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May 24, 2011 / Political Fluency

Is Obamacare Working?

My favorite friend sent me this article from Rick Unger of Forbes claiming “Solid Proof that Obamacare is Working.” I responded back to him with my thoughts below.

On Today’s Election in New York’s 26th District

It is no secret that polling reveals that Americans are very much not in favor of Ryan’s plan.

So much is this the case, the health care issue that played such a large role in handing the House of Representatives over to the GOP last November, is now the very same issue that has become the focal point of the special election in New York’s 26th Congressional District where polling shows Democrat Kathy Hochul is leading Republican Jane Corwin in what has long been a safe GOP seat.

The reason Hochul may emerge victorious?

The GOP’s anti-Medicare plan.

The irony is exquisite.

It’s not true that this “has long been a safe seat.” The district hasn’t even existed for a decade. The good Democrat year of 2006 featured an incumbent Republican held to 52% of the vote and the good Democrat year of 2008 had the Republican at 55% of the vote. The seat Leans Republican* – even Nate Silver described it as such.

The NY-26 as purely a referendum of the Paul Ryan plan is a forced Narrative. In the Siena poll showing Medicare as the most important issue at 21% also has Jobs (20%) and the Deficit (19%) as equally important issues.

Special elections are unique to begin with and a three-way race even more so. There is a Republican and a Democrat, of course, and a Tea Party candidate that’s going to siphon off votes from the candidate from the party that rhymes with Epublican. That’s two candidates for the right-most 45% of the electorate to choose from. A party can win almost any seat when the other side has two candidates.

And if the Republican wins in NY-26 we’re going to hear “Oh that was a Safe Republican seat.” Nonsense! The reason there’s even an election is because the Republican resigned for putting pictures on Craigslist looking to hook up in a national scandal. So the Republican party doesn’t have the best brand name in the district right now either.

The pundits can only spout their mouths off about Paul Ryan’s Medicare plan without truly knowing how voters will behave toward it. When there is an election and they see Paul Ryan’s plan being debated it is their opportunity to say “Let’s see how the voters react to Paul Ryan’s plan!” (which Unger calls the GOP’s anti-Medicare plan). When in truth they should say – “Let’s see how voters react to the debate about jobs, the federal deficit, Paul Ryan’s plan, and find out if there is still a divide in the Republican party between ‘the establishment’ and the Tea Party.”

But then that’s complicated – unlike sports and American Idol.

On Health Care Reform

Recent data provided by the nation’s largest health insurance companies reveals that a provision of the Affordable Care Act – or Obamacare – is bringing big numbers of the uninsured into the health care insurance system.

And they are precisely the uninsured that we want– the young people who tend not to get sick.

The provision of the law that permits young adults under 26, long the largest uninsured demographic in the country, to remain on their parents’ health insurance program resulted in at least 600,000 newly insured Americans during the first quarter of 2011.

One cannot help but notice that the health insurance companies turned in record profits for the first quarter of 2011 due, according the insurance companies, to fewer people seeking medical treatment.

When you add into their customer base a large number of people who are paying premiums but are less likely to get sick (the young adult demographic), this would be the expected result.

The age 26 mandate is one of the 5 or 6 things people like about ObamaCare. The law is over 2,000 pages long. The true law takes effect in 2014.

Unger made one additional point about the insurance company profits in the comments:

How do you square the fact that all these young adults have joined up in the same quarter that the insurance companies are reporting record profits if this ‘free’ healthcare is such a burden on them?

There are 2 reasons. The first is that there is a claim lag of 1-3 months. Meaning when you go to the doctor in January the claims incurred during that visit are paid by the insurance company that covers you anywhere from February through April. So claims incurred in the first quarter won’t be fully paid until the end of the 2nd quarter.

The second reason is that insurance carriers charged an additional 1-3% on top of the renewal in order to cover dependents to age 26. In other words they were receiving the 1-3% in additional premiums for the entire 1st quarter and have yet to fully book the claims expense for that quarter.

He is right that Obamacare is awesome for the insurance companies and I will add large consulting firms like the one I work for… right now.

It is an unmitigated DISASTER 5 years from now.

Here’s the main reasons it is a disaster in the future. He quoted the Kaiser survey for under 10 employees which is the only statistically valid survey along with the Mercer survey. The latter just said “a fifth of small employers (those with 10–499 employees) say they are likely to terminate their health plans, especially those with low-paid workers and high turnover, like retailers.” They also have 6% of employers with more than 500 employees saying they will terminate coverage.

And these employers haven’t gotten their 2012 increase (about 8% – 100 turns into 108) and their 2013 increase (another 8% – 116.64) and their 2014 increase another 8% – 125.9). That makes a more accurately worded question: “Your company’s 2014 medical coverage costs will be on average 25.9% higher than your 2011 costs due to compounded medical trend. In 2014 would you rather cover employees at this increased rate or drop coverage, pay the federal fine for each employee, and have your employees go into the exchanges?”

It is good that more employers are offering medical coverage, but what if a portion stop doing so in just a few years because of Health Care Reform?

*The Scale from Left to Right is

Safe Democrat

Likely Democrat

Leans Democrat

Toss Up

Leans Republican

Likely Republican

Safe Republican

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