ObamaCare created “risk corridors” to spread the risk of taking on the uninsured between insurers and taxpayers. The profitable insurers pay in each year, the unprofitable one’s take money out, the government puts a little money in the pot, and everyone except the GOP is happy.

Essentially risk corridors work like this: Risk corridors keep the price of premiums low by offsetting risk that would have been built into premium prices, this allows insurers to offer lower priced plans, which keeps plans “affordable” (especially with tax credits).

Risk Corridors affect ObamaCare in a Few Important Ways

• ObamaCare’s tax credits are based on the “cost of the second lowest silver plan” in a given state. So if that plan is cheap, then tax credits are more generous. If that plan is expensive people who get subsidies feel the burn.
• Risk corridors prevent insurers from “playing scared”. Without the corridors insurers would simply offer cheaper lower end plans and less higher end plans, designing plans to ensure a profit despite the new influx of sick people. As it turns out a lot of sick people signed up and not enough healthy ones, so this already has healthcare giants like UnitedHealthcare rethinking their ObamaCare strategy.
• The higher the cost of plans, the more people qualify for exemptions (that means less revenue and that means more deficit / debt problems as a nation).

Marco Rubio Travels to the Past to Save America By Breaking ObamaCare and Making Everyone Pay for it?

So why are we even talking about this?

Sen. Marco Rubio (R-FL) put a section in a 2014 budget that didn’t have an impact until insurers who had lost profits (including the one with the most ObamaCare customers UnitedHealthcare) went to go get their risk corridor money. It turned out about $2.5 billion in risk corridors payments to insurers were not there to be paid out. It’s not that they can never have the money, it’s more like there is a Rubio wrench thrown in the works that must now be navigated around.

So What Are the Consequences of This?

Unfortunately, as we just mentioned above risk corridor payments are actual vital to the law functioning correctly, people being able to afford health plans, and the insurance market not collapsing.

The ACA is self sustaining somewhat as is, but in it’s infancy still needs mini-ballouts to keep the insurers form imploding along with the rest of the system.

The GOP frames the insurers needing money as crony capitalism, the insurers are either faking it well or are actually panicking over facing mostly un-padded loses, that means they will be offering higher premium plans, that means less affordable coverage, that means more exemptions, that means less revenue.

The above means more people angry about ObamaCare. ObamaCare has Obamas name it. Obama is a Democrat. And… yes, this is the plan today and has been since the President walked into office with ideas of reforming healthcare.

Then the questions are:

• What is the morality of Rubio using these tactics to purposely break a part of the ACA for political gain? Who else is behind this?
• What is the morality of us bailing out insurers by padding their profit? What is the intention here?
• What is the morality of leaving millions without expanded Medicaid, the middle class with unaffordable premiums, and our children with debt all in the name of politics?
• Shouldn’t we be focusing on what is best for Americans? Isn’t that finding a way to keep them healthy together, rather than using them as political pawns?

The Part of the Law This is From

Just so we are all clear. Risk corridors have been part of the plan since day 1. The budget that blocked them was from 2014. And this is all coming to a head this week. The ACA isn’t broken, but it’s another wrench in healthcare reform machine that has been taking a strategic beating since it’s inception.

Here is the wording from the law:

Part V—Reinsurance and Risk Adjustment

Sec. 1341. Transitional reinsurance program for individual and small group markets in each State. For 2014, 2015, and 2016, requires States to establish a nonprofit reinsurance entity that collects payments from insurers in the individual and group markets and makes payments to such insurers in the individual market that cover high-risk individuals. Requires the Secretary to establish Federal standards for the determination of high-risk individuals, a formula for payment amounts, and the contributions required of insurers, which must total $25 billion over the 3 years.

Sec. 1342. Establishment of risk corridors for plans in individual and small group markets. Requires the Secretary to establish risk corridors for qualified health plans in 2014, 2015, and 2016. If a plan’s costs (other than administrative costs) exceed 103 percent of total premiums, the Secretary makes payments to the plan to defray the excess. If a plan’s costs (other than administrative costs) are less than 97 percent of total premiums, the plan makes payments to the Secretary.

