APTC Hacks – buggering the competitors

On the whole I want as many insurers and states to engage in a Silver Gap strategies.  However there are situations where it can be used offensively to bugger and beggar competitors.  Let’s walk though an example.

The scenario needs one insurer that actually wants to cover people in a county.  It also needs an insurer that for political/strategic/publicity reasons wants to be on Exchange while selling as few policies as possible.  I can think of at least one situation where that is an accurate assessment of the pricing configuration.  The way that a company stays on Exchange but does not sell many policies is to offer a plan design that meets minimum requirements but is a horrendous value proposition while being priced very high compared to its competing plans.

Silver Spamming strategies by the active insurer enable this sit out and wait strategy by the passive/avoiding insurer.  Mild Silver Gapping strategies where the active carrier offers a low price narrow network Silver and then a broader network plan priced 12% higher as the benchmark Silver when the passive Silver is priced 80% above the benchmark will also allow for a passive presence with low enrollment.

However if the active carrier decides that it wants to screw its competitor it can by embracing an extreme Silver Gap strategy.  It would offer its low cost narrow network plan only.  All of the sudden, the passive carrier’s Silver is now the #2 Benchmark Silver.  The #1 Silver by the active carrier has extremely low post-premium prices so it will suck in all of the healthy risk in the market.  The plan that was supposed to be a placeholder gets significant membership that the offering carrier was not anticipating and it is higher risk membership.

So in odd corner cases like this, the Silver Gap strategy can be deployed offensively.



Late-Night Open Thread: ‘Our’ Revolution Will Not Be Well-Organized

Jeff Weaver seems to have trouble making new friends. From Alex Seitz-Wald’s comprehensive NBC.com article:

As Bernie Sanders prepares to launch an organization meant to carry on his presidential campaign’s political revolution, it’s been jolted by legal questions, abrupt leadership changes and mass resignations.

The group, dubbed Our Revolution, is set to debut Wednesday evening. But eight of the group’s 13 or so staffers resigned over the weekend after former campaign manager Jeff Weaver was brought in to run the group. The remaining staffers, some of whom stayed for personal reasons, all sent letters to Sanders expressing concerns with Weaver and solidarity with those who quit.

The departures were first reported by Politico and BuzzFeed, but new details uncovered by NBC News from multiple sources close to matter reveal the depth of the turmoil inside the organization that controls Sanders’ lucrative email fundraising list and which many progressives hope will become a powerful force on the left wing of the Democratic Party…
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Open Thread: Hard-Earned Pushback

Even the Ragin’ Cajun, per Politico:

“Somebody is going to hell” over the political attacks on the Clinton Foundation, longtime Clinton confidant James Carville declared Tuesday, denouncing the recent scrutiny and criticism of the charitable organization.

If the Clinton Foundation had decided not to accept foreign donations while Hillary Clinton was secretary of state, as it has recently announced it would do if she is elected president, Carville said on MSNBC’s “Morning Joe” that the “good” thing would be that the organization would not be part of the political discussion.

“The bad would be you’d be out hundreds of millions of dollars that are doing good. What the Clinton Foundation does, it takes money from rich people and gives it to poor people. Most people think that’s a pretty good idea,” Carville said…

“I wish I could say the word I want to say. I’ll just say that’s BS,” Scarborough remarked. “You know the fact is if it’s a great charity and it’s a five-star rated charity, guess what, other people can raise the money. It doesn’t have to be Bill Clinton calling somebody up making people think, if I give him money it could help me out. If it’s a great charity, it can stand on its own and other people can raise money for it. It’s not a zero-sum game. It’s not having Bill Clinton raise money while his wife is running for president or else we’re all going to hell and little kids are going to die across the planet.”

“They’re gonna,” Carville shot back. “The other thing is, Bill Clinton has more charm and people around the world have an enormous amount of faith in him. I’ve traveled with him. I’ve seen it myself. There are not many people that have the relationships and are held in the affection around the world as Bill Clinton.”

But Joe Scarborough and his fellow Media Village Idiots are never gonna meet any of the people the Clinton Foundation has helped at a Beltway cocktail party, so who cares what happens to them?



Open Thread: It’s A Grift, All the Way Down



APTC Hacks, Non subsidized plans and choice revelation

Advanced Premium Tax Credits (APTC) are only relevant for people who buy policies on the Exchanges.  However the subsidized universe is only about half of the entire individual market.  The non-subsidized and off-Exchange universes will help us determine how carriers embark on their Silver pricing strategies.

