Relevant and even prescient commentary on news, politics and the economy.

Was the Nov. 30 Deadline the Make-or-Break Moment for Obamacare? No . . .

Somewhere in the future months, one of us is going to have to eat crow here on the success of the PPACA. The Republicans, Teabaggers, Healthcare Insurance Companies, Gerrymandered Republican Districts, ALEC, Koch Bros, etc. are working their hardest to make this much needed change in how people gain coverage fail. Meanwhile healthcare insurance companies are scamming the public with the cancellation of policies they should have never written after 2010 and are increasing policy premiums in spite of the MLR. Its the PPACA’s fault . . .

In my own state of Michigan, 315,000 people, a minority of the 9 million voters, have signed a petition to force women who want abortion coverage to seek a rider to their policy independent of PPACA coverage. Given that the state has refused to set up a state exchange and has used the Federal Exchange adding to the overloading of it, I wonder how the Federal Government will weigh in on this silliness. This petition is dangerous as it will not be put to vote on the November 2014 ballot. Instead, it will go to the Republican controlled legislature to decide whether it becomes law of not and bypass the Republican governor who vetoed a similar bill. Michigan has quite a few laws which beg for Federal review. Most recently, The state Attorney General decided he would not review juveniles sentenced to life imprisonment without parole claiming it only applies to future trials. Huh????

Maggie Mahar does a good review of the current PPACA deadline which warrants greater acknowledgement.

Was the Nov. 30 Deadline the Make-or-Break Moment for Obamacare? No . . .

Why March 31 is Far More Important –Particularly for Younger Americans 

The media has described November 30 as the administration’s “self-imposed” enrollment deadline, but conservatives—and the media itself—insisted on a date, demanding, over and over again, that the administration answer the “$400 million question”:

How long will it take to fix the Federal Exchange?

Ultimately, Jeffrey Zients, the Obama administration’s new health-care website, promised the site would be “generally operational” for “the vast majority of users” by the end of November.”  No one quite knew what that meant. But immediately, the media turned the November 30 deadline into a headline. On November 28,CNN declared:  “A moment of truth approaches for President Barack Obama’s signature health care reforms with Saturday’s self-imposed deadline to get the website to work properly for most users.”

Reuters chimed in: “President Barack Obama’s healthcare law is facing its biggest test this weekend since its disastrous October 1 launch . . .  If the website does not work on Saturday’s deadline, that could turn off millions of uninsured Americans, especially young and healthy consumers whose participation in the new insurance exchanges are critical.”

Where, I wondered, is Reuters getting its information? From Fox News?

Younger Americans Are Not as Intimidated by Website Snags

There is absolutely no reason to think that 20-something and 30-somethings are more frustrated with the technical glitches than anyone else. There is, in fact, every reason to think that young Americans are not nearly as bothered by software bugs.

First, keep in mind that most Millennials haven’t even tried to sign up. This is because they are not as anxious as older, sicker Americans about securing insurance.

But when they do go to the Healthcare.gov website, a twenty-something is likely to have an easier time than a 50-something when trying to work his way around glitches. Unlike many of their elders, Millennials solve software snags every day – at home, at work, at school. Twenty-five-year-olds who have grappled with Windows 8 will not be daunted–or surprised—by a few bugs.  For many younger Americans working through such problems is almost intuitive.

This also helps explain why, despite the sustained bad-news blitz, a CNN poll released just last week shows 18-34-year-olds overwhelmingly believe the president’s healthcare law will work: “Seven in 10 younger Americans think the current problems faced by Obamacare will eventually be fixed. Senior citizens are split, and most people between 35 and 65 years old think that the system is permanently broken,” said CNN Polling Director Keating Holland. . (So much for 35-65 year boomers. Some of the folks in my generation are getting grumpy).

