This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Welfare Reform (CCWR) Peter Ferrara was published August 11, 2013 on Forbes.com.
On July 18, President Obama held an event at the White House to promote Obamacare. It was Calculated Deception writ large, which is Obama’s rhetorical style of taking advantage of what he shrewdly calculates the great majority of average Americans will not know, and what he is certain the so-called mainstream media will not tell them. That smacks of third world style, authoritarian propaganda.
Obama falsely claimed, “In states like California, Oregon, Washington, new competition, new choices, market forces are pushing costs down.” I have already discussed in prior posts the misrepresentation regarding proposed premiums for 2014 on the California Obamacare Exchange, drawing on the cutting edge work of Avik Roy of the Manhattan Institute. The official press releases issued by the Exchange compared proposed premiums for individual health insurance in 2014 with health premiums for small business health insurance in 2013 to argue that Obamacare will not increase premiums after all in California. Saying that is like comparing apples to oranges is not even adequate. It is more like comparing prices of new Harley Davidson motorcycles next year to prices of new small buses and limousines bought by transportation companies this year, or dump trucks bought this year by small construction firms.
If the Democrat Party run California Exchange wanted to be honest, it would compare proposed premiums for individual health insurance in 2014 on the California Exchange with premiums currently paid for individual health insurance in California in 2013. When Avik Roy did that, he found, “For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.” It can be much worse than that under Obamacare next year.
Independent analysis also found that the proposed Obamacare individual health insurance premiums in Oregon for 2014 are 66% higher on average than for 2013 today, and that the proposed Obamacare individual health insurance premiums in Washington state for 2014 are 80% higher on average than for 2013 today.
Moreover, the Obamacare premiums insurance companies are proposing today for 2014 are based on the assumption that younger and healthier workers will buy the Obamacare insurance as required by the individual mandate. They are going to be sorely disappointed in that, and many are going to be scrambling to raise premiums even more the following year just to survive. They are going to be shocked as well by the employment market reorganization just now beginning to evade the employer mandate as well.
In addition, the Obamacare insurance that companies are proposing for the Exchanges are sharply restricted as to the doctors and hospitals covered by the insurance. That is necessary to keep the premiums they are proposing from soaring even more next year. That means if you think that under Obamacare “if you like your doctor, you can keep your doctor,” you and millions of other consumers are going to be sorely disappointed as well. Not to mention the docs that are going to start phasing down their practices under Obamacare.
And did Obama talk about choices under Obamacare? There are no real choices under Obamacare. You have to buy the health insurance the government mandates you to buy, covering what the government says it must cover, and you actually have no say in the matter. Under Obamacare, you have only three choices, bronze, silver, or gold, which means paying a lot more, a lot lot more, or a lot, lot, lot more.
Obama added further at his White House Obamacare circus event, “Just yesterday, state officials in New York announced that average premiums for consumers who buy insurance in their new marketplace will be at least 50 percent lower next year than today.” To mislead people about whether this would be replicated nationwide, Obama emphasized, “Think about that—50 percent lower….So if you already buy insurance on the individual market, meaning that you don’t get insurance through a big group plan through your employer, that could mean thousands of dollars a year that can go towards paying a mortgage, or putting a kid through college, or saving for retirement.”
But New York had already imposed on its individual health insurance market 20 years ago even more draconian and costly regulation than Obamacare. Moreover, after 20 years of that regulation, with guaranteed issue and community rating assuring everyone no matter how sick they became while uninsured that they could still get insurance at standard rates, costs were driven up further by adverse selection. The younger and healthier dropped out of coverage altogether, while those who waited until they became very sick and costly to get coverage were sure to sign up. People could even wait until they got sick to sign up, and drop coverage again when they recovered. As a result, New York already had the highest individual health insurance premiums in the nation.
Compared to this New York nutcase regulation, which priced all but the sickest out of the individual health insurance market altogether, Obamacare is actually deregulation in New York. Moreover, the few remaining New York health insurers in the individual market are expecting the individual mandate and the Obamacare subsidies to bring more younger and healthier individuals back into the market, countering the adverse selection built up over 20 years.
Roy calculates that the proposed 2014 rates for the individual health insurance market in New York will consequently be 39% less statewide than the 2013 rates for the individual market. But even with that, individual health insurance rates in New York will still be three times higher than the individual health insurance rates in California before Obamacare. Moreover, in eastern New York north of the city, the proposed individual health insurance rates under Obamacare will be 30 to 39 percent higher than the current 2013 rates, Roy calculates.
