The obvious, it burns

From the Wall Street Journal, a statement of the blindingly obvious:

Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show. That is sharply higher than the rate of 16% for last year’s individual-consumer market over the same time frame, according to the data, which was supplied by Inovalon Inc., a health-technology firm that receives medical claims directly from nearly 200 insurers that are its clients.

It is also more than double the rate among people who held on to their existing individual policies; among those enrollees, the rate was 12%. Those consumers, who kept so-called grandfathered individual plans, are showing by far the lowest rates of use for health-care services such as emergency-room visits, hospital stays and prescriptions.

There are a couple of take-aways.

First — no shit, this was expected.

The chronically ill or intensely acute ill were underwritten out of the old pre-PPACA individual insurance market. If an individual had cancer, if an individual was diabetic, or had any number of serious and not so serious pre-exisiting conditions, they were excluded in most states. The exclusion worked by either companies not offering coverage at all. Mayhew Insurance would not offer coverage at any price on the individual market to someone with a cancer diagnosis in the past ten years. Or they were excluded because the rates were astronomical. A diabetic could expect to see rates three times the preferred standard rate. If the rates were too high, people who needed care could not afford to buy without massive subsidies that they were not getting.

Secondly, the grandmothered individuals (the kludge to get around the “keep it if you like it unless you have junk insurance that materially changed since 3/2010” problem) are healthier than average as they were able to get good prices on underwritten insurance. These people are one of the medium size drivers of uncertainty for 2014 premiums as they were priced into the 2014 rate calculations and then removed from the pool. As I stated before, I don’t think this is a long term problem as the pool of people with grandmothered products is small and will only get smaller. The Exchange eligible risk pool will get healthier and younger as the grandmothered individuals get into the risk pool and the younger and healthier populations get into the pool over time.

Third, and most relevant to pricing, the comparison on how sick is the risk pool is not how sick is the current Exchange risk pool compared to the previous individual market. The relevant comparison for rate purposes is how sick is it compared to what the actuaries projected. Given that pricing for 2015 is well within historical norms to slightly below historical norms, I’m projecting that for most plans the risk pool is well within the acceptable variance from the 2014 projections even with the grandmothered individuals out of the pool. Companies knew they were bidding to insure a sicker than average population and most priced close to appropriately for that assumption.

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57 replies
  1. 1
    MomSense says:

    I’m still thinking that people getting insurance and treating significant health issues at the age of 45 is better than people waiting until 65 to get Medicare and dealing with all the significant health issues then. It is certainly better from a quality of life perspective and I bet it will be a good thing for the financial health of Medicare as well.

  2. 2
    feebog says:

    Actually, an 11% increase seems pretty modest to me. This thing, she is working.

  3. 3
    NonyNony says:

    @MomSense:

    and I bet it will be a good thing for the financial health of Medicare as well.

    Ah but if the costs are shifted onto private insurance then that’s privatizing the costs and socializing the benefits.

    And that’s something that doesn’t happen much in the US these days. Plus it cuts into corporate profits.

  4. 4
    catclub says:

    The less obvious bit is that the revised first quarter statistics show that healthcare usage was less than expected. Maybe people could not get through the snow to their appointments.

  5. 5
    NonyNony says:

    @catclub:

    Maybe people could not get through the snow to their appointments.

    Or maybe the actuaries, as good professionals will, erred on the side of caution in their estimates.

    I know that if I were trying to choose between two possible errors – one of which will result in the company losing money and one of which results in the company having more money than expected – which way I’d be inclined to emphasize those error bars.

  6. 6
    MomSense says:

    @NonyNony:

    privatizing the costs and socializing the benefits.

    That never happens. In fact the opposite is what usually happens. No wonder the Republicans are so mad.

  7. 7
    Richard Mayhew says:

    @NonyNony: yep, actuaries are systemically inclined to be pessimists. They or at least their boss, face a non-symetrical payoff or consequence distribution depending on which way they are wrong.

  8. 8
    SiubhanDuinne says:

    Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show.

    Okay, this is getting downright weird.

  9. 9
    RP says:

    Correct me if I’m wrong, but haven’t healthcare policy types been saying for decades that allowing very sick people to go without coverage and then having them use ERs as a last resort is terribly inefficient and a drain on our system?

  10. 10
    Richard Mayhew says:

    @RP: yep — treating chronic conditions before they flare into acute conditions will lead to lower high end utilization even if the long term fiscal cost is the same the value proposition (better quality of life and fewer hospitalizations) is damn good.

