Sunday, September 20, 2015

Insurers Win Big Health-Rate Increases

LOUISE RADNOFSKY and

STEPHANIE ARMOUR
wrote in the August 27 WSJ:

Some state regulators say new costs justify hefty increases under the Affordable Care Act

At a July town hall in Nashville, Tenn., President Barack Obamaplayed down fears of a spike in health insurance premiums in his signature health law’s third year.

“My expectation is that they’ll come in significantly lower than what’s being requested,” he said, saying Tennesseans had to work to ensure the state’s insurance commissioner “does their job in not just passively reviewing the rates, but really asking, ‘OK, what is it that you are looking for here? Why would you need very high premiums?’”

That commissioner, Julie Mix McPeak, answered on Friday by greenlighting the full 36.3% increase sought by the biggest health plan in the state, BlueCross BlueShield of Tennessee. She said the insurer demonstrated the hefty increase for 2016 was needed to cover higher-than-expected claims from sick people who signed up for individual policies in the first two years of the Affordable Care Act.

Several regulators around the country agree with her, and have approved all or most of the big premium increases sought by the largest health plans in their states for the new sign-up season that begins Nov. 1.

Not all states have made their rate decisions, and some have approved relatively modest increases. A number of the states with lower average increases this year had higher rates to begin with. Some also fared better with enrollment under the law. Insurance premiums vary from state to state, for a number of reasons including regional disparities in the costs of care.

Still, the upsurge is likely to be a big talking point not only during the three-month enrollment season, but through the 2016 campaigns, where GOP opponents of the law are expected to use it as a defining issue against their Democratic rivals.

The law provides for government subsidies in the form of tax credits for some consumers who buy insurance on their own because they don’t have coverage through a job or government program such as Medicare. Those subsidies will blunt the impact of price increases for individuals who get them, but the tab is picked up by the federal government.

EARLIER COVERAGE

Health Insurers Seek Hefty Rate Boosts (May 21)
Sorting the Numbers: Insurers’ Huge Requests for 2016 Obamacare Premiums (May 22)
Oregon Backs Hefty Rise in Health-Insurance Premiums (July 3)

White House spokeswoman Katie Hillsaid rate review processes, which were beefed up under the law, had helped lower proposed premiums “in a number of states.” She also said that under the health law, it was easier for customers to switch to a new insurer.

“Last year, more than half of re-enrolling customers on HealthCare.gov actively shopped and selected a new plan, something that wasn’t possible for many consumers prior to the ACA due to the risk of being charged a higher premium or denied coverage entirely due to a pre-existing condition,” she said.

Tennessee’s Ms. McPeak said she’s required to protect state residents by blocking unjustified increases but also guaranteeing that health plans stay financially sound. “Politics, and any opposition to the ACA, doesn’t have anything to do with it,” she said. “Do I wish they were lower? Absolutely, because I know what it means to consumers.”

Kentucky Insurance Commissioner Sharon Clark approved the 25.1% increase requested by the Kentucky Health Cooperative, the largest insurer on the state’s insurance exchange. Kentucky has taken a more supportive stance toward the health law, including operating its own insurance exchange rather than using the federal government’s HealthCare.gov.

“We’re lucky” by comparison to Tennessee, Ms. Clark said.

Oregon’s Laura Cali allowed an average 25.6% increase for Moda Health Plan Inc., the biggest plan on that state’s exchange. In Ohio, Lt. Gov. Mary Taylor approved a 14.5% increase from Medical Mutual. In Michigan, BlueCross BlueShield won approval for the average 11.4% increase from insurance director Patrick McPharlin.

In Idaho, insurance director Dean Cameron said that an average 23% increase by Blue Cross of Idaho Health Service Inc., was disappointing but “not unreasonable” and that he didn’t have the power to stop it.

The 2010 federal health law overhauled the way insurance is priced and sold, requiring companies to allow anyone to buy policies, regardless of their medical history and with only limited variation in premiums based on their age.

