President Obama on Thursday apologized to Americans whose existing health insurance was being significantly altered or cancelled altogether just as enrollment for the Affordable Care Act was commencing. "I am sorry," the President announced, "that they are finding themselves in this situation based on assurances they got from me."
But those Americans waiting for a mea culpa from either their employers or their insurers shouldn't hold their breath. After all, while their premiums and deductibles have spiraled upwards, the percentage of nonelderly Americans covered by workplace insurance has plummeted from almost 70 percent to 54 percent just since 2001. Meanwhile, even as the evidence is growing that some carriers are cynically using the launch of the ACA to squeeze or drop less "desirable" customers, the Obama administration like the Bush White House before it has had to plead with insurers to protect their current policyholders.
That shouldn't be too much to ask of an industry forecast by the nonpartisan Congressional Budget Office (CBO) to gain 7 million new paying customers in 2014 alone thanks to Obamacare or that had advocated its own plan for instituting an individual mandate, ending discrimination based on pre-existing conditions and subsidizing coverage for lower-income Americans. Besides, at the March 5, 2009 White House Forum on Health Care Reform, it was Karen Ignani, the president and CEO of America's Health Insurance Plans (AHIP), who made a very bold promise to President Obama and the American people. The top lobbyist for the nation's health insurance companies pledged:
"We want to work with you, we want to work with the members of Congress on a bipartisan basis here. You have our commitment. We hear the American people about what's not working. We've taken that very seriously. You have our commitment to play, to contribute, and to help pass health care reform this year."
Of course, that was just a façade to cover an all-out blitz to ensure health care reform was dead on arrival. Behind the scenes Ignani took out the long knives to smother the ACA in its cradle and stab Obama in the back. That summer, the insurance industry spent $173 million and deployed 50,000 workers to kill the public option and other provisions designed to make coverage more affordable. By the time the ACA was signed into law in March 2010, AHIP alone had quietly poured over $100 million into the U.S. Chamber of Commerce campaign to defeat it. But still, they lost.
Now with Obamacare the law of the land, America's health insurance companies are once again doing what they do best: maximizing profits by dropping their sickest and costliest customers while selling products designed not to be used.
Here's how the insurance industry is getting its revenge.
Cancelling Policies and Jacking Up Costs
Staying Away from the Exchanges
Dropping Hospitals and Physician Networks
(Click a link below to jump to the details for each.)
Cancelling Policies and Jacking Up Costs
With the passage of the Affordable Care Act, insurers were forced to create a new formula for keeping sicker Americans off their rolls. Prior to the ACA, insurers rejected one in five applicants in the individual market of 25 million people due to pre-existing conditions. The even more pernicious practice of "rescission" enabled the companies to drop hundreds of thousands of policyholders when they became ill. (As Ezra Klein lamented four years ago, that kind of cruelty wasn't just business as usual for the insurance industry; it was its business model.) Annual and lifetime benefits caps, limited coverage for preventive care and emergency care along with other traps helped AHIP's members keep costs down and the sick away.
But Obamacare ended all that. Its "10 essential" patient protections mean that insurers--at least theoretically-- can no longer cherry-pick their customers as they have for years. Sadly, America's health insurers have devised new ways to achieve similar results.
Their tactics start with the policy "cancellations" which may affect from 50 to 80 percent of the 15 million people who buy coverage for themselves and their families in the individual market. The AP recently tallied up those whose bare-bones policies don't meet the minimum requirements under the Affordable Care Act:
In California, about 900,000 people are expected to lose existing plans, but about a third will be eligible for subsidies through the state exchange...
About 330,000 Floridians received cancellation notices from the state's largest insurer, Florida Blue. About 30,000 have plans that were grandfathered in. Florida insurance officials said they're not tracking the number of canceled policies related to the new law.
National numbers are similar: 130,000 cancellations in Kentucky, 140,000 in Minnesota and as many as 400,000 in Georgia, according to officials in those states.
For his part, Blue Cross and Blue Shield of Florida CEO Patrick Geraghty explained, "We're not cutting people" but instead "informing folks that their plan doesn't meet the test of the essential health benefits; therefore, they have a choice of many options that we make available through the exchange." But other companies are taking a different approach by either trying to hoodwink subscribers into purchasing much higher cost policies as soon as possible, or alternatively forcing them out altogether.