  11. 11
    mai naem says:

    I think you’ll get a small not insignificant bunch of ‘sickies’ who have hung onto their not necessarily junk but crappy insurance because they didn’t know if O-care was going to work jump onto the marketplace next year. Also too, healthy people who hung onto their ok to crappy policies talking to friends/acquaintances who did make the jump and find out how much money they can save or at least get a bigger bang for their buck jumping in next year.

  12. 12
    japa21 says:

    @Richard Mayhew: There will be some instances where long term, the cost factor may be approximately the same.
    At the same time, there will be people who may have ignored certain symptoms or injuries which then developed into major, costly issues, who will now go for treatment. That treatment may be less expensive and prevent a small problem from turning into a chronic one, thus keeping liong term costs quite reduced.
    It will take a few years before we see the full impact of the ACA on healthcare costs.

  13. 13
    MomSense says:

    @Richard Mayhew:

    There was a study that was discussed recently that showed increases in high school graduation rates for students that were receiving Medicaid benefits. I wonder if we can make the case that even if the long term fiscal cost is the same isn’t there a benefit to higher graduation rates, parents who can work and keep their jobs because their families are now able to manage chronic conditions and have fewer missed school and work days because chronic conditions didn’t worsen to acute conditions?

  14. 14
    aimai says:

    @mai naem: Also healthy people who stayed out of the market but who, as they age, wise up and realize they need insurance.

  15. 15
    the Conster says:

    Who could have predicted that people need and want health care.

  16. 16
    japa21 says:

    @mai naem: There are lots of anecdotal stories out there not only concerning this scenario, but also where some people totally refused to get insurance because they heard all the horror stories about how bad Obamacare was, the death panels, etc. A lot of them are just finding out that they missed out on something, usually because they ran into medical issues and were asked why they didn’t get an ACA policy.
    I expect a strong influx of new enrollees during the next open period.
    And, as an aside, not surprisingly, many of these people are Fox viewers. Wonder how many may decide Fox isn’t worth viewing.

  17. 17
    Villago Delenda Est says:

    @NonyNony:

    Ah but if the costs are shifted onto private insurance then that’s privatizing the costs and socializing the benefits.

    The very definition of socialism. We can’t have benefits accruing to the masses, especially not at the expense of the few.

  18. 18
    Villago Delenda Est says:

    @Richard Mayhew: Of course, the issue here is where are the quarterly profits in this view of health care where you think beyond the current fiscal quarter?

    For American business, such thought of avoiding long term costs at the expense of short term profit is inconceivable, in The Princess Bride sense of that word.

  19. 19
    Tommy says:

    @Villago Delenda Est: I can’t seem to keep track of what is going on. Just the other day I saw a news report that in a few states the current health providers plan to stay in the exchange next year and others not in it said they want to join. It would seem if they are losing money this would not be the case.

  20. 20
    MomSense says:

    @japa21:

    There are lots of anecdotal stories out there not only concerning this scenario, but also where some people totally refused to get insurance because they heard all the horror stories about how bad Obamacare was, the death panels, etc. A lot of them are just finding out that they missed out on something, usually because they ran into medical issues and were asked why they didn’t get an ACA policy.

    Unfortunately I see quite a bit of this through my work and it is heartbreaking every time. The people who spread misinformation and fear mongered about the ACA are responsible for a lot of suffering.

  21. 21
    MomSense says:

    @Villago Delenda Est:

    The very definition of socialism.

    Almost the definition except for the pesky controlling the means of production part.

  22. 22
    Tommy says:

    @MomSense: The governor of MO is a Democrat. Very Republican House/Senate. He is literally freaking out and trying to find a way to expand Medicaid. They say they’ll impeach him.

  23. 23
    Wag says:

    @RP:

    Yes.

  24. 24
    gratuitous says:

    Let’s say this off the top: The PPACA isn’t perfect. No legislation is perfect. Practically every bill signed into law*, and more particularly complex legislation, has loopholes, unintended consequences, and compromises that disadvantages someone, somewhere. It would be a miracle on a par with the parting of the Red Sea if the PPACA worked perfectly out of the box.

    Routinely, what happens with major legislation is that Congress revisits it, amending it here, tweaking it there, and re-writing portions to make the meaning clearer. That hasn’t happened with the PPACA. If you got loopholed or inadvertently written out of a benefit, you’re just plain stuck. Congress can’t do anything about it, because there is a dedicated coterie of Republicans doing their damnedest not to do anything. Democrats can run on this issue, if they choose to.