The Success of Reform Turns On the Health of Those Who Sign Up

Keep in mind that 18-34-year-olds are needed to make the Exchanges work. As Ezra Klein pointed out recently, what matters most is not the absolute number of Americans who join the Exchanges this first year, but who they are. He explains:  “Back in July, when Sarah Kliff and I asked the White House how they defined ‘success’ in 2014, they always defined it as a function of the mix of people in the exchanges  . . . rather than the number of people in the exchanges . . . More wasn’t necessarily better. Twenty million enrollees would be a disaster if only 1 million of them were young and healthy. . .

“If they got 10 million people to sign up, about 3.9 million had to be young and healthy. If they got 4 million to sign up, success would mean making sure 1.5 million were young and healthy.. . . so long as the ratio was right, the premiums will remain low, and so when people eventually come to buy insurance, they can get a good deal, and they’ll want to sign up.”

In other words, it doesn’t matter whether 7 million or 5 million Americans join the Exchange this year. If enough 20 and 30-something’s join the risk pool, this will ensure that premiums are as low in 2015–or even lower– than they were in in 2014. This is the scenario that reform’s opponents fear most..

Many Young Americans Will Wait Until March

Those who argue that reform is a “failure” because October and November enrollments remain low emphasize that if potential Obamacare customers haven’t signed up by the end of November they will have only 23 shopping days left if they want be covered by January 1.

But many hale and hardy 20-somethings don’t really care whether they are insured by the first of the year. They just want to avoid forking over $95 because they  decided to ignore the mandate that they purchase coverage. In that case, they have until March 31. That is when open enrollment ends—and when the penalty kicks in for those who decide not to buy insurance.

What Happened When Massachusetts Mandated That Its Citizens Buy Healthcare?

Massachusetts’ experience suggests that, for young healthy Americans—the folks we need to keep premiums at reasonable levels– March 31 is the most important deadline

In Massachusetts enrollment in Commonwealth Care began in March of 2007. The state mandated that  but the state’s citizens wouldn’t have to pay a $291 penalty if they purchased insurance by November of 2007.A study published in the New England Journal of Medicine shows just how important that November deadline was.

Researchers began by separating enrollees into two groups—those who were healthy when the joined Commonwealth Care, and those who were not.  Using claims data from the first year that these patients were part of Commonwealth Care, they measured the health mix of the population who had enrolled from March 2007 through June 2008, looking at average age, average monthly health care expenditures, and the proportion of enrollees suffering from a chronic illness. We identified patients as having a chronic illness if within the first 12 months after enrollment they had an office visit at which a diagnosis of hypertension, high cholesterol level, diabetes, asthma, arthritis, an affective disorder, or gastritis was recorded

The chart below reveals the enormous spike in the number of healthy applicants joining the program in November–just in time to dodge the penalty. That month, there was a much smaller increase in the number of chronically ill people signing up for insurance. Many already had purchased insurance.

< a href="http://www.nejm.org/doi/full/10.1056/NEJMp1013067">NEJM Commonwealth Care enrollees

The chart also shows that the number of healthy applicants continued to outpace sicker applicants for another six months. Clearly the mandate made a huge difference in ensuring that younger customers joined the pool. I suspect that over the next four months, we’ll see the same pattern nationwide.. I don’t expect to see most Millennials scrambling to buy insurance in December. Very likely, the bigger spike will come in March. This is why MIT’s Jon Guber an architect of Massachusetts Reform, plan calls the October and November Obamacare enrollment figures “basically meaningless”:

Look, when we opened our system in Massachusetts the first month the people could pay premiums and enroll, 123 people enrolled,” Gruber points out  ”By the end of the year, it was 36,000. That meant we got .3 percent of the people the first month. By that standard the federal government did great, 1.3 percent of the people the first month. It’s too early to say anything useful. The real deadline we have to focus on is March of next year.” 

I agree. When we look at who has signed up at the end March, we will be able to assess how well reform is doing—and how likely it is that premiums will rise in 2015.

