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Saturday, August 27, 2016
Current Affairs ... Health / Nutrition ... Public Policy ...

About once a week I take the train to work, and I’ve noticed that the NJ Transit stations and the insides of the trains still have advertisement posters, even in this day and age when everything important is on your smartphone. About a year ago, I saw a lot of posters for Oscar, the “new kind of health insurance”.

So it was sad to read that Oscar is pulling out of the Obamacare market in New Jersey (where I live and where my train line is), along with Dallas. They aren’t completely abandoning the Obamacare exchanges; in fact they are expanding their offerings in some places (like San Francisco). But they tried to make ObamaCare work in NJ, and it didn’t happen for them. That’s too bad; I liked their ads. They were cute, especially the big walking bear. If you live outside of NJ, you might see them (supposedly Oscar is still drumming up business right across the river in New York). They are very cute and innovative, and they emphasize Oscar’s tech savvy nature (one ad said “Hi, we’re Oscar. We’re using technology to make health insurance simple, human and smart”). Actually, prior to Oscar I don’t remember ever seeing any sort of advertisement for health insurance! To actually have an insurer trying to convince you to buy their health coverage was very different.

At present, I don’t need Oscar; my Aetna policy from work meets my needs for now, and in a just few years I will be on Medicare. Still, it was nice to see an insurance company trying to innovate, a health insurer that seemingly wanted my business (just in case worse ever came to worst with Aetna). It all seemed like a good sign, an indication that Obamacare was working. Hey, if the Affordable Care Act (ACA) spawned the birth of ten or fifteen new Oscars, maybe health insurance wouldn’t be such a huge problem anymore.

Admittedly, Oscar’s ads seemed aimed at younger people; maybe Oscar really didn’t want my business, given my age. OK, not a surprise. That’s been a problem for Obamacare thus far. Young people haven’t signed up as much as was hoped for. According to health insurance theory, healthy young customers with relatively few claims are needed to offset the higher costs imposed by fogies like myself. The Obamacare designers had estimated that young adults would make up 38 percent of enrollees; right now they’re around 28 percent of the marketplace population.

There is an enforcement provision called the “individual mandate”, which amounts to a penalty for not having insurance. In 2016 it ranges from $695 to about $2,700 per household depending on family size and income. (Two years ago it was as low as $95; the federal government hopes that the recent increase in penalty will bring up the rate of young adult enrollment). There are a variety of exemptions, however, and the only way the mandate can be enforced is if the IRS owes you a refund (which they will then withhold, up to the amount of your mandate penalty). If you don’t get an income tax refund, then there’s not much the federal government can do to make you take Obamacare seriously. Given the relatively weak enforcement penalties for the young and healthy, too many of those who have signed up for Obamacare have been sick people who couldn’t previously get health insurance.

Thus, the high actuarial costs of the Obamacare customer mix has discouraged some of the major insurers, including Aetna, United Healthcare and Humana, which are significantly reducing their offerings in certain states and completely leaving other state markets. Also, 16 of the 23 new co-op groups formed under the ACA to offer Obamacare insurance have failed and gone under. These are/were non-profit, consumer-operated and oriented plans.

Now Oscar (a privately held for-profit insurer whose owners include the family of Jared Kushner, Donald Trump’s son-in-law and trusty advisor) is joining this trend, although in a more limited fashion. Why is Oscar cutting back? Did it fail in its attempt to draw a younger, healthier mix of customers? I read in Bloomberg that Oscar’s main problem in NJ is that they couldn’t form a narrow network in the state. “Narrow networks” means that the insured person has fewer choices of doctors, hospitals and other providers, and can’t stray from their network without huge co-pays. The insurance company seeks out the cheapest doctors and clinics and hospitals for its narrow network, the ones that will take the least compensation per patient procedure.

As to Oscar, it recently reduced its list of covered health care providers in New York State, leaving out New York-Presbyterian-affiliated hospitals and Memorial Sloan Kettering Cancer Center. Which was ironic, given that Oscar CEO Mario Schlosser had previously said that he’d prefer to send a patient to Sloan Kettering in order to achieve better outcomes. Oh well. Various New York-area customers have complained that despite Oscar’s wonderful advertisements and its easy procedures, it hasn’t always delivered a similarly smooth experience with actual health care. Some disappointed customers allegedly claimed that they were misinformed about Oscar’s provider networks and copays. The “BestCompany” review site says “Oscar has its advantages, but overall it’s not a recommended company to get health insurance from. There are too many red flags about Oscar for it to be worth the risk.” OK, so that is what the real “narrow network” Oscar is like.