President Obama enjoyed the cover of a New York Times front page story that left the gross misimpression that these New York state results would be typical of the results of Obamacare nationally. Moreover, that Times story even misled readers by exaggerating the impact of Obamacare in New York City, suggesting that individual health insurance premiums in the City exceed $1,000 per month today on average, while Roy calculates the City average at $695.
What this shows is that the New York Times behaves voluntarily today in regard to the Obama Administration like Pravda did under compulsion in regard to the old Soviet dictatorships.
Obamacare Is the Problem, Health Savings Accounts Are the Solution
Obama also claimed at his July 18 White House Obamacare event, “what we’ve seen is that health care costs have slowed drastically in a lot of areas since we’ve passed the Affordable Care Act.” But Obamacare has mostly not even been implemented yet.
The Wall Street Journal noted on May 12 that, “The health [spending] growth rate has flattened out at about 3.9% over the last three years—a record low since the 1960s and down from the old normal of 6.2% to 9.7% in the 2000s.” The Journal reported that most economists attributed the slowdown to the recession, but the slowdown actually started in mid-2005. The Journal cited instead new research published in Health Affairs, providing “evidence that the moderation [in rising health spending] is durable, and that it is structural—the result of permanent changes in the health system itself rather than the business cycle.” That Health Affairs study indicated a greater role for market choice, competition and incentives in slowing the rise in health spending, the Journal suggested.
The slowdown in the rise of health care spending actually stems from the passage of Health Savings Account (HSA) legislation in December, 2003, which began to show an effect in the data as the HSAs grew by mid-2005. Traditional insurance involves a low deductible, leaving the insured to pay only the first $100 or $250 each year, with the rest covered by the insurance; perhaps with a modest copay by the insured above the deductible. That structure creates the “third party payment” problem. With the insurance company paying virtually all the bills, neither the patient nor the doctor have any incentive to control costs. They decide between themselves what and how much health care to consume, and bill the insurer. Naturally, that makes health insurance very expensive.
The idea behind HSAs is to greatly reduce the cost of the health insurance by offering coverage with a high deductible, in the range of $2,000 to $6,000 a year, or more. The savings from the lower premium expense is then put in the HSA to be used to pay for health care costs below the deductible. Whatever HSA funds the patient does not spend on health care he or she gets to keep for future health care expenses or for anything in retirement. That creates full market incentives to control costs for all noncatastrophic health care expenses, because the patient is effectively using his or her own money to pay for them. Since the patient is now concerned about costs, doctors and hospitals will compete to control costs.
The premium savings from a deductible in this range is almost enough to finance all expenses under the deductible for the year. After one healthy year, the insured could have more than enough in the HSA to pay for all expenses below the deductible.
Moreover, patients with HSAs enjoy complete control over what health care to spend their HSA funds on. They don’t need to beg for the approval of a health insurance company to spend their HSA funds on the health care they want.
These are the reasons why the sick as well as the poor prefer HSAs. The sick have complete control to spend their HSA funds on the health care they prefer. The poor could be fully covered and could pay themselves out of the health care savings they gain with HSAs.
HSAs and their incentives have proven very effective in controlling costs in the real world. Total HSA costs, including the savings to fully fund the HSA savings account to cover the deductible, have run about 25 percent less than the costs for traditional health insurance. Annual costs increases for HSAs have run more than 50 percent less than conventional health care coverage, sometimes with zero premium increases for years.
These are the reasons why HSA accounts soared by 22 percent in 2012 alone, to over 8 million. Total savings and assets in the accounts zoomed by 27 percent to $15.5 billion. That is expected to increase by nearly three-fourths to almost $27 billion by 2015. That booming growth has continued since HSAs were adopted in 2003.
According to the National Health Interview Survey of the federal Centers for Disease Control and Prevention, about one-fourth of the privately insured population is covered by HSAs, or similar Health Reimbursement Accounts (HRAs), or other high-deductible plans. Such plans probably now exceed enrollment in Health Maintenance Organizations designed to deliver strictly managed care. About half of those with private insurance obtained outside employer plans are covered by such high-deductible plans.
As HSAs and similar plans have soared in the private market, health spending growth has plummeted. That is the result of market competition and incentives, not Obamacare.
Democrats Against Democracy
Despite President Obama’s Obamacare happy talk, his recent actions indicate increasing desperation over the impending Obamacare train wreck. In those actions, Obama has seized the power to rule by decree, without authorization of law.
