Obamacare 2014 – More Losers Than Winners

Tony Quinn
Editor, California Target Book

Covered California’ the state’s Obamacare exchange, has racked up one accomplishment.  Thanks to its policies, there are more uninsured Californians in January 2014 then there were one year ago.

According to media reports, some 430,000 people signed up for health insurance through Covered California during the three month sign up period to be covered January 1.  But over the past year, 1,087,169 Californians in the individual market had their plans canceled due to Obamacare’s new rules.

Nationwide, some 5 million people lost their health insurance.  When President Obama felt the heat, he saw the light and asked the states and insurers to extend the cancelled plans for another year.  California Insurance Commissioner Dave Jones had already pressed insurers to extend these plans and immediately endorsed the one-year extension.

These 1.1 million people are mostly healthy and had limited coverage catastrophic plans that they liked.  But for Covered California’s actuarial schemes to work, these people must be forced into the exchange.  So exhibiting the empathy of Stalinist five year planners, Covered California denied the extension.  As a result, came January 1 these people had no coverage.

But even if you assume that all 430,000 enrollees in the new exchange come from this pool (probably an inaccurate assumption), that still leaves 670,000 Californians with cancelled plans.  Some probably found new plans through the private market, but how many simply are doing without insurance because they cannot find or cannot afford another plan?

President Obama received the Politifact “Lie of the Year” award for “If you like your plan, you can keep it.”  But there is an even bigger lie that has been spread by the Administration and its liberal supporters, and that is that there are no losers in Obamacare, only winners.  In fact, there are more losers so far in California than winners, and there is every reason to expect this disparity to grow in 2014.

That’s because Obamacare is essentially a huge redistribution of wealth between income levels and between generations, and in that there are always winners and losers.

Covered California reported on December 17 that 84 percent of its early enrollees received a subsidy that is available to people making between 100 and 400 percent of the federal poverty level.  In the end, Covered California is likely to be little more than a mechanism for eligible people to get subsidized insurance. These people are certainly among the winners.

So are the health insurers, as Barrons reported in September, “The conventional wisdom on Wall Street has been that a huge influx of paying customers would drive profit gains for insurers and hospitals alike. Big expectations have fueled a rapid rise in stock prices.”  That’s seen in the 83 percent increase in the value of health provider stocks over the past three years, well outpacing the 57 percent rise in the overall stock market.  Wellpoint, parent of California giant Anthem Blue Cross, saw its stock price rise from $61 a share in January 2013 to $92 a share at year’s end.

Who are the losers?  Let’s start with the taxpayers who will end up forking over an additional one trillion dollars over the next decade to pay for these subsidies, as well as the increase in Medicaid coverage that Obamacare provides.  These additional benefits need to be paid for; the Chinese are not just sending us free Yuan to cover them.

The immediate losers are the 670,000 (or more) individual market policy holders in California who have not signed up for subsidized insurance through the exchange, probably because they do not qualify.  For them Obamacare almost universally means higher insurance premiums.  And in April, the “individual mandate” Catch 22 hits; under Obamacare these folks will be fined for not having health insurance when it is Obamacare that caused them to lose their insurance in the first place.

That is because the scheme requires coverage for “essential health benefits,” items such as substance abuse services, pediatric and vision care, mental health treatment and maternity and newborn care – even if you would never have need for these “essential services.”   So if you had just a catastrophic plan, it had to be cancelled and you must pay for a more expensive plan, which kills off the effort to provide inexpensive health insurance in the United States.

The next shoe to drop will be the small group market, where these “essential benefits” will be forced into small employer policies.  Getting small business employees insured has been one of the toughest nuts to crack because so many of these businesses are only marginally profitable.  Now Obamacare will take away their ability to buy inexpensive barebones plans for their employees.

Don’t believe me?  Here’s what Aetna is telling its customers, “Factors such as essential health benefits, maximum plan deductibles, the application of new taxes and fees and new rating rules will combine to push insurance premiums up substantially for some small businesses.”  There is a massive transfer of wealth to health insurers who not only get a new market under the mandate, but their policyholders must buy more expensive plans.  Look for huge cancellations of small business policies later this year, and watch these businesses force their employees to find their own insurance on the exchanges.

Winners and losers can also be measured by the generational transfers that will occur.  Young people will subsidize old people because Obamacare does not allow insurers to charge older and sicker people their actual costs. This is why Covered California could not allow an extension of the cancelled individual policies; too many were bought by healthier young people who must be forced into the exchange to cover the older and the sicker.

In 2014, the politics of this issue will change.  Dead as a doornail is the hope for a ”single payer” health care system in America, the long-time dream of the progressive left.  The new system imbeds the health insurers far too deeply for them ever to be removed.  Democrats and progressives are simply stuck depending upon the kindness of health insurers to make this scheme work.  That’s why the Obama Administration has resisted calls to delay the individual mandate; young people must be forced into this system or it collapses.

This also shows the self-defeating foolishness of the Republicans shutting down the government to defund Obamacare; the health insurers would never have allowed it. They should also stop their silly talk about restoring a free market health care system; there isn’t one and has not been one in decades.

Instead, this year every Republican candidate should talk about one thing: repealing the unfair provisions that are costing millions of Americans the “health insurance they liked.”  And that should begin with getting rid of the mandated essential benefits that are forcing up costs.  Republicans need to show a way to make the losers into winners.  In 2014, that is what the country will want.

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