Perhaps Oscar intentionally aims its slick marketing at the “young invincibles“, the young adults who could help balance the health care actuarial pool but don’t want to pay for insurance, confident that they won’t need it anytime soon. (Oscar may be just fine for young people who won’t need to use their health insurance very much; but as noted above, for those who actually had to rely on Oscar to help them deal with real illness, there were many disappointments). For whatever reason, Oscar couldn’t make its New Jersey network narrow enough and low-cost enough, so it’s bye bye Oscar. In many other places, it’s also bye bye Aetna, United, Humana, etc. At present, Pima County in Arizona (Tuscon and vicinity) does not have any insurers offering Obamacare policies, although two insurers might offer plans later in the year.

You might ask, what is going on here . . . not just with Oscar, but with the overall health insurance situation in the Obamacare era . . .

Sarah Kliff is a young writer and reporter who specializes in health care issues; she did a lot of good work reporting Obamacare for the Washington Post in its formative years, and she recently had a very insightful article appear in Vox about what is now happening with it. The title of her article gets right to the big question: Is Obamacare Failing? In a nutshell, Ms. Kliff seems to feel that the answer is NO, Obamacare is not failing. However, it clearly is NOT changing the health insurance industry in the ways that its founders and designers (including President Obama, I would guess) had envisioned back in 2009.

According to Ms. Kliff, it was expected that employer-provided health insurance would go the way of the do-do bird in a handful of years, given that the coverage options and prices in the Obamacare markets would be so good that most employees would rather their employers drop their coverage and give them a special pay raise in return. Most employee insurance coverage doesn’t give you much choice or many options, whereas buying in the exchange markets would give you all kinds of options in terms of price and coverage quality. In theory.

However, that hasn’t happened yet, and there doesn’t seem to be any trend towards it. According to Ms. Kliff, employees still want coverage from their employers, and surprisingly, most employers are obliging (perhaps because the bosses also need coverage, and they don’t trust that the Obamacare markets will serve their families as well as the present company policy does). As a result, Obamacare is turning into an expanded version of Medicaid, which is a very limited insurance coverage system for lower-income people who aren’t seniors yet (they go on Medicare at age 65). Medicaid doesn’t give you a whole lot of options in terms of the doctors that you can go to or the hospitals or clinics that you can use, or the medications you can take. BUT, if you follow all the rules (which isn’t always easy), it will probably keep you alive (to the degree possible).

As Ms. Kliff states, “the population that has flocked to the marketplaces looks pretty similar to the Medicaid population. The vast majority of Obamacare’s enrollees are low-income: 81 percent earn less than 250 percent of the poverty line ($29,000 for an individual or about $60,000 for a family of four). These are the types of people who likely couldn’t afford to buy coverage on the individual market before Obamacare began providing financial help.”

It looks like Oscar will be a part of this trend, offering very basic, no-choice health coverage with certain high-tech customer service innovations that make it appeal to young people. If that is true, then Oscar might be contributing to the ultimate success and expansion of Obamacare. If it brings all those missing “young invincibles” into the coverage pool, then perhaps the theory of cross-generational healthcare subsidy that undergirds the Affordable Care Act might finally be realized. If we had 15 Oscar-like insurers nationwide, as I suggested above, then perhaps Obamacare could reach its goals regarding young adults.

So why don’t we have Oscar-like health insurers popping up all over the place? Perhaps because of the various “Robin Hood” provisions in the ACA which in effect steal from the companies that recruit a low-cost mix of customers and thus do well, and give to the companies stuck with more of the older and sicker patients. These provisions are variously known as risk corridors, risk adjustment factors and reinsurance, and from a birds-eye perspective, they make a lot of sense. But from the point of view of an individual insurer, they would appear to discourage any company that is friendly to young customers like Oscar, because most of the profits they realize are going to be confiscated and used to keep those companies burdened with a more needy population going.

As such, it isn’t too surprising that there aren’t 10 or 15 other Oscars; and it’s kind of surprising that there’s an Oscar at all. You have to wonder if Oscar is eventually going to go the way of those 16 non-profit co-op insurers. Brian Biase recently wrote a piece in Forbes Magazine about why the ACA risk adjustment mechanisms are a “damned if you do and damned if you don’t” situation for insurers. Biase says that “by taxing insurers that enroll younger and healthier people, the risk adjustment program discourages insurers from attracting the people desperately needed for the law’s complicated structure to work. To the degree that the risk adjustment formula is flawed, however, arbitrary transfers among insurers occur. This produces benefits for insurers that don’t deserve them and costs for insurers that shouldn’t bear them, features not conductive to a well-functioning market.” [emphasis my own]

Perhaps then it’s not such a surprise that Obamacare is not turning out to be a very well-functioning market. Some big insurers are dropping out, at least in many states, and the non-profit co-ops didn’t do very well. Oscar, the Obamacare poster child, is struggling to survive. Part of that struggle involves raising rates — Obamacare policies rose an average of 8% for 2016 (although the federal subsidy brought that down to 4% for the average purchaser), and some estimates put the average 2017 increase nationwide as high as 24%.