TPM documented the first gambit, which often comes in the form of a "If you're happy with this plan, do nothing" letter. Looking at cases in Washington and Kentucky involving LifeWise and Humana, TPM explained:
"If Donna had done nothing, she would have ended up spending about $1,000 more a month for insurance than she will now that she went to the marketplace, picked the best plan for her family and accessed tax credits at the heart of the health care reform law...
Across the country, insurance companies have sent misleading letters to consumers, trying to lock them into the companies' own, sometimes more expensive health insurance plans rather than let them shop for insurance and tax credits on the Obamacare marketplaces -- which could lead to people like Donna spending thousands more for insurance than the law intended. In some cases, mentions of the marketplace in those letters are relegated to a mere footnote, which can be easily overlooked."
In other cases, insurers aren't racing to retain their current customers, but to shed them as quickly as possible. As Sarah Kliff pointed out in the Washington Post, "Employers have responded by increasing premiums by less than 3 percent, on average, to make up for the cost of these new benefits." But in the individual market, insurers are using the opportunity presented by the ACA's new coverage requirements to dump their costliest customers. Cancer survivor Edie Littlefield Sundby is losing her policy not due to Obamacare, but because her insurer UnitedHealthcare is abandoning the California non-group market. And as Kaiser Health News documented two weeks ago:
Both Independence and Highmark are cancelling so-called "guaranteed issue" policies, which had been sold to customers who had pre-existing medical conditions when they signed up. Policyholders with regular policies because they did not have health problems will be given an option to extend their coverage through next year.
Consumer advocates say such cancellations raise concerns that companies may be targeting their most costly enrollees.
They may be "doing this as an opportunity to push their populations into the exchange and purge their systems" of policyholders they no longer want, said Jerry Flanagan, an attorney with the advocacy group Consumer Watchdog in California.
In practice, the end result of the much larger than expected price hikes and cancellations is similar to the pre-Obamacare insurance scheme of "purging." As Ezra Klein explained it in 2009:
This is where insurers rid themselves of unprofitable accounts by slapping them with "intentionally unrealistic rate increases." One famous example came when Cigna decided to drive the Entertainment Industry Group Insurance Trust in California and New Jersey off of its books. It hit them with a rate increase that would have left some family plans costing more than $44,000 a year, and it gave them three months to come up with the cash.
With Obamacare, none of this should pose a problem for consumers, who can simply shop on the exchanges for a better deal. Unless, that is, the major insurers refuse to sell policies there. Sadly, that is exactly what has happened so far.
Staying Away from the Exchanges
The health insurance exchanges (16 run by the states themselves and 34 for them by the federal government) are where consumers go to compare plans and pricing from different vendors and, just as important, receive any federal subsidies they may qualify for. But in May, Regence BlueCross BlueShield of Oregon--the largest insurer in the state--announced it was withdrawing from the exchange there. As the Lund Report described the shocking decision:
Onlookers came away stunned. Regence had been at the table all along, testifying in favor of the exchange during legislative hearings and had staff attending work sessions organized by Cover Oregon. Its top executives, including Mark Ganz, Jim Walton and Don Antonucci had appeared in numerous public speaking forums touting their support, giving all indications they'd be a strong player in the exchange. The Oregon Insurance Division had even scheduled a hearing in early June to review Regence's plans.
"Regence is just trying to game the system and play politics in the hopes that the exchange goes down; it's quite obvious that they're setting themselves up to compete by not participating in the exchange and not gamble on a risky population that they can't predict," according to people familiar with the marketplace.
That was just a hint of things to come. Despite their strong earnings, high stock prices and the prospect of seven million new customers in 2013 alone, America's major health insurers are choosing to avoid the exchanges for now. As USA Today recently reported ("Big insurers avoid many state exchanges"):
About a third of insurance companies opted out of participating in the exchanges in states where they were already doing business, according to a report by McKinsey & Co.
CBS News made the same point in a recent segment:
In 23 states plus the District of Columbia, there are fewer than four carriers in the individual exchange market. "You don't have Aetna, you don't have UnitedHealthcare, you don't have Cigna. Those are all national carriers who are not playing in the Illinois-federal partnership."
Why are they not? "They didn't want to take the risk." The risk of not knowing how many customers they will have."
Of course, the current financial performance and future forecasts of the big carriers would suggest they are very well positioned to take precisely that risk for more market share. As the New York Times recently found:
Because they face new regulations intended to broaden coverage and limit profit-taking, some analysts have been concerned that profits will suffer. But in the run-up to the Affordable Care Act, stock market prices have told a different story.
