Nationwide, many (including New York Times columnist Paul Krugman) seem to think that California got Obamacare right. Given the fiasco of the Obamacare launch in other states, that’s a low bar. At least, the Covered California website works. And so it should.
Whereas development of the federally operated insurance exchange, which operates in 36 states, appears to have been directed by political operatives, Covered California is led by a competent chief executive, who had two years to prepare for the launch. However, even the best leadership of the most souped-up exchange in the nation can only camouflage, not compensate, for Obamacare’s fundamental flaws. Covered California had to open up a last-minute consumer hotline, just before Thanksgiving, to attempt to give some comfort to those suffering from Obamacare’s pandemic of confusion and canceled policies.
An estimated 1.1 million Californians will have their individual coverage canceled due to Obamacare. One of the worst cases is that of Edie Sundby of San Diego, who wrote an opinion piece in the Wall Street Journal, explaining that her insurer had paid $1.2 million in claims for her cancer treatment. She cannot find a policy in Covered California that includes the cancer specialists she needs.
Many other people with expensive treatments are having their policies canceled due to Obamacare. Of these 1.1 million Californians, we can expect that about 110,000 have medical claims more than $50,000, about 165,000 have claims over $30,000, and about 220,000 have claims over $20,000.
This havoc is creating a problem much bigger than the one it purports to solve – the challenge of Californians who have pre-existing conditions which have disqualified them from purchasing individual health insurance. They existed, but in much smaller numbers than Obamacare advocates charge.
Obamacare itself funded a Pre-Existing Conditions Insurance Plan (PCIP), which launched in California in October 2010. By June 2013, it had enrolled just 16,060 people. Over 1 million people are losing coverage in order to solve a problem that affected a tiny fraction of the population.
Before Obamacare, state and federal laws prevented medical underwriting for people who had continuous coverage. In California, people who left their employers’ group coverage and kept COBRA coverage for 18 months were able to enroll in any carrier’s two most-popular individual plans without underwriting. Of course, most people get another job well before 18 months have passed, so even the number who required this protection was small.
Obamacare’s response to this manageable problem is expensive in every way. Before the 2014 rates were announced, an analysis by actuaries at Milliman Inc., commissioned by the state, concluded that the changes to market structure and coverage increased premiums in 2014 by one third, above and beyond the annual trend. The report also cited analysts at J.P. Morgan who estimated that insurers would ratchet down providers’ fees by 10 percent to 15 percent. The overall outcome? Pay more, get less.
Subsidies will immunize some people from the premium hikes but only by raiding the national Treasury. In order to attract people into Covered California, the state has to use the bait of federal tax credits to attract 500,000 to 700,000 Californians whose incomes are not high enough to afford Obamacare’s sky-high premiums. The Congressional Budget Office estimates that the average subsidy per subsidized enrollee in 2014 will be $5,290, nationwide. If this holds for California, it would imply a total cost of $2.6 billion to $3.7 billion.
When the rates were actually announced, it looked like the hikes might not be so bad. Blue Shield announced a rate increase of 13 percent, of which it claimed that only 4 percent was due to Obamacare.
But there is another, greater price: Blue Shield managed to limit its rate hike by dropping almost two-thirds of its contracted physicians from its exchange network, according to Chad Terhune of the Los Angeles Times. Access to hospitals will also be restricted. In Los Angeles, where six insurers are in the exchange, only one has the renowned Cedars-Sinai Medical Center in its network.
A potential enrollee searching Covered California will not find information about insurers’ networks. Before signing up, make sure you ask your doctor if he’s in network. Chances are, the answer will be no. And, when you need a specialist, you will likely find she’s not in network, either. More than a bureaucratic bungle, Obamacare threatens to become an expensive humanitarian crisis.
Covered California’s snappy website cannot compensate for that.