anyways is a much bigger market than the individual market.
The thing that I really don’t get is the push to eliminate the health premium tax. It is a tax that all fully insured plans pay. This basically means small and medium group employer sponsored plans, individual policies, and Medicare Advantage plans pay. Large, self insured, employer groups don’t pay, traditional Medicare fee for Service does not pay. If we assume a perfectly elastic market, I could see the self-interested push to eliminate the tax as it would make going fully insured marginally less expensive than going to self-insured ASO contract arrangements for medium size employers or make Medicare Advantage bids slightly more attractive. But in the individual market all of the carriers in the 2018 rate filings indicate that the insurers assume it is a market with low elasticity of demand. The tax incidence is overwhelmingly borne by the buyer and does not eat into the operating margins of the insurer.
Most of the tax savings will accrue to the policy buyers not the insurers in competitive markets. In non-competitive markets like Alabama with a dominant Blue, more the tax savings can be captured by the insurer. But I am trying to figure out exactly how much more profitable this tax cut makes insurers. It will be billions but it will not be a hundred billion dollars of additional profitability.
I’m having a hard time grokking the actual incremental profitability that insurers got out of the BCRA compared to the assured losses they will be taking on Medicaid managed care cuts.
Hunter Gathers
Executives get a tax cut. The tax on CEO bonuses goes away. Stop operating under the assumption that the executive class gives a rat’s ass about anything other than their own bank accounts. Besides, even if insurers go under, the executives will get their golden parachutes. It’s a win-win situation for them.
OzarkHillbilly
@Hunter Gathers: Beat me to it, tho I was just gonna say, “Bribes”.
Weaselone
You’re making critical errors.
1. You’re assuming HC insurance CEOs know much more about their business than Republican Senators.
2. You’re assuming these CEOs care more about the long term interests of their firms than goosing their pay and bonuses for the next couple of years
3. There’s probably an implicit assumption that Democrats will fix things in 4 years so let’s grab the money off the table now
Betty Cracker
@Weaselone: Number 3 rings true to me. The GOP cynically front-loaded goodies for their constituents (the wealthy, including insurance execs) and back-loaded massive cuts to the poor and middle class. Insurance co’s have likely made the not at all implausible calculation that they can get the best of both worlds.
weaselone
@Betty Cracker:
I’m fairly certain they’re wrong. The Democratic base is becoming radicalized. If 4 years finds us in control of the Senate, House and Presidency after the Republicans have helpfully torn down all norms and restraints, insurance company executives should probably consider themselves lucky if the new healthcare bill allows them to choose the color of the wood chipper they get fed into.
Anonymous At Work
I agree that the thinking by executives is wrong. They are radicalizing the Democratic Party while also disincentivizing either Party from working with them in the future AND they are making the next round of reform “Medicare-for-all”.
1. Radicalize the Democratic Party: Blue Dogs and other moderate groups are seeing their reform plans to go away and be killed the moment the other party gets into power. So, why take half a loaf next time? Whole loaf, shoved down their throats.
2. Neither Party can trust the insurance industry in the future. They got almost everything they could want from Obamacare as far as any substantive reform bill went. No public option, a mandate to buy private insurance, subsidies out the wazoo. Now, they aren’t defending it? Why bother?
3. Well, the hybrid public-private is being ripped apart, it was never popular but the most effective and popular parts were either the regulatory reforms (hard to remove) and the Medicare expansion. Medicare is popular, so let’s expand it again, using reconciliation. That’s an easier lift for the next Democratic President, 50 Democratic Senators and 220 Democratic House members.
All this, so the next 3 years can be a temporary return to hookers-and-blow? Man, talk about short-sighted.
David Anderson
@Anonymous At Work: Agreed, the Democratic base (myself included) are getting radicalized.
As I see it, everything should be planned on the basis of a 51 vote Senate and a 13 or 15 or 21 vote Supreme Court (as needed)
Soprano2
I’m wondering if they are getting rid of the ACA’s closing of the “donut hole” for Medicare drug plans. My husband is finally starting to see some relief from the cost of his insulin prescriptions because of this slow closing. If this execrable bill passes, will the “donut hole” spring back open again?
Tenar Arha
@David Anderson: Wow, wow. You just threw that in there about the Court. I mean I’ve said that out loud but don’t remember writing it down yet anywhere!
Carlito Brigante
@Anonymous At Work:
Point Number 3# is interesting. You are right, the insurance industry cannot be trusted. But it cannot be ignored.
The insurance industry looks and operates a lot like Jabba the Hut.
David Anderson
@Soprano2: Medicare is not being touched. I think the donut hole help is still there. It benefits Republican base voters
David Anderson
@Tenar Arha: If we’re playing Calvinball, let’s optimize a Calvinball strategy.
Tenar Arha
Yeah, same. No more tiddlywinks against these Calvinball playing gaslighters.
Seth Owen
@David Anderson: I’m not even a long-time traditional Democrat but a Cole-style former Republican and I’m radicalized on this issue, too. The ‘conservative’ reform was enacted and the ‘conservatives’ proceeded to declare war on it.
Screw them and the insurance industry, too.
Medicare for all. No doubt there will have to be adjustments but those are merely technical issues. It’s conceptually simple and easy to explain. Since I became disabled I have been on it and it’s easy peasy from the consumer/voter POV.
Ram it through. Unlike Obamacare it will be impossible to undo.
JR in WV
@weaselone:
Speaking of Wood Chippers:
yesterday, running our errands, one street I always drive on to the fish shop was partly blocked by a tree company, taking down a really big old downtown tree that had died. Not sure of the breed, but now that it was standing cured dead wood, it was really hard.
They had a REAL wood chipper and when they fed it an 8-10 inch branch 8 feet long, it took a while for it to grind it, all the while the branch was shivering as it was being pulled into the chipper. And poker-chip sized bits were flying into the truck.
JR in WV
@JR in WV:
I mentioned a game of chance and have been moderated. Oops. Poker chips as a size of a thing. Darn…HELP!
StringOnAStick
I know that I’m one more democrat who is growing radicalized, and my husband as well.
Soprano2
@David Anderson: Thanks for the info! I hate this turd, but at least they’re leaving this alone.