Was the November 30 Deadline the Make – or – Break Moment for Obamacare?  No  .  .  .  Maggie Mahar; Economist, The Healthbeat Blog

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Ending the Era of Minority Rule

Obstructionism has been the modus operandi by Republicans in Congress to oppose President Obama with special emphasis in the Senate. Through the use of the filibuster, the Senate Republican minority has been able to block presidential appointments or sway them to less likely candidates, block the appointment of Federal Judges to the bench, and obstruct the enforcement of laws by blocking appointments to the NLRB . To bring about the end of a filibuster through cloture, 60 of the 100 senators had to vote in favor of it under the current Senate rules.  

With the appointment of Mitch McConnell as the Republican Senate minority leader, the number of cloture motions filed to break a filibuster has increased with <a href=”http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm” target=”_blank”>3 of every 10 clotures</a>  filed having occurred since McConnell’s appointment. The numbers are up drastically since Obama became president and McConnell became the Senate Minority leader (redundant alert). Maybe McConnell does not like the president as the current practice is certainly not reminiscence of past practices.

 

cloture_gfx-03

 

Senator Henry Reid decided to employ the nuclear option:

“a Senate procedure that will allow a majority of the Senate to effectively change its rules to limit widespread obstructionism by the minority. As the trigger for this reform involves seven executive branch nominees being held up by Senate Republican filibusters, the likely consequence of this round of rules reform will be to eliminate the minority’s ability to filibuster nominees.” 

The president will now be able to appoint to the judiciary and to legislative positions with just a majority rule vote. If it appears to be unfair, more nominations by President Obama since he took office have been blocked than all other presidents combined.

 

filibusters

 

Maybe they just do not like Barack Obama the man?

 

References:

“Huge, huge victory for Political Sanity today,” November 2013, http://digbysblog.blogspot.com/2013/11/huge-huge-victory-for-political-sanity.html

“Why Senate Democrats Had To Invoke The Nuclear Option,” November 2013,  http://thinkprogress.org/justice/2013/11/21/2972671/senate-democrats-invoke-nuclear-option/

Everything Yo Need To Know About The ‘Nuclear Option And Harry Reid’s Plan To Fix The Senate,” July 2013, http://thinkprogress.org/justice/2013/07/12/2291781/everything-you-need-to-know-about-the-nuclear-opinion-and-harry-reids-plan-to-fix-the-senate/

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Traveling China and Thailand

I am nearing the end of my 16 day jaunt starting in China and ending in Thailand. It has been 7 years since I have been in Thailand and the same for China other than an overnighter plus a day in Shanghai, China. Both places are surging in infrastructure and in business. Let me explain why I say such.

I am a Global Procurement Manager for a $500 million division of an $8 billion corporation. My VP and I have been hitting the machining, die casting and casting, extrusion, forging, fabrication, and steel manufacturers in both countries at the rate of 2-3 per day. We have traveled by train, plane, and automobile in China and plane and automobile (besides tok-tok) in Thailand.

The China pros: The 200 mph train ride to Ningbo, Suzhou, etc. The seats were comfortable, the stops few, and the time sent moving between cities quick. A lot of infrastructure building going on in the cities and outside of the cities. A company I visited (TonTech ) was making a $1 billion investment in a milling machine / fabrication facility and another $1 billion investment in a casting and forging facility. We stopped to see a needle bearing facility which can meet our needs and beat McGill with a lower cost and similar capability. It is a startup and the owner lives on site with his family and one huge dog. The food is good and the people mostly friendly.

The China Negs: Air Pollution is everywhere. The quality of air is typically poor to bad on most days without a strong wind. Haimen, China I thought had the worst for quality of air. It was always smoky and the air irritates. Even with license plates exceeding $10,000 per vehicle for Shanghai, China; traffic is still horrific with travel measured in hours during certain parts of the day. Shanghai is one of the biggest cities in the world. Some of the Chinese are just plain rude to each other.

The Thailand Pros: It is warm for sure and in the nineties even now. The sky train above Sumhumvit Road in Bangkok is cool. Again there are many small businesses at $2 million to $250 million which would suit our needs. The intelligence of how to machine and extrude is excellent and they bring things to the table. Remember what I have always preached, it is about Overhead and not Labor in Asia when comparing against the US. Travel in Bangkok and the surrounding areas is easier even with poor roads.