    *I’ll exclude those “name the post office” bills, but canny readers who aren’t inveterate troublemakers already surmised that.

  25. 25
    Tommy says:

    @gratuitous: But that is logical so it will never happen with this Congress.

  26. 26
    MomSense says:

    @Tommy:

    Medicaid expansion would bring sooo much money to MO for their hospitals and for the economy. If this were money for military bases, the Republicans would be falling all over themselves trying to get some.

  27. 27
    Mnemosyne says:

    @gratuitous:

    One of the reasons I keep telling people with Obamacare problems to file a complaint with their state and federal regulators is that I hope it will create some momentum for fixing some of the existing problems through the HHS’s rule-making ability. We probably can’t get any legislative tweaks done until there’s a Democratic majority in both houses of Congress and in the White House (or until Republicans finally decide that they were really the ones responsible for PPACA the whole time), but HHS has some flexibility when it comes to regulation.

  28. 28
    Tommy says:

    @MomSense: Jay Nixon has taken a pretty good approach by pointing out $2B in MO tax dollars will go to other states each year. Shouldn’t your money come back to you? I am a little stunned the hospitals in St. Louis have not put more pressure on the politicians. If there is really any growth industry in St. Louis it is biotech and medical.

  29. 29
    🌷 Martin says:

    @feebog: Well, 11% is better than it was, but it’s still not acceptable. Premiums cannot steadily outpace inflation.

    @Tommy: Some of those decisions aren’t new. Iowa’s BC/BS (Wellmark) deliberately stayed out of the market in 2013-2014 but also deliberately planned to be in the market in 2014-2015. That decision goes back at least two years, however it’s being reported as if they are making the decision in response to what happening locally. So take the reporting with a grain of salt – their decision to enter the exchanges has almost nothing to do with the rollout or the reception. They probably did miss out on some customers, but they’re the dominant player. Whether its true or not, the executives believe that they’ll be able to pull back any lost customers because they believe they offer the best product and service, meanwhile they get to skip over all of the growing pains of a new system and jump in when things are more polished. In hindsight, that seems like a pretty good decision for them, and probably good for the exchanges as well. Though their absence probably reduced how many people would sign up, that vacuum allowed for new players to enter the market including one co-op that did better than expected on the exchange. Long term, we’re better off with more early providers than we are with more early subscribers.

  30. 30
    SiubhanDuinne says:

    Apologies for the O/T, but:

    Federal judges have struck down same-sex marriage bans in INDIANA and UTAH!!!

  31. 31
    Shakezula says:

    @gratuitous: This bears repeating. Medicare 1965 is a much different beast than Medicare 2014.

  32. 32
    Tommy says:

    @SiubhanDuinne: Wow. It is long past time for things to change, but my gosh things are changing fast.

  33. 33

    @japa21:
    None, or so few it’s a statistical error. Humans have no problem holding contradictory opinions. Ask any medical psych professional!

    @gratuitous:
    Thankfully, it may not be perfect, but damn is it a giant leap over what we had. Great law. I would love to get even better legislation upgrading it. That will have to wait until the conservative existential crisis is resolved, one way or another.

    @MomSense:
    A) Asshole effect. Medicaid spends money being kind. That’s immoral.
    B) A lot of those people are blacks, who are way too uppity already, leading to…
    C) Cleek’s law. Obama is for it, they’re agin it.

  34. 34
    cahuenga says:

    Also, most grandfathered individual policies had higher fees/copays and were eligible for any premium increases they deemed necessary. I know this for a fact.

  35. 35
    cahuenga says:

    Also, most grandfathered individual policies had higher fees/copays and were eligible for any premium increases they deemed necessary. I know this for a fact.

  36. 36
    SiubhanDuinne says:

    @Tommy:

    Yep. Those state bans are toppling like ninepins. It is a beautiful thing to see.

  37. 37
    🌷 Martin says:

    @Villago Delenda Est:

    @Richard Mayhew: Of course, the issue here is where are the quarterly profits in this view of health care where you think beyond the current fiscal quarter?

    For American business, such thought of avoiding long term costs at the expense of short term profit is inconceivable, in The Princess Bride sense of that word.