Sec. 1343. Risk adjustment. Requires States to assess charges on health plans with enrollees of lower-than-average risk, and to provide payments to health plans with enrollees of higher-than-average risk. Risk adjustment applies to plans in the individual and small group markets, but not to grandfathered health plans.

Under ObamaCare the best plan is generally a Silver plan with an HSA, for low income it’s Medicaid / CHIP, and for Seniors at least Medicare A & B. There is a bit more to it, but if we only had one sentence to convey a blanket answer that would be it. If we get one more sentence then it’s “if you have employer-based coverage and your, your family, or your spouse’s coverage seems unaffordable, you may be exempt from the fee and/or get an exemption to use HealthCare.Gov“.

General Advice

Before we get to why the plans suggested above are our choices for “best health plans”, let’s review a little general advice.

First and foremost: Always consider your families actual medical needs. Silver HSA eligible plan is a great blanket statement, but a lot of shopping for health insurance is about individual needs. If you need a lot of care or drugs consider Gold or Platinum. If you need consistent but moderate care consider a lower deductible Silver plan, if you simply know you won’t qualify for cost sharing reduction subsidies on that plan and don’t plan on funding an HSA consider a lower deductible Gold plan.

• Always get subsidies if you qualify, if you are on a line consider tax breaks that lower MAGI.
• Consider what drugs you “really” need and what drugs you are taking because your doctor recommended them once and you just said “ok”.
• Especially for the expensive non-emergency stuff, consider shopping around for doctors, pharmacies, hospitals, etc.
• Always think about networks.
• Understand cost sharing in general and the cost sharing your plan offers. Always think about what is covered at what cost sharing amount (you can always ask the insurer and doc).
• You have new rights to appeal. Always contest insurer decisions if you don’t like them (sometimes the doctor has to code a service).
• And, ALWAYS, take advantage of the free preventive services, wellness visits, and essential benefits.

Why Medicaid / CHIP?

Medicaid and CHIP are free or low cost. If your state expanded Medicaid, and you make less than 138% of the poverty level you can’t beat Medicaid. States that didn’t expand may not offer coverage to single adults and kids in higher income families may still qualify for CHIP.

Why the Marketplace?

The Marketplace is HealthCare.Gov or your state’s marketplace.

The Marketplace is like your big sister or big brother (in a good way). They will help to make sure you don’t get a raw deal and that you get the cost assistance you deserve. If you qualify for Medicaid, a kid qualifies for CHIP, or if your employer is offering you really expensive coverage, or you are confused about the law, they can help.

Independent brokers and health providers can be just as awesome, due to regulations and good business practices, but make sure they are enrolling you in a marketplace plan that qualifies for cost assistance (unless you know this is something you don’t want).

FACT: Regardless of how you enroll, only Marketplace plans qualify for cost assistance.

Why a Marketplace Silver Plan?

A Marketplace Silver Plan (a plan you get on HealthCare.Gov or your states Marketplace) is the only “metal type” that qualifies for cost sharing reduction subsidies and premium tax credits. It’s not rocket science, incomes change and the Silver plan is the only truly flexible plan. Getting a Silver plan can mean weeding out the upstart companies offering bronze plans with super narrow networks and lackluster service. Some of these little guy bronze plans are great, some have unique challenges.

More specifically an HSA eligible Silver plan will be the best option of many (keep reading to understand more about what that means).

For others the best bet will be to go Bronze, Gold, or Even Platinum.

When to Go Bronze and Gold

Generally only go bronze if you are young and betting on not needing coverage. Like-wise, if you have a big family with children or you have lots of medical needs crunch the numbers on a Gold plan. At the end of the day, you’ll need to know what medical services you need and what doctors you want to go to to get the right plan for you. What is smart for most people isn’t always smart for you.

When to Go Platinum

If you have a big family or need a lot of medical services premiums matter less and copays, coinsurance, and networks matter more. The more care your family needs as a whole the more you’ll want to look at the highest premium Platinum plans.

Why a HSA?

HSAs are the hidden gem in healthcare. They lower your taxable income, qualify you for more subsidies, allow you to save thousands a year in an investment account, there is no “use-it-or-lose-it” rule, and they roll over into a retirement account. If that wasn’t enough, the money you use for out-of-pocket medical and all dental and vision can be used tax free (that is tax free in and tax free out). If you are the sort of person who likes saving money and likes paying less taxes, you should consider this.

