Thursday, November 21, 2013

Belief, hidden information, lying, and do-overs

The Wall Street Journal piece in which Nicole Hopkins talks about her mother being forced into Medicaid by ObamaCare provides some insight into a number of issues.

Briefly Ms. Hopkin’s mother had been purchasing health insurance on the individual market in Washington State. Her current policy cost her $276 per month; making those premium payments every month was a stretch for her but she believed it was important to do so. She believes it is her responsibility to take care of herself; she also believes that taking government handouts is shameful.

Ms. Hopkin’s mother received one of the infamous cancellation letters from her insurer. It informed her of the usual: her current policy didn’t meet the ObamaCare standards and could not be renewed. In its place, her insurance company offered an ObamaCare-compliant policy with a premium of $415.20. There was no way Ms. Hopkin’s mother could afford the new premium so she used Washington’s State-run exchange to see what other coverage she could find. After entering all the required information, she was informed that Medicaid was her only option. Her daughter re-did her mother’s work on the exchange and achieved the same result. Hoping that hitting “Apply for Coverage” would reveal more options, they did so and found Ms. Hopkin’s mother was now enrolled in Medicaid.

This story illustrates some general points about the understanding and implementation of ObamaCare among those who are living with it:

1) Ms. Hopkin’s mother (and Ms. Hopkins herself) appear to believe that the Washington State exchange is the only way Ms.Hopkin’s mother can buy health insurance. This is not true. Ms. Hopkin’s mother can buy insurance directly from any of the insurance companies selling to individuals in the State. (Well, actually, in her county - how weird is this whole “available policies and/or rates vary by county” thing?)

If they do believe this, I can’t blame them. I spent a few very anxious weeks believing the same thing: I could only buy individual health insurance through the exchanges and the exchanges weren’t working and oh, no, what was I going to do? I don’t remember what finally clued me in that I could still buy directly from whatever insurance companies were selling individual policies but it was a great relief to me when I finally stopped panicking and realized I would be able to buy health insurance even if the exchanges never, ever worked.

Further, based on what I’m seeing written about the ObamaCare cancellations across the blogosphere, Ms. Hopkins, her mother, and I are not the only people confused about this. There are a lot of articles, posts, and comments of the form, “Their insurance was cancelled because of ObamaCare and the exchanges aren’t working and so there is no way for these poor people to buy insurance before their policy goes away and they are going to find themselves uninsured as of January 1.” Sometimes the context makes it clear this is shorthand for “there is no way for these poor people to buy insurance they can afford before their policy goes away.” In its expanded form, this statement may very well be true: if the policy in question was cheaper than the ObamaCare policies and the people who were cancelled cannot handle the premium increase on their own, then the only way to have any hope of getting a subsidy to make their insurance affordable is through the exchanges.

Often, however, the writer seems to believe that individual health insurance can truly only be purchased through the exchanges. That’s incorrect and given the extent to which people apparently believe this, I think the series of ads put together by Wellmark Blue Cross Blue Shield is an excellent idea. The fact that the ads are funny is an added bonus not just because we can all use a good laugh about now but also because it means the ads will likely be seen by people outside their target areas of Iowa and South Dakota, thus spreading the information that the exchanges can be bypassed if buyers can live without, or are not interested in, the subsidies.

2) The replacement policy offered to Ms. Hopkin’s mother is not the cheapest policy available to her. The Premara Blue Cross site tells me that a 51-year-old woman* living in Pierce Country (zip 98303) can buy health plans with premiums ranging from $343.39 to $541.50 per month. Even the cheapest of these plans is more than Ms. Hopkin’s mother’s current premium of $276 but it is less than the $415.20 premium quoted in her cancellation letter.

There may be other insurance carriers from whom Ms. Hopkin’s mother could buy insurance. The Washington State Office of the Insurance Commissioner lists all the plans potentially available to people in Pierce County. Unfortunately, some of the links seem to go to 2013 rate sheets so it’s not clear whether there is a better deal available.

Presumably the information that lower premiums were available is exactly what Ms. Hopkin’s mother hoped to find when she entered the Washington State exchange website. Because her income was so low, however, she was never shown these options and was instead shunted into Medicaid. This leads to the third point illustrated by this story:

3) If you want to see all your options, you may have to lie about your income when you’re shopping around in the exchanges - by reporting it as higher than it is. I’m not advocating lying about your income when it comes time to finally actually enroll through the exchanges (if you decide to go that route). However, if you want to see all available information and forestall the government deciding what you “should” see, you need to fool the system long enough to gather data.

As I understand it, the problem of incomplete information arises because if an applicant’s income is between 138% and 400% of the poverty level, he is eligible for a subsidy which can be applied to whatever policy he chooses. However, if the applicant’s income falls below 138% of the poverty line, he is not eligible for a subsidy and must either pay the entire cost of his insurance himself (and cannot buy it through the exchanges) or he must go into Medicaid.** I assume the system was designed this way to reduce the number of people getting subsidies (presumably Medicaid is cheaper than subsidies) but I really don’t like it. If someone who the government thinks is “too poor” to buy his own insurance wants to do so anyhow, I’d rather we help him than make him worse off than someone who makes just a few dollars more than he does.