    That really doesn’t matter that much here. Most insurers are not-for-profits. The for-profits hated ACA, but the not-for-profits were initially on board because they were facing a difficult long-term problem – they were losing customers industry-wide. With declining policy holders, they needed to grab more money from each policy to cover overhead and their ability to negotiate for better reimbursement rates was suffering. More than anything they needed to get their costs in check, and that’s really what ACA promised them. Since profits weren’t that important to them, it was a trade-off worth making. Two things changed the landscape:

    1) Conservatives going batshit and turning legislators that were supportive of the principles (if not necessarily the implementation) of ACA against it. That’s where Grassley got picked off. I know that directly.
    2) Liberals demanding a public option which even the not-for-profits knew would kill them off in some markets if the government could run without having to build up reserves as private insurers do and if they could negotiate as the federal government which would allow them to pay Medicare rates for everything.

    Once those two sides ramped up in 2009, everyone but the drug makers bailed out. One insurance exec (a strong player in his market) who opposed ACA told me “What we really need is help with drug prices – that’s killing us.” I pointed out that he was complaining about socialism at the same time that he was demanding that the government fix prices in the free market, that if the government is going to regulate drug prices, then they have to regulate the whole stack including the insurers, and asking to regulate everything but his business was absurd. He knew it, but he was frustrated that the market was failing to provide a solution. He even knew why the market was failing to provide a solution because he was making decisions that protected his company rather than improve the situation for his policy holders or the care providers. He knew he was making things worse overall. He just didn’t like that he was losing some measure of control.

    Another exec I know was more favorable of ACA because he was running a smaller insurer that was looking to grow, and saw a lot of opportunities in the turmoil. His response was to do a bunch of acquisitions that would provide services he knew would be in demand in a post-ACA world – they looked at the Medicaid expansion as a market opportunity. So far that’s paid off fairly well.

    A third exec I know started one of the co-ops and was a supporter of ACA from the start. He has no expectation of ever turning a profit – he’s providing a service and will employ some people and make a few dollars himself (he’s retired from his big corporate insurer so he’s mostly just working for vacation money).

  38. 38
    Tommy says:

    @SiubhanDuinne: I am not that emotional of a guy. But the pics I see as individuals run to get married bring a tear to my eyes.

  39. 39
    Richard Mayhew says:

    @🌷 Martin: Martin — read the third point I made. Actuaries knew that the Exchange eligible population was going to be significantly sicker than the population that had underwritten individual insurance. They knew that as that was how the program is designed — it is supposed to bring people into the individual market who were getting written out of it. The relevant question on rates is not how muck sicker is the Exchange pool compared to the previously underwritten insured pool. The relevant question is how much sicker or healthier is the Exchange risk pool compared to projections. Right now, looking at the tenatative/prelim pricing, most companies’ guesses were pretty damn close.

  40. 40
    🌷 Martin says:

    @Richard Mayhew: No, I agree with you on why rates were set and why some will need to go up. I was just taking issue with an 11% increase as broadly acceptable. We can’t accept rates across the industry increasing at that pace. I agree that it’s too early for insurers to get this dialed in, but within a few years we need to see aggregate rate increases down in the 3% range. If we see that, then we’ve won this little economic battle. Right now I’m pretty encouraged by how many rate decreases I’m seeing. That’s almost unprecedented.

  41. 41
    MomSense says:

    @Frankensteinbeck:

    A) Asshole effect. Medicaid spends money being kind. That’s immoral.
    B) A lot of those people are blacks, who are way too uppity already, leading to…
    C) Cleek’s law. Obama is for it, they’re agin it.

    Sadly I think almost all the issues boil down to a variation of those three things.

    Immigration: Asshole effect. Being Kind. Immoral.
    A lot of the people are browns who are stealing our jobs leading to….
    Obama is for it so of course they are agin it.

  42. 42

    @MomSense:
    Yes. There used to be a complex political landscape, although all three of those (Cleek’s law exists in a less extreme version without Obama) were core conservative values. Now they’re boiled everything down to those three. You can poll them and find overwhelming support for increased gun regulation as a theory, but fuck that shit because A, B, and C.

  43. 43
    MomSense says:

    And often times, C is enough by itself.

  44. 44
    Pogonip says:

    2 questions: 1). What is grandmothering?

    2). What’ll happen to these people when the Republicans get back in?