If this trend continues, then the only group that Obamacare will make sense for are those nearly-poor families and individuals who don’t quite qualify for Medicaid but still qualify for significant coverage subsidies under the ACA. In the end, Obamacare may just be an extension of Medicaid, one that ultimately contributes to the federal deficit. (The question of whether the federal budget would ultimately be better off or worse off without Obamacare remains thorny and uncertain; but if Obamacare becomes mostly a program to subsidize the near-poor, the argument for any benefit to the federal budget, or even cost-neutrality, becomes weaker.)

As such, the ACA will still do some good; it has lowered the percentage of Americans who go without health insurance, and hopefully it will hold those gains. But as to revolutionizing the system by which health care is provided in the USA, making it more efficient, effective and user-friendly . . . nope, that didn’t happen and probably won’t. Healthcare is still a confusing and costly mess, and the more money and power that you have, the better the healthcare that you will receive. Oscar turned my head last year while I was riding the NJ Transit trains, as it seemed to offer hope that a simpler, cheaper and higher-quality healthcare system was starting to emerge as a result of President Obama’s ACA. But Oscar is now gone from Jersey, and what it still provides in other states isn’t quite what that walking huggy bear seemed to promise. Bye, Oscar. And bye bye Obamacare revolution.

◊   posted by Jim G @ 12:57 pm      
 
 


  1. Jim, I think you do an excellent job in this post of explaining insurance and how it works. My tho’ts will be simply random tho’ts (once again) that occur to me in this very knotty problem of Obamacare or perhaps more accurately, an attempt to help out those who have no health insurance and get them some. Do NOT look for a logical and systematic approach to what follows; it will NOT be there. Just “random” tho’ts.

    I have never heard of “Oscar Insurance”; I tho’t surely it must be written in all caps and be a composite of names meaning what the company does. I Googled it and seems I am wrong. A strange name, seems to me, anyhow. Well, that’s unimportant.

    A quick glance at Google and I see it listed as having a “one star” rating. “Warning, warning, warning” flashed thru my mind, even tho I have no intention of trying to apply for it. I guess that’s the answer to why it doesn’t have many subscribers.

    I can’t speak to the ads for this insurance as I’ve never seen any; and my Google search said it is not being sold in my state. So the answer to why no ads here.

    In general there seems to be something “odd” about insurance or perhaps it’s the CONCEPT of insurance in a Capitalistic society. As to those selling the insurance: Who would think that people would want to sell something that’s going to cost the company a LOT of money, sell it to the group that’s going to use it the most (old people like me), pay for the bills of these people who use it the most, and then think that young people are going to sign up like crazy for it cuz they will pay for the money the company puts out for those who get sick the most. HOWEVER, it does seem to have a good “moral” ring to it and even perhaps more important than a “moral ring”, an empathetic ring of trying to help people who need it the most, a truly noble concept, seems to me. YET, while young people may agree with the concept in theory, they likely would not be willing to put their money in such a company. (And right there it seems one can see a crucial weakness in Capitalism.)

    Sounds like something Mother Teresa might think up or St. Francis with his lack of respect and disregard for money, his wanting to be poor like the 99%. (Wasn’t called “the 99%” in his days, tho; but I’m putting it in today’s terms; that’s who St. Francis wanted to be a part of.)

    I think it was back during Reagan’s term when the gov’t was short of money for something; so the gov’t started looking for money to pay for it. (Must have been Reagan himself. I plead old age here, having forgotten the details.) The question was: Where was some money that could be used for bills that had to be paid. What I DO remember was thinking, “Oh, oh! Not a good idea” when the “looking around” led to seeing a MASSIVE pile of money in Social Security that was earmarked to pay for all Social Security needs, including Medicare. “Here’s a big pile of money we can use.” (I can hear it in my mind still and heard in my mind then.) So the Medicare money was used. Very similar to a household budget where money is earmarked for “electricity” and instead gets used to pay for “food” or even something less important, say the phone bill. A situation one might call “robbing Peter to pay Paul”.