The Thailand Negs: It is hard not to walk the streets and see crippled people, moms with kids, and the elderly begging for coins. If you have a soft heart, carry plenty of small change (20 baht) in your pockets. Safety at machining is a lesser priority than what you would find in the US. There is civil unrest with the government and corruption also. There is a fair amount of pollution; but, it is not a serious as China.

In general inequity is far more wide spread in China and Thailand than in the US; however, China with all of its infrastructure building and investment in domestic improvements will overtake the US in in time as we continue to invest in Defense and tax breaks for a few. It is just a matter of time before the US is a Tier 2 nation.

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The Not So Bad PPACA Numbers

After 10 days scurrying around the Shanghai, China area; I am now sitting in Bangkok, Thailand and reading more of the news. Such is the life of a Global Purchasing Manager dealing with automotive and industrial. I have been reading and watching the typical media reporting about the PPACA while drinking my green tea.

Greg Sargent as reported on Crooks and Liars – How the Obamacare numbers actually look pretty good picks up on what the numbers to date mean for the PPACA. So what is the big deal???

p3

Republicans are gleefully pointing to the numbers as proof Obamacare needs to be scrapped entirely.

That confirms two things we’ve long known to be true: the website is a disaster, and short term enrollment figures are a serious political problem for the White House and Democrats. But to Larry Levitt, a vice president at the nonpartisan Kaiser Family Foundation, another very telling number is this one: over 975,000 have been determined eligible for a marketplace but haven’t yet chosen a plan.

‘That’s one of the most telling numbers — a million people have been determined eligible,’ Levitt tells me. ‘That means if the website had been working well, and a million people had gotten to the end of the process, we’d be looking at a very different trajectory now. We heard about the surge in traffic when HealthCare.gov went live. This suggests there is in fact a lot of interest.’”

We can establish the PPACA website which was more or less designed as a backup to expected state run exchanges and did not function as expected. We can also safely say > half of the states who were supposed to have systems in place declined to implement state exchanges much less pass the PPACA. My experience as a part of multiple MRPII/ERP implementations where businesses decided to either change source code or make other extensive changes has always resulted in system issues. this leaves me to say, the crowing about commercial enterprises being far more successful in system implementations is just plain nonsense. Even so, the federal exchange was never meant to handle the traffic which showed up at its doorstep due to obstinate political and moneyed interests (such as in Michigan) who are more interested in seeing a President in failure than helping their constituents. 20 years since Hillarycare and little has happened to help the uninsured or stem the rising cost of healthcare (sans insurance).

Looking at the chart, Larry Levitt of the Kaiser Foundation points to the “975,000 being determined eligible in the marketplace but not having yet chosen a plan.

if the website had been working well, and a million people had gotten to the end of the process, we’d be looking at a very different trajectory now. We heard about the surge in traffic when HealthCare.gov went live. This suggests there is in fact a lot of interest.” A lot of interest in having some type of healthcare insurance

Because we have issues with the PPACA software; the proposal by Republicans, tea-baggers, and those who simply dislike the president is to scrap the PPACA this decade and wait for another decade or two to implement another version? Hmmmmmmmmmm, nope! There is no way another bill would get past the Republican held House in this decade. I have not participated with a commercial interest yet which has shut down when there have been software issues and we should not be so willing to back away from the PPACA. The companies worked through the issues and went onward for the most part. When the TSA was blowing $200 million a year (since 2007) trying to read your personality in conversations while you were getting x-rayed and patted down, no one was calling for an immediate halt to it. 6 years later, > $1.2 billion spent, and the TSA finally determined their Vulcan mind-meld methodology did not work. Even so, we do need to move forward much faster with a PPACA website fix.

”’Assuming the website gets fixed, I would assume a surge of enrollment in December, and another surge in March,’ KFF’s Levitt explains.”

But what about the lowly numbers (100,000) who did get insured through the state and federal exchanges? This is an extremely low number when compared to expectations for the individual market place; but, the critics and pols conveniently side step the 400,000 who were made eligible for Medicaid in states which embraced the expansion. Isn’t this about insuring more people whether through the individual exchanges or through Medicaid?

