Monday, February 24, 2014

GOP deceptive tweet reminds us that they are the stupid party

Speaker Boehner's tweet
Today, House Speaker John Boehner found a new opportunity to demonize the Affordable Care Act and mislead his constituents.  His tweets proclaim that "Obama administration says 11 million will pay higher premium costs for their health care under ObamaCare."

Boehner's tweet derives its conclusion from a GOP  requested study from the Office of the Actuary, Centers for Medicare and Medicaid Services, which was released last Friday, the 21st of February.

The first thing that I should mention is that the population of people considered by the study is individuals who receive their health insurance through their small business employer and not through the ACA state health insurance exchanges.  So this is not about ObamaCare causing people financial harm even though Boehner interpreted it that way.

When the Affordable Care Act was created, it added requirements known as sections 2701, 2702 and 2703 to the Public Health Services Act.  These sections are intended to end discrimination by insurers on the patient population.

Section 2701 is titled "Fair Health Insurance Premium" and changes a practice called "community rating" where insurance companies used to be able to discriminate by charging higher prices for women of child bearing age; those having more health claims; or the elderly.  Now premium prices can only vary between individuals because of individual versus family enrollment; geographic area; age (but the ratio of higher premiums for the elderly is reduced from 5:1 down to 3:1); and tobacco use.

Section 2702 requires insurers to accept all applicants and is designed to prevent insurance company discrimination due to pre-existing conditions.

Section 2703 requires that group and individual health insurance must be renewable.

So, Boehner's tweet is actually attacking that part of the ACA that protects consumers from discrimination, probably because he didn't read it or perhaps because he didn't understand it.  The obvious fact is that he just read the lines in the study that supported his unreasonable view that "ObamaCare is bad" and tweeted.  This is unfortunate because there are important aspects of the study that place their own conclusions into serious doubt.  Some of this is self revealed, such as the admission that there are other studies that have found insignificant change in premiums.  Also, some parts of the study text indicate that the results are highly suspect and subject to large variations.

The study also found that the employer sponsored health insurance premium price changes would only affect small employers (100 employees or less) and the premium changes would only come from section 2701 requirements.  This is because they speculate that smaller and younger companies have younger employees who have been able to take advantage of the greater old to young ratio in premium prices allowed before ObamaCare and section 2701 requirements.  This would make those employers (only if they provide insurance for their employees) more likely to have increased premium prices after January 1, 2014.  The study also only speculates that any increase in the employers insurance costs would be passed on to their employees.

Additionally, these new requirements are only effective for employer health policies that are not grandfathered.  Grandfathered policies are any that existed on or before March 23, 2010.  So only new small businesses who provide employer sponsored health insurance and were created after March 23, 2010 should have been considered in the study.

However, the study indicates that 17 million individuals would be in this population.  This can be shown to be inaccurate by using the Business Dynamics Statistics data from the website.  One can see there that the maximum number of employees in new small businesses, using the largest employee population cited in a range for the category of small business created through all of 2010 and 2011 is about 2.3 million each year.  This calculates to 4.6 million employees.  Estimating a 20% increase year over year through 2013 adds another 6.2 million employees for a total population of 10.8 million.  This is a very high estimate since it would mean that nearly all of the increase in employment in the USA since 2010 has been from small business.   Prior government estimates of jobs created by small business is closer to 45% of the total.   A more reasonable population would be 5 million affected.  Still not a small number, but much smaller than the estimate of 17 million cited in the study.  (Even less than GOP led states have refused to provide expanded medicaid for.)

The study also speculates that about 35% of the population would receive reductions from their pre-ACA insurance premium costs.  The other 65% would receive increases that would put their 2014 premiums at about the average cost for health insurance prior to the ACA.

Additionally, the number affected is further trimmed down by the number of individuals who purchase health insurance from the ACA exchanges in their state.  The benefit is that many who earn less than 400% of the federal poverty level will receive federal tax reductions.  Hopefully, many of those people will take advantage of that and stop listening to misleading GOP rhetoric instructing them to avoid buying from the insurance exchanges.

Further the study stipulates that small businesses who currently provide health insurance may find it more advantageous for themselves and their employees to discontinue providing insurance and telling their employees to get their health insurance from the ACA state exchanges.  Again, Republican deception has made a large portion of America uncomfortable with ObamaCare, so it is not clear that employees would readily accept this idea.

The small business employer also has the option to utilize the small business health insurance exchange established by ObamaCare.  This option would allow the employer to continue providing insurance to its employees and be exempt from the section 2701 requirements.

Another option for the small business employer would be to self insure.  This would also allow them to provide insurance to their employees and be exempt from the section 2701 requirements.

The total number of employees affected by minor premium increases is likely to be less than 3 million and even that number depends on a lot of the variables mentioned which could make the number much smaller.  My suggestion for small business employees is to get your health insurance from the state exchanges.