A couple of the commenters over at the WSJ article are suggesting Ms. Hopkin’s mother lie to the exchange, reporting her income as high enough not to qualify for a subsidy, and that she do this as part of actually buying whatever policy she wants. There’s no need for this. She can report her income as high enough to see all her options on the exchange; pick the policy she wants; and buy it directly from the insurance company. So long as she does not want to try to get a subsidy, there is no need to buy her insurance through the exchange so there is no need to lie in a formal application.***

4) It sounds like the exchanges - Washington State’s, probably the Federal one and those of other States - need a better “are you sure you really want to do this” step and a relatively easy way to say “oops” if someone signs up without intending to or changes her mind or realizes she’s entered data incorrectly or her situation changes or whatever. This is particularly true if signing up erroneously affects someone’s ability to get insurance down the road, as I have seen claimed (although I can no longer find the source of that claim).

So was Ms. Hopkin’s mother “forced” into Medicaid. Sort of. There were other options available: she didn’t have to buy through the exchange; there was at least one plan that was cheaper than what her insurance company quoted her. However, by jacking up the price of health insurance to a level Ms. Hopkin’s mother could not afford; refusing to subsidize her purchase of this more-expensive insurance; and not making clear to her what other options she had, ObamaCare may have removed any other option. In that sense, yes, she was forced into Medicaid.

I find Ms. Hopkin’s mother’s story hits close to home. I admire her determination to take care of herself and find it terribly sad that her ability to do so has fallen victim to ObamaCare.



* Why are insurance sites (and this isn’t the only one) still asking about gender? I thought ObamaCare required that men and women be treated exactly the same.

** If your State did not expand Medicaid then if you make between 100% and 138% of the poverty level, you cannot go into Medicaid and your cannot get a subsidy. The technical term for this situation is "up the proverbial creek without the proverbial paddle".

*** If Ms. Hopkin’s mother lies on her actual application, reporting her income as higher than it is so she can get a subsidy rather than going into Medicaid, that’s fraud: she has received more than the law says she’s supposed to get. I have to admit that I planned to do exactly that at a point when I believed I would only be able to buy insurance through the exchanges; would not be able to afford to pay for an ObamaCare-compliant policy myself; and would have income low enough so that ObamaCare would throw me into Medicaid. (I have assets rather than income.) I figured I could get away with it because Obama had waived income verification for 2014.

According to this, I was wrong: it’s not true income verification has been waived. However, the guidelines for checking “suspect applications” apparently are all about looking for people who are reporting too little income, not people who are reporting too much. This seems to be yet another case where the people running ObamaCare don’t understand where the trap doors are.

Going back to whether lying on a formal application is fraud, if someone lies on a formal application through the exchanges, giving his income as higher than it is and high enough to not qualify for a subsidy, is that a crime? Fraud? Something? I suspect the government - Federal certainly, some States - would consider it so but the effect of the lie didn’t cost the government anything - may, in fact, have saved the government money if the applicant would have qualified for government help (either Medicaid or subsidies) if he had told the truth.

Here’s a more interesting example. Let’s say someone has been buying health insurance for himself all along. Now the ObamaCare policies are all that are available to him and they are all more expensive than what he’s been purchasing. His income is low enough that he would qualify for a subsidy that covers the entire cost of a policy roughly comparable to his old one. He does not like the idea of being subsidized but figures the only reason he needs the subsidy is because of ObamaCare. He decides to misrepresent his income, reporting it as higher than it is so the amount of the subsidy he receives is just enough to make his cost for the new insurance the same as his cost for his current insurance. Is this fraud? He has lied and he has received payment from the government but, once again, he has saved the government money.

(Apparently the whole issue of income and fraud is a tricky one as this piece points out.)


Anonymous said...

I live in WA State. With Obamacare, she very likely can't get insurance off the Exchange for less than about $100 more/mo than she's paying now. And that will be for a bronze plan with a way too high deductible.

The plans off the Exchange are actually MORE expensive than the ones on the Exchange. We now live in a rigid bronze/silver/gold world. You can't shop anything with these plans except provider network. The nice thing about the off-Exchange plans is they have a better provider network.

Elise said...

I'm finding much the same thing although I haven't seen any plans in NJ that are sold only off the exchanges. As I've said elsewhere, I can get a plan with out-of-network coverage but the network is narrower. My last post has a link to a Laszewski piece where he talks about how ObamaCare has done away with two of the mechanisms insurance companies used to compete on price, leaving them with only network size (and some pay for value not per service type stuff that I think hasn't payed off yet - don't know if it ever will).

It's incredibly frustrating.