Learn more about HSA’s and ObamaCare here.

How High of Deductible?

To qualify for an HSA you need at least a $1,300 deductible for 2016 as an individual and a $2,600 for a family. So when we suggest “high deductible” (i.e. HSA compatible plans) we aren’ t necessarily suggesting a $6,450 individual / $12,900 family deductible (the maximum it can be). In general only a young healthy person who won’t use a lot of services on average will benefit over time form a truly maxed out deductible.

For someone who could reasonably expect to get subsidies, and has reasonable medical needs, would suggest looking at higher end of Silver plans with decent copays to get the best of all worlds. Remember copays help right away, coinsurance only kicks in after you have met your deductible.

NOTE: People get a little uptight when you suggest they squirrel away hundreds or thousands for a rainy medical day. This is understandable, life is expensive. However, if you look at net savings over time, or rather overall value of the dollars you earn, an HSA can make a big impact over the course of say ten years. If you don’t use it, you just take the money out at a fee later. An HSA isn’t fool proof, or without it’s risks, but you would be doing yourself a disservice not to look into them.

Why Medicare Part A & B?

In most cases, as an American you have a right to Medicare part A & B when you turn 65. Here is the deal though, Medicare isn’t a “public” program, it’s a quasi-public program like ObamaCare. What that means is that if you forgo B, D, and C or Medigap when you turn 65 insurers can start charging you higher rates.

Navigating the free marketplace of Medicare is a little like asking our grandparents and parents to run a gauntlet of capitalism as some retirement ritual. “Hey Grandma I know you can’t figure out the VCR… but figure out Medicare enrollment periods, and supplemental coverage, and make the right choice that will cover you from now until perhaps the next 40 years”. Cynical jokes aside, you need to make smart Medicare choices during your initial enrollment period.

We suggest always getting A & B (unless you have a good excuse not to, like you have specific retirement coverage that allows you to avoid the part B penalty). We also suggest getting D and C or Medigap early. For many Medicare types the longer you go, the more expensive your premiums. This can lead to not having supplemental coverage when you are older and need it the most. On that same token, make sure you have savings. Having coverage until you are older and sicker (and then don’t have money to pay your premium or out-of-pocket costs) is not going to feel very good. With Medicare you always have to think total spending as a senior, end-of-life costs, and other factors (this should be considered with life insurance too).

Find a Broker

Whether you use HealthCare.Gov go to Medicare.Gov or you find a local broker, it’s smart to get help tailored to you. Finding an insurance broker you can trust is a good move. This is America, typically someone in sales has an incentive to sell you things. That aside, a good salesperson will focus on your needs and getting you the best product for you so you come back next time (or you keep the plan and they get residuals). Build a relationship with a local broker you trust and ask questions like given where I live, and my pharmacy, and my illness, and my income, and planning for the future, what do you think would be good plan choices for me?

Keep in mind some brokers can only offer a limited selection of plans. Always consider your own needs and shop around to find the best plan. If you don’t get it right this time, there is always next year.

Learn more about buying health insurance under the Affordable Care Act.

People of all income levels, news sources, insurers, and providers have expressed frustration over rising health premiums and deductibles going into 2016. There are the grim and ominous warnings by the Congressional Budget Office (CBO) and Join Committee on Taxation (JCT) in regards to interest on national debt (and the 184 page report that goes along with it that points at healthcare as one of the star players in causing debt).

The above leads naturally to a few simple and obvious questions like:

“Why are health premium and high deductibles so expensive?” and “If people’s pocket books, both parities, health insurers, health providers, and the federal and state Governments are all stressed out over money… where the heck is the money going?”

In other words, “How is it that a law that seeks to ensure affordable accessible health insurance has managed to shock everyone with its high cost?”

Below we provide a few answers to those questions, a few tips for those dealing with the core problem on a personal level, and some suggestions for what can be done about it as a nation.

FACT: Despite the current problems with health care costs, the PPACA has created many benefits. 1 in 6 Americans got a Marketplace plan for $100 or less in 2015. The uninsured rate is at a historic low, and under the ACA health care spending grew at the slowest rate on record since 1960. Cost curbing measures are real and are working, but curbing long-term costs does little to curb the frustrations of the present day.

