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Obamacare Strong - More Details Coming Out - All about who controls the Money
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There is a dance going on with President Obama and the designers
of Obamacare giving a wink and a nod to Insurance Companies about why they, the insurance companies, should spend huge amounts
of money, to provide President Obama and the Democrats with Political Cover on these canceled insurance policies.
The insurance companies have hitched their wagon to Obamacare. But why?
One reason is that while Obamacare limits the excessive profits Insurance Companies
can keep, there is
no limit on the excessive profits the insurance companies can make, and the Obamacare law also promises to limit losses for insurance companies as well.
Another is that the Obamacare law allows the insurance companies to massively increase premiums and massively cut benefits on captive markets that are forced, by federal law and massive penalties, to buy their product. They have to share any price gouging profits with the federal government, but the insurance companies believe this will be a good deal in the early years - and insurance companies still in the individual market are betting the reward
of huge short term profits are worth the risks
of eventual government confiscation
of their business. Each year they have the option
of taking their money and running, so it is only a year to year risk.
How does the government promise to limit insurance company loses ? This is the part no one talks about, certainly not the main stream media, or the vast majority
of the Republican party, or the vast majority
of Democratic party. It would require them all to read and understand the thousands
of pages
of the law and the tens
of thousands
of pages
of regulations. But the main way is by using those slush funds to keep an insurance company from going broke the first few years
of selling the Obamacare regulated insurance policies. The law does not allow these funds to be used for grandfathered insurance plans that do not comply with with Obamacare Regulations - but Obama is hinting that he will do that by executive order if the Insurance Companies will help him out on his little political problems with canceled policies.
Obamacare has multiple wealth re-distribution mechanisms built into it.
These include the following Wealth Redistribution Mechanisms:
- 1. The largest, and virtually ignored, is redistributing wealth from ALL those buying ANY Obamacare regulated policies, into a U.S. government controlled slush fund, and through that fund to any player in the Obamacare market that the U.S. Government wants. The Obama administration has promised in the law noble goals for the use of this slush fund, but, the message President Obama, and the Obamacare architects, sent yesterday to the insurance companies was we can reward our friends, and punish our enemies, at our sole desecration, reward with cash - from this slush fund(s) - and punish with prosecution by the U.S. Justice Department of any individual insurance company that defies us, and punish with the denial of the ability of any individual insurance company to sell insurance by the decree of U.S. government regulators. Several people have pointed out that the law does not permit this use of the slush funds for these purposes, to which the Obama administration has replied that Obama was not bound by the law when he issued executive orders related to "The Dreamers Executive Order" and "Delaying the Obamacare Business Insurance mandate Executive Order", so does any one really want to bet against President Obama once again ignoring federal law and getting away with it?
2. The other large redistribution mechanism is wealth from those who use health care services less, to those who use health care services more. Many describe this as the from the young and more healthy, to the older and less healthy, but that is really a conclusion, rather than a driving force, and is to a large degree wrong, and can also shift greatly based on year to year jiggering of health care regulations. This is also described as from those without terminal illnesses to those with terminal illnesses, and that has certainly been a correct conclusion in the past.
3. There are many other,wealth redistribution mechanisms built into the Obamcare law, resulting from the ability of the U.S. Government to adjust regulations to pick winners and losers among patients. For example, wealth is transferred from smokers, men and the older U.S. citizens, and wealth is transferred to illegal drug addicts, the mentally ill, women, non-smokers and the younger U.S. citizens - that is based on the current effect of the regulations, but this is subject to change based on the year to year desires of U.S. Government executive branch employees and sometimes law makers.
4. These different wealth redistribution methods can work at cross purposes, so for instance the large increases in insurance premiums and large increases in annual deductibles ( when premiums and annual deductibles are compared to comparable insurance policies being canceled ) for Obamacare regulated insurance policies, can be partially offset, by premium subsidies from the slush fund to the lowest income individual purchasers of insurance. Another example is that premiums for younger people are less than older people, for the exact same policy, yet the younger people virtually never exceed the high deductibles so young people still get less for their insurance dollar.
How is (are) the slush fund(s) funded ?
- These are by far the most interesting aspects of the Obamacare law which are never talked about together.
Only Obamacare regulated policies may be sold by private insurance companies in the private market begining in 2014 - for some states like California, that date is January 1st, 2014, other states might be on different dates in 2014. All Obamacare regulated policies must contribute to the slush fund(s). Theoretically grandfathered, non-Obama care regulated, policies would only have to contribute to some, not all, of these slush funds. But as has become clear in the last few months it was not in the interest of the Federal Government nor the Insurance companies to keep these grandfathered policies around.
All policies sold on the Obamacare Exchanges ( both the federal exchanges and the state exchanges ) are private insurance policies. The exact same policy can be purchased direct from the insurance company as can be purchased on the exchanges. The difference is only the Exchanges can offer discounts on premiums, also knows as subsidies, ( funded by the slush funds ). Regardless of where the policy is sold ( exchanges or direct from the insurance company ) the price paid the private insurance company in premiums is the exactly the same, high ( full ) price.
Obamacare laws allowed the Insurance companies to increase premiums charged for Obamacare regulated insurance policies ( which are the only policies that may be sold in most private insurance markets now, such as California ), but at the same time it masked these premium increases by offering subsidies from the slush fund to some of the purchasers. This allowed the Media to report a policy selling on an exchange "for as low as the lowest net price after the largest possible subsidy was applied" for that specific policy, or to report "the average net price for a policy after all net price subsidies were applied", instead of the actual very high price the insurance policy was selling for before the subsidy coming out of the slush fund. Regardless of how low the premium price appeared to be in the media, or how low the net price appeared to be on the exchanges after subsidy, every single one of those policy premiums was paid to the private insurance company at full price, at the massively increased price [when compared to similar policies not subject to Obamacare regulations, which are now illegal to sell] - Only the buyer saw the discounted price - the seller, the private insurance company, received the full high premium ( for those purchasers buying with a subsidy - the slush fund made up the difference). The resulting price gouging profits are thus available to the insurance companies to split with the government via a number of profit sharing mechanisms. The governments portion goes into the slush funds.
