(Health care) Reform Turns Real – NYTimes.com. Time for a reality check

Paul Krugman, Laureate of the Sveriges Riksban...

2013

I find Paul Krugman quite entertaining. He has a way of turning what should be done into reality with no regard for; well, reality. Perhaps that comes from looking at numbers, tables, charts and computer models too long.

His article in the NYT October 3 is a case in point. He makes the valid point that initial computer problems are not going to sink Obamacare, although it may discourage some people from going further. Here it is October 4 and I still haven’t been able to log in to the NJ site. Does that give me a feeling of confidence even though the glitches have nothing to do with the insurance I may want to buy?

Krugman claims the good news is that the glitches are caused by overwhelming interest and hence overload. Maybe that’s true, but maybe a lot of people are just curious. Are the people Krugman identifies below the type of people who generally take quick action on their own behalf and online no less? Hey, we aren’t talking about standing in line for an iPhone. His views also raise a fundamental question. If people are chomping at the bit to enroll in this good deal, why the mandate to carry coverage?

Krugman also turns an insurance gamble (loss leaders) into a positive. He assumes insurers are offering lower than expected premiums because they believe young healthy people will enroll. Reality suggests that insurers are gambling on lower rates the first year in an attempt to attract the people they need and that the subsidies will keep them enrolled the second year. They are guessing and taking a risk which is why some of the major carriers are taking a pass initially.

But there is one other major factor where Krugman ignores reality; lower than expected premiums and subsidies notwithstanding, the insurance still costs money and more money than the penalty for not carrying insurance. These non-white, non-affluent Americans in low paying jobs he identifies haven’t seen the monthly premiums yet, or the deductibles or networks of doctors it takes to create “unexpectedly low premiums.”

What we still don’t know, and is crucial for the program’s longer-term success, is who will sign up. Will there be enough young, healthy enrollees to provide a favorable risk pool and keep premiums relatively low? Bear in mind that conservative groups have been spending heavily — and making some seriously creepy ads — in an effort to dissuade young people from signing up for insurance. Nonetheless, insurance companies are betting that young people will, in fact, sign up, as shown by the unexpectedly low premiums they’re offering for next year.

And the insurers are probably right. To see why anti-Obamacare messaging is probably doomed to fail, think about whom we’re talking about here. That is, who are the healthy uninsured individuals the program needs to reach? Well, they’re by and large not affluent, because affluent young people tend to get jobs with health coverage. And they’re disproportionately nonwhite. Paul Krugman, NYTvia Reform Turns Real – NYTimes.com.

We have a long way to go before claiming victory in health care reform, a very long way. Getting millions more people covered in our system may prove to be worst thing to happen. The administration has created high expectations, but we still don’t know what “affordable” truly means.

3 comments

  1. Large insurers are taking a pass because they have previously abandoned the individual and small group market. That is, they are not offering coverage in states where UHC, Aetna and CIGNA were not already actively involved in the individual/small group marketplace.

    You forget about the Transitional Reinsurance Fee.

    Transitional reinsurance is designed to raise $25B to stabilize premiums in the individual/small employer exchanges for 2014 – 2016. Assuming they get 7MM enrolled in 2014, the $12B raised equates to nearly $2,000 per individual. In 2014, under the transitional reinsurance program, insurers will receive a reimbursement of 80% of the individual claims that exceed an attachment point of $60,000 up to a national reinsurance cap of $250,000. For example, for an individual claim of $100,000, the insurer will receive 80% of $40,000 (the excess of $100,000 over the $60,000 attachment point), or $32,000.

    The total amount to be collected under the reinsurance program from insurers and self-insured group health plans, WHO ARE NOT PARTICIPATING IN THE EXCHANGES is $25 billion (2014 – 2016).

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    1. In that case, assuming insurers have factored this reinsurance into 2014 premiums, then we can expect hefty increases after the transition period, assuming the period actually ends as scheduled.

      This is the first I saw actual numbers associated with the attachment point.

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    2. Given the reinsurance you would think that some of the big insurers would see this as an opportunity especially given at least som

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