    Seemed to me at the time that money budgeted for a particular purpose should be USED for THAT purpose and not something else. But I grant that even the ordinary person who budgets his/her household expenses will rob Peter to pay Paul were it a matter of using money to buy food. Nevertheless, I tho’t, here’s trouble coming. And sure enuf: Trouble came in droves.

    So, now about 30 years later, the gov’t is left to figure a way to find some money to help out those who have no insurance as businesses that are solely interested in the bottom line would consider paying even part of an insurance premium not good business, even tho his employees pay part of the premium. Even tho the company may have more satisfied employees, companies generally are not truly interested in an empathetic response to employees; they are interested in the bottom line.

    I am not sure you said this, but likely it’s somewhere in your post: The people who need the most insurance are those who are least able to pay the tons of money for the premiums for “good” insurance. Actually, I have observed over the years that when I was younger and healthier, my insurance (and the doctors too) were most interested in paying for “preventive medicine”, that is, keeping me from getting sick; so I was offered aggressively every vaccine on the market (or so it seemed) and other various tests and whatnot to be SURE that as I got older I did not get sick.

    As it turned out, I hit 70; the doctor said to me, “come back every 3 months” for follow-up. When I hit 80, it is now “come back every 4 months for follow-up”. The older I get the more sickness I have, the less the doctor seems to want to see me. I’m sure this change is due to the fact that “they” (the insurance people who reimburse the doctors) will not pay the doctors for seeing older patients every 3 months; so 4 months it is. The insurance companies seem to figure after 80 a person is sure to die of something sooner rather than later; so why pay for lots of extra checkups. Even being in the hospital for what could be life-threatening problems end with “Medicare says it won’t pay for more days” so home you go. (I will admit that my very good insurance paid for nurses to check up on me regularly, but I tho’t during this time: What must people who do not have the insurance I have do? Some of them might likely die as a result of lack of care. Thus, Capitalism does not have an option of any kind of empathetic consideration of those who need help the most.

    One of the things that is not often considered, but that is surely very true, when something truly new and different is upon “us” (that is our society as a whole) the first attempt at anything is often filled with problems/mistakes/errors of one sort of another. Only with an attempt at trying to do something, finding out where the problems are, then fixing those problems will anything really new be developed. Perhaps it might be worth consideration that we not throw out the baby with the bathwater.

    So it seems to me that perhaps Oscar is one of those important “things” that shows where the problems/errors/mistakes/issues of one sort or another are, where the things that need “fixing” are, so that a very good product may be the end result.

    So, Oscar may be a start, may be the insurance that shows where a lot of the problems are, thus serving as a true part of the “solution” to what may work best. It may be showing where the real errors are, how to help the people who need it the most, and still allow an insurance company to make a reasonable profit.

    Then again, it occurs to me that insurance may be one of those things that Capitalism is NOT designed for­­making money. Could it be that Capitalism has come to the point where it’s wondering how to help the 99% rather than simply making the 1% even more exclusive, say the .05%?

    And lastly and perhaps one last thing that occurs to me: What ordinary, everyday person, with a family, 2 adults working perhaps 3 jobs (2 for one adult and one for the other adult) has the time to really sit down and think: Now I’ll put everything aside and give some careful tho’t to searching out which insurance will be best for my family? More likely, just the people who need it the most are those who are working the hardest at the lowest paid jobs (and “lowest jobs” too), come home dead tired, must care for the children with love (that takes both a great deal of time AND energy from the person) . . . what ordinary person has the time and energy to sit down and study which insurance should be bought for the family? While one definitely does NOT want the government to tell who to get what when it comes to anything at all (to say nothing of insurance), somehow or other the process of figuring out which insurance is best for “my family” needs simplification, and needs it in a serious way.

    I think that right THERE is a very large problem. First of all, most people are so taken up with the problems of life and trying to live a good life that time and energy to search carefully for insurance is on the bottom of the list of things to do in the day, week, month, in life itself.

    What may be needed is an easy, quick, very good choice of insurances that are required to be offered by the employer, for the people who need it the most, for those who labor at even the “lowest” job. Now there would be a truly innovative approach to health insurance. Oscar may be on to something. Perhaps with some help by both insurance companies and the gov’t, Oscar may find a way to succeed. MCS

    Comment by Mary S. — August 29, 2016 @ 6:52 pm

  2. Hi Jim, Thanks for your insightful analysis of the ACA’s predicament. I have never seen it explained more clearly. Al

    Comment by Allan Lacki — September 11, 2016 @ 1:44 pm

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