ENLARGE

Many of the most popular plans in the country offered low rates for the first and second year of the law’s rollout, unsure what to expect but eager to snap up the new business. That was especially true in Tennessee, which had some of the lowest premiums in the U.S. initially.

Now, insurers have found that business has been more costly than expected. Some have said they’ve incurred steep losses. The American Academy of Actuaries also said in a recent paper that some programs designed to cushion insurers against high-risk enrollees are ending.

Some people will be able to switch plans and pay a modest increase from 2015, according to an analysis of proposed rates earlier this year by the consulting firm Avalere Health LLC.

For the Obama administration, that means a stepped-up campaign this fall to persuade people to return to HealthCare.gov and shop around in the coming open enrollment season.

The administration said late Tuesday it would automatically renew the coverage of people who signed up through the site last year and don’t come back to it by Dec. 15 this year.

The administration said that for the current year, about half of the site’s users returned. Of those, about half switched insurance providers and half opted to stay with the one they had.

States that were able to keep rate increases down breathed a sigh of relief this week. In Indiana, Anthem Inc. had asked for, and was granted, a 3.8% average increase. In Virginia, Anthem reduced an initial request of 13.2% to 8.6%. In Arkansas, BlueCross and BlueShield was approved for an average increase of 7.15%.

Corrections & Amplifications

Some insurers say they have incurred steep losses from sicker than expected enrollees. An earlier version of this story incorrectly said an American Academy of Actuaries paper made that conclusion.

Write to Louise Radnofsky at louise.radnofsky@wsj.com and Stephanie Armour at stephanie.armour@wsj.com

Highmark Is Latest to Trim Offerings Under Health Law

ANNA WILDE MATHEW wrote in the September 3rd WSJ:

Insurer retrenches amid losses, focusing on plans that have more limited choices of providers

126 COMMENTS

Highmark Health said it would reduce its range of offerings on the Affordable Care Act marketplaces, becoming the latest insurer to retrench amid steep financial losses.

The big Pittsburgh-based nonprofit company said it would continue to sell plans related to the federal health overhaul in all of the areas it currently serves, which span Pennsylvania, Delaware and West Virginia. But “we will have less products in the market overall,” said David L. Holmberg, the company’s chief executive, who said Highmark had lost $318 million on its individual health-law plans in the first six months of 2015, after rolling out a very broad array of options that had attracted many consumers with chronic conditions who required costly care.

He said the company was still working on the details of its offerings, but it expects a “mix shift” toward plans that offer more limited choices of health-care providers. Such plans typically have lower premiums than versions with broader networks. About Highmark’s offerings for next year, he said, “Is there going to be a trend toward more narrow networks? Yes.”

Highmark’s announcement follows similar moves by some other insurers grappling with the financial fallout of their exchange business, which has also prompted some, including Highmark, to seek double-digit rate increases. Highmark is a substantial player in the individual insurance market related to the health law, with around 380,000 enrollees.

Blue Cross and Blue Shield of Texas, a unit of Health Care Service Corp., said it would no longer sell preferred-provider-organization plans to individual consumers next year. In a notice sent in July to insurance brokers, the company said that about 367,000 people were enrolled in the plans that were being withdrawn. The insurer also said it had paid out more than $400 million more in claims than it collected in premiums on its individual business in 2014. “Losses that high are unsustainable,” the note said.

Analysts said it is likely that the array of insurers offering products on the exchanges will remain robust next year, though the full picture isn’t yet clear. A Kaiser Family Foundation analysis of 10 states and the District of Columbia found that the number of insurers participating was flat or up in nine of them. “In general, the number of insurers available to consumers is as large if not larger” for next year, said Larry Levitt, senior vice president of the foundation. But some insurers are “narrowing the number of options they offer,” he said.

A spokesman for the Department of Health and Human Services said “consumers will find a range of quality, affordable coverage options on the Marketplace in 2016.”