If an individual would have qualified for an APTC but buys an off-Exchange policy for whatever reason, they do not get any subsidy to help offset the premium.  They pay full price.  There are some non-subsidized buyers on the Exchanges.  A common case will be people with variable incomes who are not sure if they are subsidy eligible.  They may overestimate their income so they don’t have to pay the APTC back but if they have a bad year, they can collect the Premium Tax Credit the following year when they file for their tax refund.  People who know that they can not qualify for the Exchange have no reason to shop on Exchange.  Indeed, they have a mild incentive to look off-Exchange.

Policies that are sold on Exchange must be offered off-Exchange.  However carriers can offer policy and plan designs off-Exchange that they do not offer on Exchange.  Mayhew Insurance did that in 2014 with an experimental product as we needed data to see if our hunch was right (we weren’t).  Carriers can decide to only participate off-Exchange if they wish to do so.  The advantage of selling off-Exchange is that the population is a bit higher income and that tends to correlate with two things; better health and more stability in paying bills.  Even though policies are offered off Exchange, the on and off-Exchange policies in a single metal band in a state are in a common risk pool for risk adjustment purposes.

Off Exchange has a typical policy buying decision maker earning over 400% Federal Poverty Level (FPL).  On Exchange, subsidized buyers have a median policy decision maker earning around 200% FPL.  These are very different market segments.  And those differences can feed some insight into why a carrier that has the ability to capture the #1 and #2 Silver positions would engage in either a Silver Spamming or Silver Gapping strategy.

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Tuesday Morning Open Thread: Money Can’t Buy You Gandalf

Yes, it makes me happy that Douche Flotilla Admiral Sean Parker’s wedding will never stop being mockable.

As a reminder, Sean Parker’s cri du couer:

Weddings Used To Be Sacred And Other Lessons About Internet Journalism
…. When I got started in this industry almost 20 years ago, things were different. Back then there were no blogs, no Twitter or Facebook, and the editorial world was still a growing business. The reporters I interacted with diligently researched their stories, tracked down sources, conducted interviews, and even fact-checked their stories before publication. The trouble with online media is that there’s no incentive for them to do any of this. It’s easier to generate traffic with snarky stories than hard news, and there’s no downside for getting the facts of a story wrong, or even making it up entirely. The law offers no recourse, since being a “public figure” denies you, for all intents and purposes, any protection under libel laws. The blogs attack you, do their damage, and then move on to their next target. Now, because of the permanence of the Internet and the ease of Google, these vicious online attacks leave behind a reputational stain that is very difficult to wash out…

Always think before you hit the publish button, my friends!

Apart from cheap mockery, what’s on the agenda for the day?

trump pivots flat faced morin

(Jim Morin via GoComics.com)
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Long Read: “Soul of A New (Political) Machine”

I am personally pro-machine, both out of filial piety (my Irish grandparents owed their livelihoods to Tammany Hall) and because the known alternatives are so much worse. Perhaps the concept is due for revival, as the retro vintage artisanal alternative to the kleptocrats of our Second Gilded Age? Are we sophisticated enough, technologically or socially, to harness the machines’ benefits without the corruption for which they were infamous?

Kevin Baker, in TNR — “Political machines were corrupt to the core–but they were also incredibly effective. If Democrats want to survive in the modern age, they need to take a page from their past”:

How is it possible for Democrats—seemingly the natural “majority party,” on the right side of every significant demographic trend—to suffer such catastrophic losses? Explanations abound, most of which revolve around the money advantage Republicans derived from the Citizens United decision. Or the hoary, self-congratulatory fable of how Democrats martyred themselves to goodness, forsaking the white working class forever because it passed the landmark civil rights bills of 1964 and 1965. Or how the party must move to the left, or the right, or someplace closer to the center—Peoria, maybe, or Pasadena.

But there’s a more likely explanation for these Democratic disasters. While 61.6 percent of all eligible voters went to the polls in the historic presidential year of 2008, only 40.9 percent bothered to get there in 2010, and just 36.4 percent showed up in 2014, the worst midterm showing since 1942. What the Democrats are missing is not substance, but a system to enact and enforce that substance: a professional, efficient political organization consistently capable of turning out the vote, every year, in every precinct.

What they lack is a machine.

New York’s Tammany Hall, the first, mightiest, and most feared of the political machines, went online on May 12, 1789—less than two weeks after George Washington took the oath as president in the same city…. [T]he man who turned Tammany into a full-fledged political machine never actually joined the society: that murky intriguer, Aaron Burr. By 1799, Alexander Hamilton and his Federalists held a virtual monopoly on banking in New York, frustrating smaller businessmen who wanted to start their own banks and “tontines”—investment companies that would not only make them money, but also get around property requirements that kept even most white men from qualifying for the franchise. Burr marched a bill through the state legislature that created the Manhattan Company, which promised to slake the island’s thirst for a dependable water supply. But Burr slipped a provision into the bill that allowed the company to invest any excess funds however it desired—which was the legislation’s main purpose all along.

