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Death Spiral   Leave a comment

Has anyone noticed that Obamacare appears to be failing?

I know! Absolutely no one could have seen that coming and so nobody predicted it. Right?

Image result for image of obamacare failureInsurance companies are dropping out of the ACA’s exchanges. Pretty much weekly, Insurers are announcing that they are trimming or eliminating their Obamacare coverage in more and more states. Alaska is one of those. The companies explain that healthy individuals are not buying insurance under Obamacare as expected, thus triggering a corporate death spiral.

If you have a memory, and I do, you remember that John Robert’s opinion for the Supreme Court last year was supposedly meant to save the ACA from a death spiral by ruling that the individual mandate applies in every state, regardless of whether it is for a state exchange or the federal exchange. So what happened?

In the sausage factory that created the ACA, there were a modest number of exemptions allowed, one of which is a huge backdoor.


Fast-forward to today, just a little over one year later.  Insurers are announcing on practically a weekly basis that they are trimming or even eliminating their Obamacare coverage in more and more states.  They give as the reason that healthy individuals are not buying insurance under Obamacare as expected, thus triggering a death spiral.  Wait!  What?  Didn’t the Supreme Court protect Obamacare against a death spiral by deciding, as the president argued, that the individual mandate applies in every state, regardless of whether it has a state exchange or the federal exchange?  What is happening?

Image result for image of obamacare failureIn the sausage factory that produced the ACA several categories were exempted from the individual mandate and one category is a huge escape hatch: “any applicable individual who for any month is determined by the Secretary of Health and Human Services … to have suffered a hardship with respect to capability to obtain coverage under a qualified health plan.”  It’s a “hardship” exemption.

The Obama administration then took it upon themselves to define “hardship” in such expansive language that huge swathes of the population are exempt from the individual mandate.  Yup! You can’t make this crap up. After pleading before the Supreme Court to make sure that the individual mandate applies nationwide, arguing that it would prevent a death spiral, the administration has triggered a death spiral by issuing regulations exempting 10s of millions from the individual mandate.

For 2015, the list of exemptions invented by the bureaucrats and said to represent “hardship” relieving the individual from the individual mandate includes:

– homelessness,
– eviction within the past six months,
– facing eviction or foreclosure (even if not evicted yet),
– received a shutoff notice from a utility company,
– experienced domestic violence,
– death of a close family member,
– fire or flood or other disaster that caused substantial damage to your property whether natural or man-made,
– filed for bankruptcy within the past six months,
– medical expenses within the last 24 months that you couldn’t afford to pay,
– unexpected increases in expenses due to caring for a family member who was ill, disabled or aging,
– a child has no medical coverage because some other person is responsible (by court order) but has not paid,
– ineligibility for Medicaid because your state did not expand eligibility under Obamacare, or
– your individual insurance plan was cancelled and you believe other marketplace plans are unaffordable.

If … somehow … one of those categories doesn’t cover your particular exemption situation, the regulations allow you to make up your own category. Yeah, that’s right. Any other hardship that prevented someone from obtaining health insurance will be reviewed and accepted as necessary.

The effect of the hardship exemption has been to eliminate any financial pressure on millions of individuals to buy health insurance under the ACA. The Congressional Budget Office issued a report in June of 2014 that said:

30 million non-elderly residents will be uninsured in 2016 but … 23 million uninsured people in 2016 will qualify for one or more of those exemptions.  Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or other reasons[.] …  All told, CBO and JCT estimate that [only] about 4 million people [out of the 30 million uninsured] will pay a penalty because they are uninsured in 2016.

In other words, about 90% of the national’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing number of exemptions to the health-coverage requirements.

Image result for image of crap hitting a fanSo, is Obama and his administration just incompetant or are they master manipulators? They got the decision they wanted from the Supreme Court by conjuring the specter of a death spiral, then directed the issuance of regulations shielding almost all of the uninsured from the individual mandate, thus guaranteeing the very death spiral that they warned against before the Supreme Court.  Now, as insurers are announcing their departure from Obamacare due to lack of participation by healthy individuals, Obama is leaving the White House, so it’ll be someone else’s problem.

If it weren’t for the fact that this thing is tangled through the economy like a brain aneurysm, I’d be preparing my cheer outfit for when the time bomb goes off. It doesn’t really matter who is holding it when it goes “boom”. Hillary Clinton richly deserves it and Trump has been a great booster for this disaster too. Maybe Gary Johnson would like to step out of the race now before he gets any of the fecal matter on him.

Posted August 30, 2016 by aurorawatcherak in economics, Uncategorized

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