Analysts said that the changes are the latest sign that the health-law insurance markets aren’t yet stable, with insurers still shifting their strategy and pricing. One way for insurers to manage costs is to offer plans with tighter controls over the health services members use—particularly designs that can limit consumers’ access to higher-cost health-care providers, or to hospitals and doctors outside an insurer’s network.

“The managed-care plan has more control over where the member goes,” said Deep Banerjee, an analyst with Standard & Poor’s Ratings Services. A majority of the insurers that Standard & Poor’s rates lost money on their health-law exchange business, he said. For large insurers, the plans are only a relatively small share of overall business.

In North Carolina, where Blue Cross and Blue Shield of North Carolina said the operating loss on its health-law business in its first year was $123 million, the insurer has said it would no longer offer its broadest-network plans in three of the state’s most populous cities, Charlotte, Raleigh and Durham.

Going further, Blue Cross and Blue Shield of New Mexico, also a unit of Health Care Service Corp., recently said it wouldn’t offer health plans through the state’s health-law exchange next year, after a New Mexico regulator rejected its request for a rate increase that averaged 51.6%. The company said in a statement on its website that it had lost $19.2 million last year on the 35,000 people enrolled in its individual plans. It will continue to sell certain plans to individuals in the state, though off the exchange.

Lisa Reid, an official at the New Mexico regulator, said the company hadn’t shown evidence that justified its requested increase. New Mexico’s exchange will still have four insurers, with “a lot of good choices for people,” she said.

The cost pressures on insurers tied to the ACA may fall hardest on smaller insurers. The Iowa insurance regulator said in January that it would shut down CoOportunity Health, one of the 23 nonprofit cooperative insurers launched by the Affordable Care Act. At least two other co-ops, in Nevada and Louisiana, have said they won’t offer plans next year.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

Wednesday, September 9, 2015

The March of Foolish Things

Kyle Peterson wrote in the September 4, 2015 WSJ:

The conservative sage on the decline of intellectual debate, Ta-Nehisi Coates, and what the welfare state has done to black America.

KYLE PETERSON

Sept. 4, 2015 6:56 p.m. ET

601 COMMENTS

Stanford, Calif.

Thomas Sowell turned 85 years old this summer, which means he has been teaching economics to Americans through his books and articles for some four decades. So it seems like a natural question: Have we learned anything? Has the level of economic thinking in political debate gone up at all?

“No—in fact, I’m tempted to think it’s gone down,” Mr. Sowell says, without much hesitation. “At one time you had a lot of people who hadn’t had any economics saying foolish things. Now you have well-known economists saying foolish things.”

The paradox is that serious economic discussion enjoys a wider platform than ever before. One of the great bounties of the Internet is the trove of archival news and debate footage that has been dumped onto YouTube and other websites. Anyone with a modem can now watch F.A. Hayek discussing, in a soft and dignified German accent, the rule of law with Robert Bork in 1978. Or Milton Friedmanat Cornell the same year, arguing matter-of-factly about colonialism with a young man in a beard, sunglasses and floppy sideways hat.

There is plenty of old footage of Mr. Sowell floating through the ether, too, and if one watches a few clips—say, his appearance onWilliam F. Buckley, Jr.’s “Firing Line” in 1981—two things stand out. The first is how little Mr. Sowell has changed. The octogenarian who sits before me in an office at the Hoover Institution, where Mr. Sowell has been a senior fellow since 1980, has a bit of gray hair and a different set of glasses, but the self-assurance and the baritone voice are the same.

The second thing that strikes is how little the political debate has changed. Maybe economics isn’t merely a dismal science, but a futile one.

Take the minimum wage. In 1981, a year in which the federally mandated hourly pay rose to $3.35 from $3.10 (in today’s dollars that would be to $8.79 from $8.14), Mr. Sowell argued on “Firing Line” that the minimum wage increases unemployment by pricing unskilled workers—young minorities in particular—out of the job market. It’s the same point he makes today, as activists call for a minimum wage of $10.10, or even $15.