Reasons why Health Insurance Premiums and Deductibles are High

In it’s simplest form the answer to the above question is: The bulk of the $3 trillion dollars system is centered in a for-profit model. This means that we need about twenty cents on the dollar in profit for each middleman. At least, if we don’t hit that 20% profit, our huge health market providers and all of those who profit from the industry, including those of us who have savings, pensions, or investments are unhappy.

The healthcare sector of the economy also expects those profits to grow each year, or they are unhappy (especially stockholders, and it’s worth noting there hasn’t been an unhappy stockholder for years as the growth from 2009 to now has been staggering). This is a factor that some insurers are struggling with under the ACA due to more old and sick people enrolling than young and healthy people. This is something that doctors and hospitals struggle with: cheap ACA plans from new insurers, Medicaid, and Medicare where claims aren’t always processed at top dollar.

To make up the losses, and to keep stockholders happy, insurers and providers increase rates every year. Medicare, Medicaid, and ObamaCare subsidies pay rates that can’t be paid by people, and we borrow money as a country to make up the difference (we don’t actually have enough money to cover our projected spending over the next ten years).

If we were projecting a surplus this might be a good solution, but we aren’t. We are projecting dangerous levels of debt. We have to pay interest on debt. Over time we will need to borrow more and more money to pay off that interest. It’s not just healthcare that is to blame (think Military spending, college loans, 30 year mortgages, etc.), but healthcare is an undeniably big chunk of the fiscal problem and the focal point here.

It seems hopeless, but we are Americans and we don’t stand for hopeless, so we need to look harder. Stockholders and profits may be cogs in the wheel of unsustainability, but they aren’t the whole machine. What are we missing?

The Underlying Cost of HealthCare

Insurers aren’t the only ones who need to profit from the healthcare system, and want to see profits increasing every year. Drug companies, healthcare innovators, and manufacturers are also for-profit companies that want to see profits (as do their investors). Before insurers and hospitals know how much they have to increase prices, they have to know what the base prices of healthcare will be and compare that to the projected needs of their policyholders.

In other words, underneath the whole health insurer and provider system is another system that is pushing pressure upwards trying to ensure their 20% growth of profits.

So, healthcare companies raise rates, insurers must raise rates in return, and in order to insure near 100% coverage under the current system we must pay out-of-pocket and subsidize these increases to keep the machine rolling.

Of course there is always a bureaucracy that processes cash flow, claims, billing, and litigation.

It Was All Essentially True Before ObamaCare. The Difference is that ObamaCare Pressured the System to Include More Sick People and Poor People.

It used to be that only the relatively well off took part in healthcare. The poor received sub-standard or no care. Even without the pressure to add the sick and poor into the healthcare system, the machine was breaking down we’ll before the patient protections and subsidization of PPACA. In fact, in large part, the PPACA was a last ditch response to the rising costs of healthcare and the rising numbers of uninsured Americans.

The whole thing was completely unsustainable before the ACA, and apparently after it as well, according to many. There is data to show the existence of a happy, healthy, but less vocal, tens of millions enjoying their now affordable healthcare and health insurance.

In a sense we have a dangerous game of hot potato. The hot potato being the increasing expectation of profits from the healthcare system, when considered along with our democratic imperative to provide everyone with a reasonable level of healthcare.

What Can Be Done on a Personal Level?

On a personal level, the best thing a family can do is being smart about tax breaks and legal loopholes. Max out an HSA, consider starting a small business and enjoying the tax perks of being self employed, really shop around for healthcare (prices are all over the place), lower your premiums with the right HMO, protect against costs when traveling with the right PPO, get a Marketplace silver plan and take advantage of cost sharing reduction subsidies, the list goes on. Essentially we suggest you read the information we wrote on the topic.

What Can Be Done on a National Level?

Costs can’t rise forever; people can’t afford it. The Government can’t afford it. At some point there isn’t going to be any more juice left in healthcare to squeeze; think of the housing bubble. We can wait until we are all in boiling water, or we work on finding solutions ahead of time. Here are some ideas about ways in which we can be proactive:

Single payer Medicare-for-all with a supplemental option: In this option, insurers would move to a catastrophic public plan with private supplemental options. Supplemental options could be subsidized. This strategy caps what one can expect from insurers, but it preserves the industry.

