Be Afraid... Be Very Afraid

young scared woman in bedThe premise of the Affordable Care Act aka ObamanCare is to provide affordable coverage for the uninsured, underinsured, old, poor, and sick. To provide this coverage, health exchanges were created for people to enroll. In my opinion, the young, uninsured who were counted on to pay a lion’s share of the cost for the old and sickly with the influx of their premiums coupled with their good health. Those that couldn’t afford the premiums would be subsidized by the taxes, higher premiums, and penalties forced on the rest of businesses and individuals electing to participate or not. Why should we not be surprised that during the very first phase; the very first introduction to ObamaCare, the system is on the verge of implosion? With over three years (March 10, 2010-October, 2013) to prepare for open enrollment, one has to ask what has Human Services Secretary, Kathleen Sebellius, and her massive department been up to besides writing thousands of pages of health care regulations1? Could you imagine being the head of Product Development of a major corporation on the verge of rolling out the largest program your company has launched in fifty years and you were this far behind in the technology needed for that product. No soup for you!

In fact, the reason the system is in early ‘disarray’ is that this administration elected to omit a tool during the open enrollment allowing a person the ability to browse what their premium might be and what subsidy they might be eligible for. Why? I believe they were more afraid that letting people see the underlying cost of ObamaCare’s premiums would scare people away2. This inability to browse created a massive bottleneck.

Wait….I thought this was the Affordable Care Act. According to a report from American Action Forum (AAF), health insurance rates for 2.7M people aged 18-35 would rise substantially. On average, a healthy 30 year male, non-smoker will see his lowest cost insurance option increase 260%. A healthy 30 year old would see his health insurance costs rise in all 50 states and DC. Premiums before government takeover of healthcare averaged approximately $62 per month according the AAF and jumped to $187 per month…a 202% increase. Younger Vermonters will see a 600% increase, South Carolinians up an average of 227% and the Left Coast…an additional 247%3. It is much less expensive for the Invincibles to pay the fine in my opinion.

Adding to the controversy is the fact that this opaque administration refuses to give hard numbers as to how many have actually enrolled. Over 500,000 were to be enrolled at this juncture to be considered “on time.” With the current problems, it is unlikely they are even close to that number prompting the UK’s Daily Mail to say today, “A startup venture recruiting people for a one-way, 43 million mile trip to live on Mars has generated more signatures than all the Obamacare health insurance plans combined4” as over 200,000 have signed up for this excursion.

So last week the legacy owner of this ObamaCare fiasco defended the law vehemently with the usual backdrop of the smiling, earnest diverse representation of what he claimed this law was trying to protect many of whom probably had tried to log on and found their passwords had been erased by the system. Twelve minutes into his diatribe he finally focused on the problems of Heatlhcare.gov. He explained that these were more than just glitches and that some of the brightest minds in IT America both inside and outside of government were riding their preverbal white horses to the rescue.

The problems with ObamaCare are systemic. It begins with the mundane collection of data which should be the easiest, most simplistic part of the process. It continues with the failed premise that healthy, younger people will enroll and help augment the costs for the uninsured, poor, old and sick. Time is running out. According to Timothy Jost, a law professor and health care reform expert at Washington & Lee and an Obama supporter, “If things aren’t resolved in three weeks, we’ve got some serious, serious problems. I don’t think we’re anywhere close to there yet, but if the whole collapses, it’ll be another generation before we get this problem fixed.5”

I’ll ask the obvious question. If 50M people are uninsured today mainly because they say ‘insurance is too expensive’, why is it better to make coverage even costlier. I believe the answer is it was never designed to help healthy with average incomes get health insurance. It was designed to forge another government takeover and force these same people to pay more to subsidize insurance for people with incomes near the poverty line and those with chronic and costly medical conditions2. I’ll follow up with another obvious question. If they can’t run a website, how can they run the delivery of the most complex of health services in the world to 320M Americans?

There are two things basics to insurance I learned before passing my Life and Health exam a hundred years ago. For programs to work, you need: 1. The Law of Large Numbers to even your pool of participants out and 2.The Avoidance of Adverse Selection. ObamaCare seems to be failing miserably in both of these two basic components of insurance to the point that insurance companies will likely be forced to pass on their catastrophic payouts by raising premiums even higher on the current batch of customers they already have or face bankruptcy. And to quote Jeff Godblum’s character in the 1986 rather forgettable thriller, The Fly, “Be Afraid….Be Very Afraid.”

 

 

(1) “Despite Three-and-a-half Years to Prep, Obamacare, A Fiasco Takes Shape. Tom Blumer. PJMedia.com. October 1, 2013. http://pjmedia.com/blog/despite-three-and-a-half-years-to-prep-obamacare-a-fiasco-takes-shape/ (2) “Obamacare’s Website is Crashing Because It Doesn’t want You to Know How Costly Its Plans Are.” Avik Roy. Forbes.com October 14, 2013 http://www.forbes.com/sites/theapothecary/2013/10/14/obamacares-website-is-crashing-because-it-doesnt-want-you-to-know-health-plans-true-costs/ (3) “Study: Obamacare spikes young people’s health insurance costs.” Michael Bastasch. The Daily Caller.com. October 3, 2013 http://dailycaller.com/2013/10/03/study-obamacare-spikes-young-peoples-health-insurance-costs/ (4) “More takers for one-way trip to Mars than for Obamacare, and one state spending $12,000 so far to attract each new insurance customer: Is this the worst launch ever?” David Martosko. Dailymail.co.uk October 18, 2013 http://www.dailymail.co.uk/news/article-2465661/More-takers-way-trip-Mars-Obamacare-state-spending-12-000-far-attract-new-insurance-customer-Is-worst-launch-ever.html (5) “Obamacare Website Failure Threatens Health Coverage for Millions of Americans.” Jeffrey Young. Huffingtonpost.com. October 18, 2013. http://www.huffingtonpost.com/2013/10/18/obamacare-train-wreck_n_4118041.html

• The opinions in this commentary express the views of the author and in no way represents the views of LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.