“When looking back over my life, I think of the lucky things that happened to me. And one of the luckiest ones, I just realized recently, is that when I left home as a 17-year-old high-school dropout, the unemployment rate among black 17-year-old males was in single digits,” Mr. Sowell says. “In 1948, the Fair Labor Standards Act of 1938 was 10 years old and it hadn’t been changed. And there was huge inflation, and so it was as if there was no minimum wage.” He got a series of jobs—delivering Western Union telegrams, working in a machine shop—that put him on the right path.

Which is not to say that life was easy: In his 2002 memoir, “A Personal Odyssey,” Mr. Sowell describes how he once pawned a suit of clothes to buy food—a knish and an orange soda at a little restaurant on the Lower East Side in New York City. “Since then I’ve eaten at the Waldorf Astoria, I’ve eaten in Parisian restaurants and in the White House,” he tells me. “But no meal has ever topped that knish and orange soda.”

Or take “disparate impact,” the idea that different outcomes among different groups—say, that there are more male CEOs than female—is ipso facto evidence of discrimination. The Obama administration has used disparate impact to charge racism in housing, employment and other matters. In the absence of discrimination, the theory goes, people naturally would be dispersed more or less at random. Nonsense, Mr. Sowell says. “In various books I’ve given lists of all the great disparities all over the world, and I recently saw a column byWalter Williams in which he added that men are bitten by sharks several times as often as women.”

Differences in outcome is a matter that Mr. Sowell takes up in his new book, “Wealth, Poverty and Politics: An International Perspective,” out Sept. 8. Its theme, he says, is that “in a sense, there was never any rational reason to believe that there would be this evenness that they presuppose.” Some continents have more navigable rivers and deep water harbors than others. Some cultures value education highly, and some don’t. Underwhelming as the conclusion might sound to those with the urge to reorder society, many disparities arise simply because people are different, and because they make different choices.

Another problem is that the “disparate impact” assumption misidentifies where group differences originate. He sets up an example: “If you have people in various groups in the country, and their kids are all raised differently, they all behave differently in school, they do differently in school. And now they’re grown up and they go to an employer, and you’re surprised to find that they’re not distributed randomly by income.” It’s “just madness,” he says, to assume “that because you collected the statistics there, that’s where the unfairness originated.”

Mr. Sowell, looking back, can count the lucky breaks that contributed to his own success. As a baby he was adopted into a household with four adults who talked to him constantly. When he was 9 years old, the family left the South, moving from North Carolina to Harlem in New York. A mentor there took him to a public library for the first time and told him how to transfer out of a bad school into a good one. Not everyone has that kind of luck.

“It is unjust—my God it’s unjust,” Mr. Sowell says. “And yet that doesn’t mean that you can locate somebody who has victimized somebody else.” In human affairs, happenstance reigns.

Why do we never seem to learn these economic lessons? “I think there’s a market for foolish things,” Mr. Sowell says—and vested interests, too. Once an organization such as the Equal Employment Opportunity Commission is created to find discrimination, no one should be startled when it finds discrimination. “There’s never going to be a time when the EEOC will file a report saying, ‘All right folks, there’s really not enough discrimination around to be spending all this money,’ ” he says. “You’re going to have ever-more-elaborate definitions of discrimination. So now, if you don’t want to hire an ax murderer who has somehow gotten paroled, then that’s discrimination.”

It’s a funny line—and an instance of what sets Mr. Sowell apart: candor and independence of mind. No one can suggest that he doesn’t say what he thinks. In 1987, while testifying in favor of JudgeRobert Bork’s ill-fated nomination to the Supreme Court, he told Joe Biden, a senator at the time, that he wouldn’t have a problem with literacy tests for voting or with $1.50 poll taxes, so long as they were evenly and fairly applied. When I ask whether he remembers this exchange, Mr. Sowell quips, “No, Joe Biden is forgettable.”