”‘In total that’s over 500,000 people who signed up for insurance in the midst of a tumultuous launch,’ Levitt says. ‘People make a distinction between the marketplace and Medicaid, but those are both elements of the Affordable Care Act — both are mechanisms to get people insured.’” 500,000 in one month?

The argument put forth by the Obama foes have been about people experiencing negative impact (as if the Republicans actually cared for their constituents as opposed to the moneyed interests) from the PPACA website failures, purposeful insurance company cancellations, and higher rates due to broader coverage. All of this is occurring in the individual market as opposed to the much larger group market. The cancellations have been made by companies, the increased costs have mostly been disproven, and the website is being worked on feverishly. Going forward, the answer to today’s issues and the success of the PPACA will be determined by the numbers who benefit from coverage. As a result, the outlook is still unsettled but positive when the entire numbers are reviewed as shown. The PPACA is moving forward albeit slower than expected. It is accomplishing at a less than spectacular rate on the exchanges what it is supposed to do . . . cover people. Given time, it will succeed.

What the Obamacare enrollment numbers really tell us,” Greg Sargent, Washington Post November 13, 2013

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Socialism At Its Finest

The Grey Matter Blog does a nice little bar chart on insurance profitability; “Socialist” Obamacare a boon to insurance companies” since the passage of the PPACA in 2010. I gotta say this is nothing like what I would have expected to happen; but, I have to acknowledge my other blogger-foil’s told-you-so remarks to me repeatedly.

With all of those socialism programs we liberal put out there, who would have thought the healthcare insurance racket would do so well under government regulation? Only one insurance company failed to outperform the S&P.

Insurance

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The Truth About Obamacare’s Exchanges

Maggie Mahar at The Health Beat Blog writes bout the exchanges.

Paul Krugman: “There are two remarkable things about this kind of doomsaying. One is that the doomsayers haven’t rethought their premises despite being wrong again and again — perhaps because the news media continue to treat them with immense respect.”

If you Google “Obamacare,” “Exchanges,” and “Disaster,” more than 20 million articles will pop up.

One month into a six-month enrollment process, the Media Pundits have spoken.

In truth, there are two tales to be told: one that is getting widespread coverage, and one that is not.

The stories that you are Not hearing come from folks like Michael Cadigan, the president of a New Mexico law firm who enrolled his firm’s four employees the day his state’s Exchange opened. “I thought it was going to be an administrative nightmare,” he confesses. Instead, he quickly found a policy “that will cost $1,000 less a month than I’m currently paying.”

 

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Ripping Off College Students’ Economic Future

Previously, I had written on Fair Market Value and its use by the CBO’s Douglas Elmendorf to rate the risk of Student Loans as advocated by both The New America Foundation and the Heritage Foundation. A rebuttal answer to a partisan CBO, the right-leaning New America Foundation, and the conservative Heritage Foundation on the usage of Fair Market Valuation methodology in the same manner as what I would have used it for to rate the return on a piece of capital equipment is simple. It is inappropriate for student Loans as there is little or no risk to loaning students money which can not be discharged through bankruptcy. The news media has been pandering to students promoting  a generational war by advocating the theft of student’s futures by such programs as Social Security, Medicare, Medicaid, etc. The Tom Friedmans, James Freemans, and others suggest baby boomers are ripping-off the X, Y, and Z generations with these programs.  From the well-heeled segment and do not have to work anymore 1-percenter population, we find Stan Druckenmiller, Pete Peterson, the Koch brothers, etc. spending portions of their $billions advocating the discontinuance of Social Security to save the country, students, and themselves. Some are taking to college campuses with false data and advising students to protest the rip-off of their futures in a Days of Rage manner. All tend to ignore the real threat to students and their future. The threat is not likely to come from Social Security, Medicare, etc.