The upshot was that the Manhattan Company laid down a lot of water pipes that were little more than hollowed-out logs. They leaked badly and absorbed sewage, thus contributing to the city’s constant, deadly epidemics of cholera and yellow fever. But Burr’s company used the money it made from the scheme to found the Manhattan Bank (later to become Chase Manhattan, later to become JPMorgan Chase). The Hamilton banking monopoly was thus broken, and new banks and tontines proliferated, allowing financial speculation to run wild, and untold numbers of middle and working-class New Yorkers to gain the franchise for the first time. In this one coup, Burr established the defining characteristics of political machines for all the years to come: They would be first and foremost about making money, no matter the cost to the general good; they would supply significant public works, no matter how shabbily or corruptly; and they would expand the boundaries of American democracy in the face of all attempts by conservatives or reformers to contain it…

… Republicans have always been, for better and for worse, the truly radical party in this country, from the abolitionists and Lincoln’s “Free Soil, Free Labor, Free Men” platform, to Progressivism and Teddy Roosevelt’s “New Nationalism,” to the right-wing conservatism of Barry Goldwater and Ronald Reagan, to the Ayn Rand utopianism of Paul Ryan. By contrast, machines made Democrats—again, for better and for worse—the party of compromise and inclusion…

***********
By the 1960s, even the mightiest machines were grinding to a halt. The Tammany tiger finally ran out of lives in 1961, put down for good by a coalition of Greenwich Village rebels, whose ranks included Eleanor Roosevelt, Jane Jacobs, and Ed Koch. Even Daley’s notorious Chicago organization, the last one standing, was no longer a machine in the old sense, surviving only on a combination of ruthless efficiency and ethnic resentment. The turmoil at the 1968 Democratic Convention in Chicago completely unhinged Daley, who was caught by the cameras screaming “you fucking kike!” at Senator Abe Ribicoff on the convention floor, a previously unimaginable violation of machine etiquette.

Its death, however, did not stop politicians from continuing to rage against the machine. The silliest example of all is the fervent Republican contention that Barack Obama brought “Chicago politics” into the White House, as if the president learned his trade at Dick Daley’s knee. What they really mean by “the machine” is whatever clique of state legislators or local pols have figured out some new means of boodling public funds or soliciting bribes. But that’s simple theft. Today our politicians don’t steal because the machine helps them, but because we have ceded them the entire political system—as reflected in our miserable voter turnouts.

So the machines died, their demise hastened by the sweeping social revolutions of the 1960s and ’70s, which made them look reactionary and ludicrous—pudgy gray men in gray suits and hats, holding back the future. Good riddance. But what was to replace them? For a short time, it was constituent groups: disparate organizations fighting for civil rights and liberties, environmental causes, the poor and the dispossessed, community empowerment, and above all labor, which provided the bulk of the party’s funding and its ground troops. But this new arrangement soon began to unravel as well. As Thomas Frank points out, “Big Labor” was viewed as suspiciously by the Democratic left as the machines were, scourged for its cultural conservatism and support for the Vietnam War, caricatured as hopelessly mobbed-up and resistant to progress…

With the traditional pillars of their party crumbling, the Democrats turned to that balm for all political wounds in America: big money. In the process, they further abandoned their traditional populism, as well as their appeals to working people—appeals that, however imperfectly, stretched all the way back to the start of the machines. And those few leaders in the party who weren’t pandering to corporate and financial interests began to think in idealistic terms that have nothing to do with “practical politics,” habits that prevail to this day. For many years now, liberal/left campaigns have rarely revolved around specific bills or policies, but instead around broader and more abstract demands: climate change, say, or racial equality. The Occupy and Black Lives Matter movements have proven to be balky, fitful vehicles for social change. They lack the ruthless practicality and organization of their right-wing counterparts. Occupy invented the human microphone. The Tea Party took Congress.

Democrats need a Tea Party—less delusional, less hell-bent on destruction—that can do what the machines did…

Baker argues — and I don’t think he’s wrong — that the oligarchs and kleptocrats have bankrolled the Republican “machine” because it’s been a good investment for them. If we’re going to compete with them, Democrats need an equivalent structure that can nuture activists starting at the lowest levels of government (school boards, county commissions). We’ve gotten into the habit of assuming that the “public service” of running for office will mostly be funded by the would-be office holders, which — barring corruption, or outside financial support — means relying on the independently wealthy or the voluntarily penurious. And while we have sometimes been extraordinarily lucky (as when a patrician like FDR or a once-in-a-generation leader like Barack Obama decides to compete) it’s demonstrably not working as a process to keep this messy nation on an even keel.