  45. 45
    cmorenc says:

    Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues

    There are several fundamentally important numbers in mathematics, such as pi, e, the golden ratio etc, each being undiscovered until some sharp minds recognized, at some point in history, the respective number and its relation to natural phenomena. The fundamental importance of the number 27 did not become apparent until around 2008 and the following year, but its significance is now being recognized.

    What it needs is its own name and symbol. I propose for its symbol, the Greek letter Tau, and naming this magic 27% number “the Golden Turd”, because the 27% seems to always reflect the existence of some seriously pathological condition in human society, particularly American society.

  46. 46
    Richard Mayhew says:

    @Pogonip: “Grandmothering” is a term of art in the insurance industry for the policies that were supposed to be cancelled because they were no longer grandfathered in due to significant benefit changes since March 2010 but were extended for up to three years due to the clusterfuck of a roll-out of the website.

  47. 47
    xenos says:

    Waiting for peak wingnut is reminding me of Poul Anderson’s Tau Zero.

  48. 48
    feebog says:

    @🌷 Martin:

    I was referring to this 11%:

    Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show. That is sharply higher than the rate of 16% for last year’s individual-consumer market over the same time frame, according to the data, which was supplied by Inovalon Inc., a health-technology firm that receives medical claims directly from nearly 200 insurers that are its clients.

    Perhaps I should have made that clear.

  49. 49

    @MomSense: Being kind also makes economic sense. If not enough people have jobs/ are healthy, the economy will shrink. Deflation is worse than inflation. If you don’t believe me check out the data during the Great Depression.

  50. 50

    An antidote to the ugly: Your Wednesday moment of Zen
    Warning: No has kitteh.

  51. 51
    gene108 says:

    @Mnemosyne:

    or until Republicans finally decide that they were really the ones responsible for PPACA the whole time

    I really get tired of people on the political Left saying the PPACA was a Republican idea. If it becomes as popular as Social Security and Medicare, Republicans will run on the very vague notion that the PPACA was a Republican plan implemented by the Democrats and all their obstruction and sabotage will be down the memory hole.

    The idea of universal healthcare coverage, which the PPACA tries to implement, is a liberal/Democratic goal that has constantly been fought by Republicans, sine the Truman Administration. How we got to the goal, via the PPACA, had no real constructive input from conservatives/Republicans.

    Some hacks at Heritage wrote about the idea of a mandate to buy health insurance. Republicans have dropped the notion of using policy to achieve actual benefits for 99.99% of Americans 20 years ago, when Newt and his knuckle draggers took over the House.

    P.S. If there is an actual conservative/Republican idea that has worked and has been co-opted by liberals/Democrats it is cap-and-trade as a method to control air pollution, which modern day Republicans have decided is about as communist as the love-childe of Chairman Mao and Joe Stalin.

  52. 52
    drkrick says:

    @MomSense:

    The people who spread misinformation and fear mongered about the ACA are responsible for a lot of suffering.

    The funny thing is how many of the same people spread misinformation and monger fear about so many other subjects that are responsible for a lot of suffering. Makes you wonder whether it’s really an unintended result.

  53. 53
    Mnemosyne says:

    @gene108:

    If it becomes as popular as Social Security and Medicare, Republicans will run on the very vague notion that the PPACA was a Republican plan implemented by the Democrats and all their obstruction and sabotage will be down the memory hole.

    That’s what I was saying, yes. :-) I totally agree with you that PPACA can’t be called a “Republican plan” using Earth logic.

  54. 54
    MomSense says:

    @schrodinger’s cat:

    It’s true that so much of the time the kind thing to do is also the smart thing to do. But I think that this basic idea of a nurturing society is what makes liberals liberals.

  55. 55
    MomSense says:

    @drkrick:

    The funny thing is how many of the same people spread misinformation and monger fear about so many other subjects that are responsible for a lot of suffering. Makes you wonder whether it’s really an unintended result.

    It’s true. I wonder if there isn’t just a really sadistic strain in our politics.

  56. 56
    MomSense says:

    @gene108: @Mnemosyne:

    The Heritage plan was for the mandate to buy insurance without the patient protections and the cost cutting provisions–like the medical loss ratio. I think too much of the criticism from the left even focused just on the mandate and didn’t realize how important the other provisions were.

  57. 57
    dopey-o says:

    @Tommy:

    …If there is really any growth industry in St. Louis it is biotech and medical.

    you forgot used bricks (many with mortar still attached), rusty steel and pot holes. the economy has gotten – and stayed – so bad in st louis that the meth labs have all moved to the suburbs and adjacent counties.

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