Ultimately, if our Republican leaders would stop spreading misinformation and start to support ObamaCare, more people would benefit.  The federal government can be a valuable partner to business and individuals despite what radical GOP-ers want you to believe.

Wednesday, February 05, 2014

The CBO explanation of ACA effects screams for single-payer

Congressional Budget Office
To many Republicans in Congress the CBO's recent comments on the effects of the Affordable Care Law on labor markets appear to be the proof they need to continue attacking the law.  That's because they are Republicans who welcome the opportunity to mistakenly interpret and then mislead Americans into thinking badly about the health care law. 

The CBO's explanation is not about a bad health care law forcing business to take jobs away from Americans. It is mainly about Americans who may make a personal choice to leave the labor market or change their jobs because of some amount of financial benefit the health care law subsidies may give them.  

Whether this conclusion will ever be realized is questionable since many of the CBO's premises are purely conjecture and have no means to substantiate them.  The affordable care act law has not been in effect long enough to have shown any historical data to even hint that the conclusions drawn by the CBO are accurate.  Throughout the CBO's report, which can be found on the web at , the CBO itself has warned that the comments are subject to substantial uncertainty.

There are four areas where the CBO believes the ACA will have an impact on reducing labor supply, but major among them is the subsidies for health insurance purchased through the exchanges.  These subsidies are largest for individuals whose income is near the federal poverty level.  In many cases these people are working at the lowest level of low paying jobs and some may be working two or more jobs depending on their family situation, just to earn enough to pay their bills.  In such cases, a worker may find that the health insurance subsidy reduces their family expenses enough to allow them to spend more time caring for their family at home and less time trying to earn the money to feed, clothe and shelter them.

Quoting from the CBO study,
The CBO's estimate of the response of labor supply to the subsidies is based on research concerning the way changes in marginal tax rates affect labor supply and on studies analyzing how labor supply responds to changes in after-tax income.
However, the study cited does not consider a family's real expenses.  It only looks at a static response by all such families to an increase in taxes with the expected result of reducing their working hours to avoid paying higher taxes.  It is not a convincing argument of real-life and is most likely another flaw in their analysis.

The expansion of Medicaid is a second area which the CBO believes can impact certain parties in the workforce to reduce their personal working hours, since a person who is at 100-138% of the poverty level in states that have not enacted Medicaid expansion are eligible for health insurance subsidies through the exchanges.  Apparently the CBO believes that once people get subsidies they no longer want to contribute to society. 

Penalties on employers that decline to offer insurance is a third area that the CBO believes will reduce workers personal preference to work.  The CBO believes that business owners will transfer the costs of these penalties to their workers, thereby effectively reducing their wages or by removing other employee benefits.  Again, the CBO believes that the effective reduction in wages will cause some employees to reduce their working hours.  The CBO believes that although there is only currently anecdotal evidence that employers will reduce their employees working hours to side-step the health care law, it states that they may do it in the future. 

The CBO also expects that new taxes imposed on labor income will reduce the time some workers  will want to work.  Again implying that a worker's actions towards increases in taxes is to reduce his working time.  Not very realistic in my opinion. 

So, although most liberal media outlets are claiming that the CBO is only suggesting that workers themselves will make the decision to leave work early or reduce their hours, I believe the study causes more confusion than it is worth. 

It's conclusions are suspect based on it's inability to derive future events from historical facts, largely because the health care law has only just begun to have an effect on people.  It draws conclusions about worker actions in response to increases in taxes or reduction in wages without consideration for the real-life situation every person is in;  to survive at a reasonable level of comfort;  to contribute to society and feel valued.

Although business owners may take the unethical steps to circumvent the law by reducing employees wages or benefits, they can do that to others and the outcome for the business is positive insomuch as profit margin.  A worker cannot simply reduce his work without changing some other aspect of his life and a health care subsidy is simply not enough of a change to result in the kinds of actions the CBO expects.

The CBO's explanation of the behavior of workers because of a subsidy may be worthless, but one aspect of the study does have some merit.  That would be the possibility that when business is involved in providing insurance, they may transfer costs that are intended for them to their employees.  Although I don't completely agree with the CBO's estimation that some workers may leave work because of this, where it occurs, it does still have a negative impact on workers.  Because of this, an improvement in the ACA that the CBO study seems to be inadvertently advocating is to remove businesses from the equation altogether.  This would make health insurance a single payer national program where the government is responsible for providing all health insurance.

Single payer health insurance was discussed in the United States legislature before but never got more than 20% support from Congress.  It has been favorably evaluated by the CBO many times since 1993.  Since it would be a government program, it's cost would need to be offset by new tax revenue, such as would be obtained from eliminating tax loopholes for the wealthy and minimizing government subsidies for big corporations.

Republicans would never allow their constituents to pay their fair share of taxes, so we are pretty much assured that single payer would never be a program while they control the House, which is another good reason to vote them out of office.