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As Obamacare Rates Soar and Exchanges Fail, Gruber and Media Still Downplay Failures

Obamacare rates are soaring and the majority of the highly touted state exchanges established by the law have failed.

But MIT professor Jonathan Gruber, the Obamacare architect who famously claimed the American people were too stupid to be told the truth about the ill-starred law prior to its passage, wrote in Politico recently “the fear of ‘death spirals’ from rapidly rising premiums is greatly exaggerated when the vast majority of exchange enrollees are subsidized, meaning they don’t pay those higher premiums.”

Many mainstream media outlets, just as they did in 2009 and 2010 when Gruber touted the supposed benefits of Obamacare, are repeating Gruber’s talking point.

But the current failures of President Obama’s signature legislative achievement extend well beyond the designation given to the president’s promise that with the new law “if you like your health care plan, you can keep it,” which Politifact declared in 2013 to be the lie of the year.

As Fox News reported, “16 of Obamacare’s 23 approved healthcare cooperatives have closed up shop, or announced their intention to close by year’s end, further reducing competition.” That’s two more failed exchanges since last month, when Breitbart reported the fourteenth failure in Connecticut:

Connecticut’s Obamacare health insurance co-op is being placed under state supervision because of its status as financially “unstable,” leaving 40,000 individuals on the hunt for new insurance plans.

HealthyCT – a nonprofit health insurance plan set up under President Barack Obama’s signature health care reform, is one of 23 original Obamacare co-ops and the 14th to fail since they began selling their health insurance plans on the Obamacare exchanges.

Insurance commissioners in eight states have already approved significant premium rate increases for 2017, as Fox News reported:

Courtesy of ACASignUps.net, here are the average weighted increases for [seven of these] states thus far. . . Kentucky: weighted average increase of 24.5%, Oregon: 23.8%, New York: 16.6%, Mississippi: 15.8%, Arkansas: 9.4%, Vermont: 7%, Rhode Island: 1.3%

Rates in an eighth state, Tennessee, also just went up significantly, where the state’s insurance commissioner just authorized dramatic rate increases for the three remaining insurers in the market: “Blue Cross Blue Shield received a 62 percent increase in rates, Cigna received a 46.3 percent increase, and Humana received a 46.3 percent increase”, as Breitbart News reported:

Tennessee’s insurance commissioner said the Obamacare exchanges in her state are “very near collapse” after she approved rate increases for three insurance carriers on the exchanges in an attempt to give consumers more options for open enrollment in November.

I would characterize the exchange market in Tennessee as very near collapse … and that all of our efforts are really focused on making sure we have as many writers in the areas as possible, knowing that might be one. I’m doing everything I can to prevent a situation where that turns to zero,” Tennessee Department of Commerce and Insurance commissioner Julie Mix McPeak said to The Tennessean.

It’s the way the law is written that’s causing these problems, Fox News reported:

To begin with, adverse selection is crushing insurers, while at the same time they’re struggling to enroll healthier young adults. Adverse selection describes the process by which sicker individuals were among the first to enroll, leaving insurers with a less-than-desirable mix of new patients who are proving quite costly. Remember, prior to Obamacare insurers were allowed to pick and choose their customers and turn away those with pre-existing conditions. That’s no longer the case with Obamacare.

On the other hand, younger adults are enrolling in greater numbers, but their overall participation is nowhere near what insurers need. The culprit here may very well be the Shared Responsibility Payment, or SRP. The individual mandate, which is the actionable component of the ACA, states that individuals need to buy health insurance or pay a penalty come tax time. The SRP is the official name of that penalty, and in 2016 it’s the greater of $695 or 2.5% of your modified adjusted gross income. The Kaiser Family Foundation predicts 2016’s SRP will average $969. The SRP was intended to encourage young adults to enroll, but when full-year premium costs for even the cheapest plans are typically $2,400 or higher, most are choosing the cheaper route of paying the penalty. In other words, insurers are being hindered by adverse selection and low healthy adult enrollment figures.