What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer Labor intensive opportunities.  The increased funding necessary to go to college is the result of decreased governmental funding of schools, declining or stagnant household incomes, financial strategies delineating the increased risk of student loans  (CBO, The New America Foundation, Heritage Foundation, etc.), and the increased cost of attending colleges and universities (which as Alan Collinge of Student Loan Justice Org. states cost increases have outstripped CPI and even Healthcare) .

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7 Million Insured versus 2.7 Million Millenials

The argument has been the ACA depends on a number of the young to sign up for healthcare insurance on the PPACA or at least this is what S.E. Cupp believes and suggested on This Week with George Stephanopoulis.

There’s two problems, one is the technological, sort of mechanics of this. Obamacare relies on Millennials, these young invincibles who have never bought health insurance in the past, to suddenly change their behavior and buy something they don’t think they need. And in some cases can’t afford. That mechanical issue remains to be seen and the web site rollout has affected that. But it also reads as an inability to speak their language. Donna, you might call an 800 number and sit on the phone for 20 minutes  .  .  .  Millennials are not used to that. They do not meet in person with Insurance agents  .  .  .  They need a website that works, tat gets them  .  .  . ”

Howard Dean:

I would have to disagree with S.C. This has been written on by many, many people, so I am not just picking on her. It is not true that if young people do not sign up the program is not going to work. That is false and the reason it  .  .  .

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Insurers “Had a Seat at the Table” when Reformers Hammered Out the ACA, but Things Didn’t Work Out Quite As They Expected . . . –

Maggie and I have discussed this topic on several occasions and she tackled it here at: The Health Beat Blog. In the general public, it always surfaces as accusations of a sell out to the insurance companies. It is unfortunate we could not have Medicare for all or single payor; but, the political environment at the time was not conducive to such a venture.

What This Means for Health Insurance Stocks–and Your Premiums

When Congress passed the Affordable Care Act (ACA) in 2010, liberal critics feared that the Obama administration had “cut a deal” with for-profit insurers. Single-payer advocates,were particularly incensed when reformers invited the insurers’ lobbyists to the table to help hammer out the details of the legislation. Some charged that, in return for the industry’s support, the administration agreed to a mandate that would force 30 million uninsured to buy private-sector insurance (or pay a penalty,) thus guaranteeing carriers millions of new customers, and billions in new revenues.

“It pays to be one of the few sellers of a product the government is going to force everyone to buy and provides subsidies to help them do it,” one Obamacare opponent sniped.

Why Health Industry Insiders Were Offered Seats at the Table

At the time, I didn’t believe that the administration was selling out to the health care industry. Reform’s architects offered insurers, drug makers and device-makers seats at the negotiating table, in part because because they hoped to persuade them to help fund reform – and they succeeded.

Ultimately, the industry agreed to shell out over $100 billion in new fees and taxes to help fund the legislation. Those contributions are critical to financing subsidies for low-income and middle-income Americans.

The Obama administration also did not want to watch re-runs of the “Harry & Louise” television ads that helped torpedo “HillaryCare.” Here too, they prevailed. In a new series of 2009 ads, the make-believe TV couple were all smiles: “A little more cooperation, a little less politics, and we can get the job done this time,” Louise declares.

Still, some feared that the administration was giving away the store. “No wonder the cost of reform keeps going up and up and up,” said Bill Moyers. “Could it be” he asked, “that Harry and Louise are happier because, this time, they’re in on the deal?”

But Didn’t the Administration Capitulate On the “Public Option”?

Skeptics on the Left also believed that reformers agreed to quash the “public option”—a government insurance plan that would compete with private sector carriers.

The truth is that Connecticut Senator Joe Lieberman ( sometimes known as “the Senator from Aetna”) almost single-handedly killed “Medicare for Everyone.” When Lieberman said “I’m not going to let this happen,” Congress was on the verge of passing legislation that would let Exchange shoppers choose between a public option and private sector insurance.

Then, in the fall of 2009 ,Lieberman, who was supposedly a Democrat, stood up and brazenly announced that if reformers didn’t drop the public option from the plan, he might join the Republicans in a filibuster that would stop the health care reform bill come to the Senate floor. In other words, he was threatening tote kill reform.(At that moment in time, Lieberman could have drummed up just enough votes from moderate Democrats to help him do this.)