Straight up single payer: In this option, all insurance would be public. We remove one 20% profit margin, but also absorb the entire burden. If this doesn’t come with super charged bargaining power with healthcare manufacturers and innovators, the implications are a potentially frightening.

Reduce claims, billing, and litigation: The GOP wants to reduce bureaucracy in healthcare. All their repeal rhetoric aside, the GOP idea a strong one at it’s core. We can’t pay our bills. Finding reasons not to pay them is a poor solution… it just makes the private companies jack up their rates further to pad their profits. We’ve seen the need for this in our increasing oversight of Medicare.

Let Medicare negotiate drug prices: There is a strong argument for government regulation of the amount of profit that the drug companies make on pharmaceuticals. 70% of Americans take prescription drugs. How many take drugs they don’t actually need? Why do they take them? Are people taking highly advertised drugs when simple generics would work as well? How much do those drugs really cost? At some point the rain must come, even at the best of parities.

Focus on HMOs: HMOs can be really lackluster, but in general, by being focused on a certain area, an insurer can shave off some premium pricing by negotiating solid rates with a small group of providers for a small subsection of policy holders. The fewer middlemen between the patient and doctor the more room there is for reasonable profits.

Limit Premiums for everyone: “The group making over 400% of FPL but less than the rich” (I’m not sure there is a catchy name for this group that we tend to call “middle class”, but they are frustrated if our blog is any indication). These people, many with employer coverage, are getting the raw end of the deal. Some pay considerably more for healthcare than we should ask… and yet they also face the mandate if they aren’t covered. Solid though needs to be given to giving this group a fair deal.

Reform the employer mandate: The 9.5% for self-only coverage from employer rule is a nightmare. Who decided this was a good idea? It must be 9.5% for family coverage (maybe based on a family of 4 to be fair). Even better, let family members opt out and use the exchange. Or let the employer provide the subsidy the Government would have provided. It’s not rocket science. This part of the system obviously needs a review.

Limit Deductibles Even Further / Mandate HSA: Another GOP idea is the establishment of compulsory HSAs. Part of the healthcare tax system might be revised to include compulsory HSAs for those who can afford to set money aside for healthcare in order to ease the burden of high deductibles. Few people have $13,000 for a deductible. This means, without an HSA savings account, the current high deductible plans just don’t work. For many of us health coverage unworkable because having to meet a high deductible without the padding of an HSA essentially means that this group cannot afford to use health insurance, or uses it and faces bankruptcy. For some there is no point in having catastrophic coverage with a catastrophic deductible. That only works for those with money in income or savings to fund an HSA. We need to figure out the deductible issue a little better, and curb premiums (which will need to be higher the more they are expected to cover) with subsidization. Again, single payer may sound attractive when it comes to the catastrophic coverage, but only if we fix the issue of high deductibles.

Forget Insurance and Single Payer and Just Have HSAs with New Rules and Tighter Regulations on HealthCare: The whole reason we have insurance is because a single person can’t absorb the costs of a catastrophic accident, chronic condition, or illness. We need is to know that American families are covered in an emergency, and that they have access to affordable preventive care. That is the part that should be a right, and the part that the ACA has worked toward. There could be a plan in which everyone who can afford to pay taxes has a mandatory HSA that is funded in exchange for a tax break, and paired with a small healthcare tax that covers people in catastrophic accidents and offers basic preventive services for free. All other stuff could be paid out-of-pocket. If we focus our attention on regulating the rest of the healthcare system, the end result might be that people are protected in an emergency, get basic preventive care, and buy everything else out-of-pocket (with HSA as padding) if their wallet and the market allows it.