Over the last 12 months, shares of the top five publicly traded health insurance companies -- Aetna, WellPoint, UnitedHealth Group, Humana and Cigna -- have increased by an average of 32 percent, while the Standard & Poor's 500-stock index has risen by just 24 percent.
As USA Today noted, Aetna and the Coventry plans it recently acquired will be available on a statewide basis in 10 state exchanges and in limited geographic areas in seven state exchanges." Spokesman Matthew Wiggin says the company "narrowed in on those states where we had the right cost structure and network arrangements to meet the specific demographic needs of exchange consumers." The result, he says, is the company's presence will deliver "long-term profitable growth."
Especially if customers can't use the products they're paying for.
Dropping Hospitals and Physician Networks
Americans going to their state's insurance exchange may not only be surprised to find their current insurer is not there. As it turns out, their preferred doctors and nearby hospitals may not be offered either.
For insurers new to some markets, that quandary may just reflect the time it takes to build to construct a provider network from scratch. But for many others selling policies on the exchanges, that flaw is a feature, not a bug.
Take, for example, the situation in New Hampshire. Right now, almost all of the 40,000 people buying individual policies in the Live Free or Die state purchase them from Anthem BlueCross BlueShield. Anthem also happens to be the only insurer selling coverage in the New Hampshire exchange. And none of those plans pay for care at Concord Hospital, the largest in the state. As the Concord Monitor reported last month:
The president of Anthem Blue Cross Blue Shield in New Hampshire faced an unhappy audience of state senators yesterday as she defended the insurer's plan to exclude 10 of New Hampshire's hospitals from the limited network of health care providers available for people who purchase insurance through the new exchange.
As the Monitor explained, "Anthem built the so-called narrow network in an effort to keep costs down for the plans it will sell on the new state insurance marketplace."
That "narrowing" is underway in other states as well. In Oregon, only one insurer in the CoverOregon exchange includes the Oregon Health Sciences University (OHSU) and its doctors in its network of hospitals and physicians. Across the border, the University of Washington Medical Center--the premier provider in the state--is similarly missing from most insurance plans on the exchange. As Seattle King5 TV told viewers, that is no accident:
Teresa wrote, "...the following hospitals are OUT OF NETWORK providers for Premera's Exchange plans: Swedish Hospital, University of Washington Medical Center, Providence Hospital, Harborview
and Seattle Cancer Care Alliance..."
Other shoppers on the exchange say even if they stay with the same insurance company they have now, they would be forced to switch doctors.
Washington State Insurance Commissioner Mike Kreidler described how insurers are keeping their costs down and profits up by making it less likely customers will actually use the health care they thought they were paying for:
"We are seeing some of the health insurers now, narrowing down their network, of who are their 'in network' doctors and hospitals.
One of the ways they work in the exchange to hold down costs is to have narrower networks. Most of the carriers wound up doing that, meaning that they were much limited as to which hospitals and doctors would be participating in the 'inside the exchange' plan."
Many insurers will let their customers keep their doctors, but only if they purchase more expensive plans directly. To do that, they'll have to pay more and forego federal subsidies for which they are qualified.
In late 2008, AHIP published its own proposal for the health care reform its CEO Karen Ignani knew the incoming president would be pushing. It included an individual mandate, ending the ability of insurers to discriminate against those with pre-existing conditions and financial assistance for Americans earning up to 400 percent of the federal poverty purchasing coverage and many other provisions of what would become the Affordable Care Act. When AHIP's Karen Ignani made her since forgotten pledge in March 2009, an excited and obviously satisfied President Obama told his White House audience:
Good, thank you. Karen, that's good news. That's America's Health Insurance Plans. (Applause.)
But just six months later, President Obama used an October 2009 address to call out the insurance industry for its betrayal:
This is the unsustainable path we're on, and it's the path the insurers want to keep us on. In fact, the insurance industry is rolling out the big guns and breaking open their massive war chest - to marshal their forces for one last fight to save the status quo. They're filling the airwaves with deceptive and dishonest ads. They're flooding Capitol Hill with lobbyists and campaign contributions. And they're funding studies designed to mislead the American people.
Four years later, the health insurers are still misleading the American people. With Obamacare now the law of the land, AHIP is still getting its profits--and its revenge--at their expense.