In our interview he maintains that the 1964 Civil Rights Act should have stuck to desegregating buses and government services, and let market forces take care of integrating lunch counters. Mr. Sowell says that the precedent set by imposing integration on people likeLester Maddox, a segregationist governor of Georgia who also owned a chicken restaurant, has opened a Pandora’s box. “If you say that Lester Maddox has to serve his chicken to blacks, you’re saying that the Boy Scouts have to have gay scout masters. You’re saying—ultimately—that the Catholic Church has to perform same-sex marriages.”

Mr. Sowell is unsparing toward those who purport to speak for American blacks. I ask him about the unrest in Ferguson, Mo. “People want to believe what they want to believe, and the facts are not going to stop them,” he says, adding that black leaders—from President Obama and former Attorney General Eric Holder down toAl Sharpton—“do all they can to feed that sense of grievance, victimhood and resentment, because that’s where the votes are.”

What about Ta-Nehisi Coates, the black writer whose new book, a raw letter to his son about race relations in the U.S., is stirring public intellectuals? I read Mr. Sowell a line from Mr. Coates’s 15,000-word cover story for the Atlantic calling for reparations for slavery: “In America there is a strange and powerful belief that if you stab a black person 10 times, the bleeding stops and the healing begins the moment the assailant drops the knife.”

“Ah . . . yes,” Mr. Sowell sighs, as if recognizing a familiar tune. “What amazes me is not that there are assertions like this, but that there is no interest in checking those assertions against any evidence,” he says. “One of the things I try to do in the book is to distinguish between what might be the legacy of slavery, and what’s the legacy of the welfare state. If you look at the first 100 years after slavery, black communities were a lot safer. People were a lot more decent. But then you look 30 years after the 1960s revolution, and you see this palpable retrogression—of which I think the key one is the growth of the single-parent family.”

Mr. Sowell says he cannot remember ever hearing a gunshot when he was growing up in Harlem, and he used to sleep on the fire escape to beat the summer heat. He cites changes in black enrollment at New York City’s highly competitive Stuyvesant High School, which he attended. “In 2012, blacks were 1.2% of the students at Stuyvesant,” he says. “Thirty-three years earlier, they were 12%.”

Here’s the point: Does anyone believe that racism and the legacy of slavery are stronger today than in the 1970s—or for that matter in 1945, when Mr. Sowell enrolled at Stuyvesant? “It’s not a question of the disproportion between blacks and whites, or Asians, but the disproportion between blacks of today and blacks of the previous generation,” he says. “And that’s what’s scary.”

He offers another statistic: “For every year from 1994 to the present, black married couples have had a poverty rate in single digits,” Mr. Sowell says. “Those people who have not followed the culture—the ghetto culture—are doing fine.”

So how can the case for reform be made? Let’s say the Republican presidential nominee has a speech lined up at the historically black Howard University. What should the candidate say?

Mr. Sowell says he should tell the audience that “one of the worst things for blacks is the minimum wage. The worst thing,” he says, is “the public schools run by the teachers unions who will protect the most incompetent teacher there is, who will fight tooth and nail against your being able to make a choice and go to voucher schools.” Lay out the case, Mr. Sowell says, and “address them as if they’re adults. You’re not going to get 50-plus percent of the black vote. But good grief, if the Republicans got 20% of the black vote it would be a revolution.”

One can only hope that if such a day comes, Mr. Sowell, who has been making these arguments since Barack Obama was a teenager, is around to see it. He says he doesn’t intend to retire. The fifth edition of his 2000 book “Basic Economics” came out last December, and although his newest title isn’t on store shelves yet, he is already mulling a sequel. Mr. Sowell seems as sharp as ever, so I have to ask: Does he feel 85 years old?

Another answer with no hesitation. “Yes. Maybe 95 on some days,” he says, with a deep laugh. “When I think of the things that other people my age are going through, I really should feel so lucky.”

Mr. Peterson is an associate editorial features editor at the Journal.