In October of 2009, I wrote:: “This is vintage Lieberman. He’s an opportunist. I knew him many years ago, back in Connecticut, when I was working for a a reform candidate in New Haven who was challenging the Democratic machine. Lieberman wavered on the sidelines, waiting to see who was going to win. He didn’t want to risk picking a losing team.” For Lieberman, politics was not about issues and what might be best for his constituents. It was all about Joe.

Was he doing the administration’s bidding?

Hardly.Lieberman and Obama were never soul-mates.. Indeed, in 2008, Lieberman, nominally a Democrat, appeared at the Republican convention where he endorsed John McCain– and criticized Obama.

In 2009, many observers agreed that Lieberman wanted to stop the public option, not just out of loyalty to the Connecticut insurance industry, but out of spite. He was still furious that Democratic party leaders allowed liberal Ned Lamont to run against him in the state primary. Lieberman wanted to “show” the Obama administration what happens to anyone who dares to cross him.

What Investors Did Not Understand

In 2012, two years after President Obama signed the bill, the myth persisted that the administration had gotten into bed with the insurance industry,. As proof, critics pointed out that from 2010 to 2012 Aetna’s shares gained 33%, market leader UnitedHealth Group soared 65% and Humana climbed 76% Clearly Wall Street knew that in 2014, insurers were going to clean up.

But strangely, in just the past two months–on the eve of the Exchanges’ opening– investor confidence has weakened:

What is going on?

Wall Street is beginning to figure out that under Obamacare, for-profit insurers are not going to make out like bandits.

Investors who drove carriers’ shares to record heights were misled by media reports that the White House had “sold out” to insurers. Meanwhile, they overlooked the many ways that Exchange regulations would whack carriers’ profit margins:

  • Insurers can no longer shun customers suffering from “pre-existing conditions”—and they cannot charge them more.
  • All policies must offer free preventive care.
  • The amount that a carrier can ask patients to pay out of pocket is capped.
  • But insurers cannot cap the amount they pay out in a given year, or over the course of a life time.
  • All Exchange policies must cover the 10 essential benefits—no more “Swiss Cheese” policies filled with holes.
  • Perhaps worst of all, from the industry’s point of view, if carriers don’t spend at least 80 cents of every premium dollar on medical care for individual and small business policyholders (85 cents for large groups), must send rebates to customers, letting them know they were overcharged.

In order to keep their seats at the table, insurers also agreed to pay annual fees to help fund reform. The fees begin at $8 billion in 2014, grow to 14.3 billion in 2018, and then rise to track any growth in premiums.

Finally, Wall Street ignored the provision in the ACA that reins in overpayments to Medicare Advantage insurers. Last week, when UNH announced earnings, it cited this as a reason it is lowering projections for next year’s profits.

Virtually No One Actually Read the Bill

Why didn’t investors recognize the many ways the ACA would squeeze carriers? Like most Americans, they hadn’t taken in the details that make the ACA both strong and complicated, with checks and balances embedded on virtually every page.

Most of the reporters who spread the rumor that the administration had “caved” to insures also hadn’t read the legislation: “Too long, too complicated, too many details,” they groused. It was easier to simply repeat what the grand generalizations that the pundits offered.

To be fair, by 2010, print journalists were trapped on a high-speed information highway where they were trying to compete with bloggers working in “real-time.” Flogged by editors who wanted the story “Now” the just didn’t have the time to hunker down with the Affordable Care Act.

Meanwhile, by then, most publications had eliminated the fact-checkers who would have realized that the text of the legislation was their only reliable “red check.”

I Was Just Plain Lucky

Fortunately, in 2010, I was no longer on staff of a daily newspaper or a weekly magazine. Back then, the non-profit foundation where I worked was run by old-fashioned bosses who gave me great freedom to do in-depth research– and try to make sure that what I wrote was true. As a result, I had the time to read the Affordable Care Act, more than once. That was my job. (When I explained this to Lou Dobbs, at first he was incredulous, then he laughed. But ultimately, I think he was convinced.)