The failure of the risk corridor is another reason why competition has faltered. The risk corridor was designed to collect money from overly profitable insurers on Obamacare that would be redistributed to those insurers that were losing excessive amounts of money. The idea was to create a sort of risk-pool among insurers to both protect them against adverse selection, as well as from pricing their premiums too low. It was also believed that the added financial protection of the risk corridor would encourage new entrants, thus promoting competition that would keep premium inflation in check.

Unfortunately, the risk corridor was a disaster. There weren’t many overly profitable insurers on the ACA, so just 12.6% of the $2.87 billion in requested funds from insurers was paid out.

Even Jonathan Gruber conceded recently in the aptly titled “What We Didn’t See Coming” column he wrote for Politico that the actual results of the law’s implementation “include some surprises, even for those of us who have tracked the law closely and rooted for its success.”:

More people are in Medicaid than anticipated; fewer bought health plans through the exchanges. . .

What did happen? The law has more or less hit its target for covering Americans. Almost 20 million people had coverage in 2015 close to what the nonpartisan Congressional Budget Office had forecast in early 2013. But it didn’t quite happen in the ways the CBO and many of us other analysts expected.

The diehard supporter of the law offers this conclusion though: “Surprises aren’t necessarily failures.”

“[T]he sizeable rise in exchange premiums over the past year, and even a rapid rise in the coming year, does not imply a long run unsustainable pricing pattern for exchanges, despite what critics of the health law may contend,” he asserts.

As for the exchanges, he concedes they “will probably end up smaller than expected – but still plenty large enough to continue. The fact is that exchanges in every state are well above the minimum scale required to function effectively. And the fear of ‘death spirals’ from rapidly rising premiums is greatly exaggerated when the vast majority of exchange enrollees are subsidized, meaning they don’t pay those higher premiums.”

Gruber concludes “Any objective analysis of the ACA will find that it vastly improved the lives of millions of Americans who could not previously rely on the security of employer or government-provided insurance — while leaving the vast majority of Americans able to still rely on the insurance arrangements that they enjoy. And that should be no surprise.”

On the campaign trail, however, candidates are finding that most voters still do not agree with Gruber, even though the mainstream media seems eager to declare that, despite the failures of Obamacare, political criticism of the law have lost steam.

As Politico reported:

As insurers push large premium increases for 2017 Obamacare plans, some of the steepest hikes have been requested by insurers in crucial swing states that could determine control of the Senate.

In nine of 11 states with competitive Senate races, at least one insurer seeks to hike rates for Obamacare customers by at least 30 percent next year: Highmark Blue Cross Blue Shield in Pennsylvania wants to jack up average premiums by more than 40 percent. In Wisconsin, three insurers have asked for rate hikes of more than 30 percent. In New Hampshire, two of the five carriers want to sell plans with rate increase above 30 percent.

The potential sticker shock — coupled with the likelihood many consumers will have fewer choices next year after major insurers scale back their exchange participation — creates a potential political opening for Republican candidates, especially since the next Obamacare enrollment season starts one week before Election Day.

“People who are feeling it in their pocketbooks are going to be very unhappy about [rate hikes],” said Brian Walsh, a former communications director for the National Republican Senatorial Committee. “You would expect to see this will be part of the campaign messaging for House and Senate Republicans. … If it hasn’t started, it will be coming.”

While Donald Trump often cites eye-popping rate hikes as proof the health care law is a “disaster,” rate hikes haven’t yet emerged as a major campaign issue in most Senate races — although several Republicans said they plan to spotlight the issue in the fall.

Not surprisingly, Politico, which ran Jonathan’s Gruber’s July defense of the law, borrows one of his lines from that defense in its reporting on the issue: “The reality is that most Obamacare customers won’t have to pay headline-grabbing rate hikes since the vast majority are eligible for federal subsidies that reduce their monthly insurance costs. And proposed rates, which HHS posted publicly earlier this month, are likely to come down under regulatory scrutiny.”

Politico does acknowledge, “However, millions of people who buy their own coverage and who don’t receive federal help will be exposed to the full rate hikes unless they can switch into a cheaper plan.”

It is those voters who have to pay the full freight of Obamacare who are likely to let Democratic candidates know just how they feel about their continued support for the law at the polling booths in November.

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