The Obamacare law explicitly states that the employer mandate goes into effect in 2014. The law grants no power to President Obama to rewrite that law. The Constitution requires him to “take care that the laws be faithfully executed.”
President Obama’s recent decree that the employer mandate shall be delayed by one year to 2015 consequently violates the Constitution. It is simply third world style, lawless, Obamacare authoritarianism.
No employer mandate next year while the rest of the Obamacare law goes through creates new problems under the Obamacare law. Employees are eligible under that law for generous subsidies on the Obamacare Exchanges only if their employer does not provide employee health insurance that complies with all of the requirements of the Obamacare law. The law requires the federal government to verify whether the employer of each individual seeking Exchange subsidies provides qualifying insurance. But with no employer mandate in effect next year, employers are not actually required to provide any health insurance. The federal government is also required under the law to verify with each applicant’s employer the income of the applicant to determine what subsidy the applicant is qualified to receive under the law.
So President Obama issued another authoritarian decree declaring that the federal government will not seek to verify for 2014 whether any applicant for Exchange insurance and subsidies has employer provided insurance, nor the applicant’s stated income, again contrary to the Obamacare law. This opens the door to widespread abuse of taxpayer subsidies. Moreover, CBO’s estimate of the cost of Obamacare projected that only 30 million employees would qualify for the Exchange subsidies, with over 160 million expected to be covered by employer provided insurance. President Obama’s unilateral rewriting of the law after passage means that the CBO cost estimates will likely be wildly inaccurate next year. Remember President Obama’s promise during the Obamacare debate that his program will not increase the deficit by one dime? Well, that will certainly still be literally true.
The same lawless authoritarianism is evident in the Obama Administration’s recent decree exempting members of Congress and their staffs from Obamacare, again contrary to the express provisions of the Obamacare law. Senators, Congressmen, and their staffs today participate in the Federal Employees Health Benefits Program (FEHBP). That program allows them to choose from 21 health plans in metro DC, or 24 plans in Virginia, with their federal employer paying three-fourths of premiums, as an employee benefit.
But the Obamacare law explicitly states,
“Notwithstanding any other provision of law, after the effective date of this subtitle, the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are—
(I) created under this Act (or an Amendment to this Act); or
(II) offered through an Exchange established under this Act (or an amendment made by this Act).”
There are only 3 insurance plans to choose from on the DC Obamacare Exchange. Moreover, under the Obamacare law, employers are expressly banned from providing any assistance for the purchase of insurance on the Exchanges. The Exchanges are for those without employer provided insurance, or who find their employer provided insurance inadequate (in which case the employer is subject to a penalty).
To a lawyer, there is nothing unclear or ambiguous about the text quoted above. It expressly removes members of Congress from the FEHBP, and puts them in Obamacare, on the principle that Members and their staff should have to eat their own cooking.
But President Obama’s Office of Personnel Management (OPM) claims to read “Notwithstanding any other provision of law” as “Subject to any other provision of law.” That impermissible reading warrants immediate dismissal of all OPM officials involved for abuse of office. The Wall Street Journal reported last Thursday that this was done “At President Obama’s personal request….’ This is another violation of the Constitution and the concept of the rule of law.
Still another episode of authoritarian, Obamacare, rule by decree arose earlier when the majority of states refused to set up their own Exchanges, and left that to the federal government. The Obamacare law expressly states that the Obamacare subsidies are available only for health insurance sold on state Exchanges. But still another decree from President Obama ruled that the same subsidies would be available on federally run Exchanges as well.
President Obama cleverly calculates that no private citizen has legal standing to sue over any of these authoritarian abuses of his office. Employers are not aggrieved by the delay of the employer mandate, and private citizens do not have legal standing to sue over federal expenditures that are not authorized. So he figures that his illegal actions are not subject to review by the courts, like his illegal recess appointments of federal officers when the Senate was not in recess. We shall see if that is true. He figures as well that the Democrat controlled Senate will protect him from any attempt to impeach him for his illegal conduct by the Republican controlled House.
But the voters can hold the Democrat Party accountable at the ballot box for President Obama’s authoritarian rule by decree. The Democrats are establishing now the principle that the President is not subject to the rule of law, when the President is a Democrat. The Democrats are openly supporting President Obama’s seizure of the power to rule by decree. The question is, will the voters support this Democrat suspension of democracy and of the rule of law?