Because I understood how the ACA’s regulations would hem in insurers’ profits, in the Spring of 2010, I wrote that under Obamacare, for-profit insurers would not be big winners. Quite the opposite.

How the Insurance Industry Mis-Calculated

Okay, maybe investors and reporters did not read the bill. But the insurers’ lobbyists did. After all, they were “at the table.” Why, then, did they swallow the new rules and fees that would

“Because there is nothing the health insurance industry wanted more than an individual mandate to force people to buy their product,” explains Consumer Watchdog’s Carmen Balber.

As the Center for Public Integrity (CPI) points out, when the reform law passed in 2010, “the Democratic Party controlled the White House and both houses of Congress. By supporting the law, the industry was able to stay in the game on a very complex piece of legislation.”

Privately, the insurers’ lobbyists believed that Obama would not be re-elected in 2012. Down the road, they assumed that conservatives would help them overturn the parts of the bill that they didn’t like. This is why, even while loudly professing their support for Obamacare insurers were quietly funneling two-thirds of their campaign contributions to Republicans.

As they hoped, by October of 2011, the political environment had changed dramatically. “Democrats no longer hold a filibuster-proof majority in the Senate, the House is controlled by Republicans and the president is in a tight race for re-election,” CPI noted.

Insurers now began publicly criticizing Obamacare. At this point they openly lobbied for new legislation that “would effectively gut” the provision that insurers must spend 85% of premiums on medical care.

But to the industry’s utter chagrin, in November, President Obama won.

Ultimately, carriers would lose on every provision in the Affordable Care Act that they had hoped to see repealed.

State Regulators Develop Spine

Then came the final blow: Last summer, as carriers began proposing rates for the policies they hoped to sell in the Exchanges, state regulators flexed new muscles.

The ACA had set aside $250 million for state insurance departments to support an “enhanced rate review process.” Meanwhile the administration encouraged regulators to get tough– and many clamped down..

In response to the federal law, Colorado, Maryland, New Mexico and New York, all passed legislation giving their regulators more authority to review health insurance rates.

Insurers selling plans in Portland, Oregon ultimately were forced to reduce their rates by nearly 10% on average. Three of the 12 insurance companies in that market had to lower their rates more than 20% compared with what they requested.

In Maryland, Aetna filed a proposal with state insurance regulators to raise its rates 25.4 percent, the highest of any carrier. The rate the state approved July 26 was 29 percent lower than what Aetna sought, while other carriers saw their proposals cut back by as much as 33 percent.

Aetna backed out of Maryland.

In the end,, Aetna also fled California, New Jersey, New York, Georgia –-and Connecticut. “As corporate identity crises go, this is like L.L. Bean quitting Maine or Apple leaving California–for the Moon ”The Wall Street Journal commented.

Aetna is now participating in Exchanges in just 16 states.

Even in states where regulators didn’t reject bids, the Exchanges forced insurers to compete on price. Brand-name carriers who able counting on high premiums to offset the costs of the new regulations soon realized they couldn’t compete with non-profit insurers who don’t have to deliver profits to investors.

For consumers, this is good news. When it comes to the quality of the care that they deliver, and customer satisfaction, non-profit carriers get the highest marks..

In the end, the biggest for-profit insures backed away from the exchanges. WellPoint wound up participating in Exchanges in only eight states. UnitedHealth will be peddling policies in four. .

“It’s almost surreal to see the most dominant company in the industry completely sitting out the launch of the . . . exchanges,” observes Deutsche Bank’s Scott Fidel.

Reportedly UnitedHealth is now eying insurance markets overseas.

So much for having a seat at the table

(Note to readers: A shorter version of this post appeared on Health Insurance.org.

Soon, I plan to write about how drug-makers, device-makers and hospitals will fare under Obamacare, and where there shares are likely to be headed over the long term.

Maggie Mahar at The Health Beat Blog

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