One Single Solution Given all of the Above

Above we have opinions for problems and possible solutions. This is (in this authors opinion) one overall solution:

• Public Single Payer catastrophic coverage with Private Supplemental options (which would be trying to do a better job than Medicare, and so is not Medicare-for-all).
• A general push toward limiting what is expected from profits. Catastrophic coverage and life saving drugs need to protect America as much as they need to have profits that incentivize innovation. If you can sell a drug for $1 in Canada, then you can sell it for $1 in the U.S., if you already made back your profit and you can afford to sell a drug for $30, don’t sell it for $3,000. Have some consideration for your fellow Americans.
• Giving the government more power in negotiating and regulating supplemental plans and private healthcare industries. It should be done out of the interest for fairness and affordability and not used as a tool to cripple the private industries.
• A focus on HMOs and coordinating healthcare locally.
• Even more focus on preventive care. Hidden costs of related procedures could be done away with as they scare people off from actually getting preventive care.
• Compulsory HSAs. Money that would have gone into premiums and deductibles of ObamaCare could be put into HSAs.
• Reduce litigation, billing, and claims by simplifying rule sets without sacrificing quality.
• Focus on curbing profits rather than ramping up taxes. We need a strong healthcare system, not an overly bloated and unsustainable one. We want to incentivize a cancer cure, not incentivize delaying a cancer cure or monopolizing one.

Lastly, we as America need to come together and fix the problem and leave a better world to our children. We should ideally do this without instituting radical change and without crippling an existing industry. But more importantly, we must improve our healthcare system without crippling the American people.

How many more price increases can the market, the people, or the nations bank ledger stand before we start having larger economic problems? We need to act to further the progress that began with the Patient Protection and Affordable Care Act and make the healthcare system sustainable.

Tea Party favorite Matt Bevin (R) is the new Governor of Kentucky and that is bad news for 400,000 Kentuckians who qualify for Medicaid under ObamaCare.

The Bottom Line: All adults making less than 138% FPL can get free or low cost coverage in Kentucky, but Matt Bevin may change that. Kentuckians need to let him know they want to keep their health insurance.

Matt Bevin and the ACA

Matt Bevin strongly opposes the Affordable Care Act (ObamaCare) on ideological grounds. He made it clear that he would do everything in his power to get the ACA out of his state. While he doesn’t have much control over this in reality he does control one of the most important aspects of the ACA, Medicaid expansion.

Medicaid Expansion’s Cost Are Mostly Covered By Federal, Not State Dollars

Medicaid expansion provides free or low cost health insurance to as many as 400,000 Kentuckians. It uses 100% federal tax payer dollars until 2020 when it uses 90%. Regardless of what Bevin does it won’t affect taxes, until at least 2020, for Kentuckians because the tax and spending part of legislation is federal and not state based. After 2020 taxes could go up a bit to cover the 10%, but even then we have to weigh that against 400,000 hard working Kentuckians.

Who Voted For This Guy Anyway?

Only 30% of Kentucky showed up to vote and that 30% has decided the fate of the rest of Kentucky.

For Now Medicaid is Still Expanded in Kentucky

For now Medicaid is still expanded in Kentucky, but that can all change under Matt Bevin. Matt has flipped and flopped slightly on whether he will gut the program or whether he will try to restructure it with a waiver (legitimate and allowed for under the current rules).

Who Are These Medicaid Recipients Anyway?

The thing to remember is that you can work hard your whole life, build capital, build up assets, but ACA cost assistance and the ability to afford insurance (premiums and out-of-pocket costs) is based on income. So this means you can get sick one year, not have income the next and thus qualify for no assistance. Then you are left with only Medicaid. Kentuckians can still make use of Medicaid for now, but there is a strong chance Matt Bevin will “free” 400,000 Kentuckians from the grips of the dreaded Federal Government leaving them to face the medical related bankruptcy that Medicaid expansion would have prevented.

What Has ObamaCare Really Done For KY?

About 521,000 Kentuckians have got coverage under the Affordable Care Act.

Still Hope

Bevin’s actions aren’t set in stone, although his words are. He may simply choose to restructure Medicaid, but that will require perhaps more than 30% of the residents of Kentucky to stand up and let him know that they would keep their health insurance more than they want to make some ideological point.

Learn more about Medicaid Expansion.

In Leslie, Perry & Letcher counties, uninsured rate fell from more than 20% pre-ACA to less than 5% under @Kynectky. pic.twitter.com/CUlhTApnQ7

— Rep. John Yarmuth (@RepJohnYarmuth) July 30, 2014