Rotten Potatoes

Congratulations to Idaho, now in the lead in the national race to the bottom.

Idaho Governor C. L. “Butch” Otter, his handpicked successor, Lieutenant Governor Brad Little, and Insurance Director Dean Cameron addressed the Associated Press at the annual legislative preview last month.

Congress and President Donald Trump have eliminated the individual mandate requiring all Americans to buy Obamacare plans or face financial penalties. That means we will no longer be penalized for buying coverage that doesn’t meet all of the Obamacare rules.

Modern Healthcare

According to the Associated Press report, “Cameron added that the goal is to reduce costs for essential healthcare coverage by 30% to 50%”. That’s a heck of a goal. Can it be achieved? The answer, of course, is a qualified YES.

Idaho hopes to create a two path system. The poor, the working class, and the sick would be forced down one bumpy road. The healthy and the gamblers would take the other road which could be a dead end.

Option 1

Idaho maintains its own exchange, Your Health Idaho, which offers policies compliant with the Patient Protection and Affordable Care Act (Obamacare). These policies, per the law, cover the ten Essential Health Benefits. Policies are guaranteed issue, cover pre-existing conditions, and don’t have a lifetime cap on benefits. Tax Credit Subsidies are designed to help the working class pay for the premiums.

Option 2

Rates could drop quickly if, with the state’s blessing, the insurance companies could cherry-pick the healthy and reconfigure the benefits.

• Underwrite – Accept only the healthy or charge more for those that aren’t.
• Pre-existing conditions – Limit or exclude ongoing health issues
• Cap Benefits per year or lifetime - $1,000,000 will be the starting point.
• Add co-pays to Preventive Care – Good-bye free colonoscopies and annual exams

You get the idea. It is like buying a car. That BMW would be a lot cheaper if you weren’t forced to pay for the engine and tires.

The Idaho Statesman reports that Director Cameron is adamant that the new plans will cover newborns and won’t have lifetime caps. I wonder if the regulations he is making up today will be in effect next month, much less next year or the year after.

The consequences of this move, if implemented and not blocked by the courts or the feds, are pretty easy to predict. Let’s look first at the PPACA compliant policies.

Policies on the Idaho exchange, Your Health Idaho, will increase substantially from day 1. President Trump eliminated the funding for the Cost Sharing Reduction Subsidy last fall. This will continue to impact premiums. As the healthy are siphoned off, the existing pool will simply become sicker and sicker. Each successive premium increase will force those paying the full premium to reassess their needs and risk tolerance. Those individuals and families who are eligible for the tax credit subsidy will continue to qualify for income based assistance. The premiums go up, their subsidies go up.

The non-compliant policies have a distinct price advantage. And though the initial offerings might appear to be insurance lite, it won’t take long for the benefits to devolve into a portfolio of non-coverage with plenty of Idahoans not truly understanding the limitations of their policies until the time of claim. For every 60 year old questioning the need for maternity coverage there is a 20 year old wishing to opt out of the cost of a policy covering cancer treatment. But this being the real world, we know that it will be the distraught 20 year old caught without maternity and the devastated 60 year old underinsured, or possibly uninsured, for cancer.

The good news is that Blue Cross of Idaho is really excited. According to the Idaho Statesman the insurer has been a driving force for this change. And really, it is pretty easy to understand why. The policies that Blue Cross of Idaho sells on the exchange will be allowed to rise to cover the anticipated claims while the new contracts will be specifically designed to not have long term expensive claims. Blue Cross will peel off the good risks and the exchange will be stuck with the rotten potatoes.

DAVE

www.cunixinsurance.com

Photo – Idaho Potatoes – David L Cunix