Obamacare law and Obamacare regulations also allow the private insurance companies to massively shift the cost of health care to the patient from the insurance company. The private insurance companies can take advantage of this cost shifting by increasing annual deductibles, and increasing co-pays, and shifting frequently used high expense diagnostics, such as MRIs from preventive not subject to deductibles, to treatment costs subject to to the high annual deductibles. This cost shifting massively increases private insurance company profits by massively lowering the portion of health care costs being paid by insurance companies for those people who are slightly sick, moderately sick and or become chronically sick after being healthy for years. There is the added benefit that low information health care purchasers will rely on the promise of the government that the Obamacare Policies provide better benefits and do not check out such things as MRIs and hospital co-pays when evaluating how much an Obamacare regulated policy costs.
The U.S. Federal government ( tax payers ) will loan these slush funds any money they need to prime the pump and get the Obamacare regulated insurance market running. Once enough people are forced to buy very expensive Obamacare regulated policies the plan is to have the slush funds pay the federal government back for the loans. Because over time all policies, even employer sponsored and offered policies, will be Obamacare regulated policies. All grand fathered plans, including ERISA regulated employer grandfathered plans, will change enough to be forced to become Obamacare regulated plans.
How does the money flow from the purchasers of these Ombancare regulated plans into the slush funds? There are many ways. The private insurance company must contribute a fix amount for each Obamacare regulated policy sold, so that is part of the price paid for the policy that provides no medical care to any patient. The private insurance must also pay a "tax" on it's "reasonable" profits. The private insurance company must also pay a confiscatory tax on any amount over "reasonable profits". The confiscatory tax is at least 40%, but may be higher. All of these taxes, or fees, or whatever you want to call them, go to the slush funds.
It is important to remember that every policy sold on the Obamacare Exchanges is a Private Insurance Company policy re-sold through the Obamacare exchanges. Everyone of those policies sold on the exchange are subject to diverting part of the price of the policy paid to the private insurance companies through the exchange, to the slush funds. Built into the price of every Obamacare regulated policy, including those sold on the Obamacare exchanges, and also including those offered by employers, is the costs of the Slush Fund "taxes".
How large is the extra cost paid into these slush funds ? Well the answer is in what they are intended to do. The entire cost of the subsidy program is expected to be paid by these slush funds - and pay back the loans to the Taxpayer funds.
At the bare minimum the premium prices must be inflated so that those paying full price for the premiums, and those receiving the smaller subsidies, must be overpriced at least enough to cover the cost of all the subsidies. There are other purposes for these slush funds as well, such as limiting any individual private insurance company's losses, so the overpayment by all must be much larger than just enough to cover subsidies for those receiving
These overcharges are represented by President Obama as charges on private insurance companies profits, not overcharges, but the bread and butter funding is structured as revenue taxes, so even if the insurance company loses money it must still pay the base fees into the slush funds.
But profits for the insurance companies are determined by the difference between premiums paid, and health care costs paid by the insurance company. So by raising premiums only moderately and cutting insurance companies costs greatly ( by raising annual deductibles for comprehensive policies to the same as they use to be for catastrophic policies for example ) those profits can soar.
These slush funds provide the key to understanding why premiums are increasing and and benefits are decreasing under all the new Obamacare regulated policies. Insurance companies understand less people are going to buy these less beneficial and more expensive policies - that is why the mandatory purchase is important - and also why eliminating any alternatives is also important - canceling old grandfathered policies is important to force people to buy the new less beneficial and more expensive policies - but in any event the insurance companies are taking as few chances as possible - thus they are shooting for "excessive net profits" on every policy sold. Sharing excessive profits with the government is better than losing money on every policy sold, and then after losing money on every policy sold, paying into the government slush funds an addition amount for each policy you lost money on.
This also explains why the federal government is desperate to kill grandfathered policies so nobody has anything to compare costs and benefits with.
Initial excess profits are also great for the government because they will fill up the slush funds and eliminate, or at least reduce the need for, federal taxes being diverted into the slush funds, thus allowing those taxes to be spent on other purpose those running the government are interested in. A side effect is the high deductibles will suppress moderately sick people going to the doctor which will make it appear that Obamacare drove down the cost curve for health care. Excess profits will also allow the federal government to blame everything on "bad apple insurance" companies.
Penalties of 3% of GROSS INCOME ( before any exemptions or deductions for costs of living are deducted ) are charged to those who do not buy Obamacare regulated insurance policies - and this 3% of gross income also goes to the slush funds. This penalty starts out at 1% of gross income in 2014, goes to 2.5% in 2015, and finally to 3.0%. So a family of four making a modest $50,000 of income would be required to pay $1,500 per year into the slush fund, going forward ( if they decline to fund the slush fund by paying an intentionally over priced Obamacare regulated policy.)
Finally, all the above slush fund, funding mechanisms are a regressive income tax, on gross income before any exemptions or deductions for living the costs of living are allowed. This regressive income tax will hit the lower middle class and middle class working families the hardest. After all, that is where the real money is, in the pay checks of the lower middle class and middle class that Obama promised to never raise taxes on. Their is over 200 Million of these potential blood donors. President Obama has found a way around his promise not to raise taxes on the poor and middle class.
