The Fruitcake Continues Around

TIt was a 1995 episode of Seinfeld that popularized the term ‘regifting,’ but just because it took Jerry and Elaine to give us the vocabulary, the practice is not that new at all.

For example, take the famous holiday fruitcake.

I know that when I was a kid, we got one from someone most every year.  I know for certain that we NEVER took a bite of one.  I know that my parents, both raised by Depression-era, dirt-under-their-nails farmers, would not allow a perfectly good anything to be tossed in the trash.  So, though I cannot prove it in court, I am fairly certain that my mother was a ‘regifter.’ 

The fruitcake just keeps coming back around, never quite accomplishing what the giver intended, but doing enough to stay alive to come back again next year.

Just like Obamacare.

Yes, we still have a small quota of bad analogies left over for 2017 and we’re trying to use them all up before yearend.

As you likely know by now, last Friday a federal judge in Texas ruled that the Affordable Care Act’s individual coverage mandate is unconstitutional.  He also took the next step and said that the individual mandate is so essential to the whole Act that it cannot be severed from it, thus the entire ACA is rejected.

Here are the essential, and inseverable, bullet points that go with that news:

  • This was a lawsuit brought by 20 red state attorneys general, heard by a Bush appointee in Texas.  This is the Red team. The appeal will be led by California and other like-minded states.  This is the Blue team.
  • Though the judge ruled the ACA unconstitutional, he did not block its continued operation, so it is all business as usual for now.  Is this now an actual zombie law?
  • The appeal will likely head back to the Supreme Court, where Chief Justice John Roberts broke conservative hearts in 2012 when he voted to uphold the law.  Gorsuch and Kavanaugh now sit in the seats then occupied by Scalia and Kennedy.
  • The appeal will not likely be heard by the Court before the 2020 election, which means that if we thought healthcare would be a big issue in the next vote, then it just get amped up by a factor of ten. 
  • Be assured of one bi-partisan point of agreement we will hear during this mind-numbing cacophony coming our way: everyone is against people getting denied coverage for pre-existing conditions. We’ll get lots of swearing allegiance to this idea; just don’t press for the underlying economics of it all.
  • This all prompted a flurry of tweets from the President.  Shocking, I know.  As a sign of the coming times, one shouted, ‘Mitch and Nancy, get it done!’

And with that, we’ll come back to that tweet Wednesday to explore an optimistic idea for those of us who still believe in Santa Claus.

Two Lemmata

The Trump administration, specifically CMS Seema Verma, faced a dilemma.

Before we get to that, we’re opening the week with a little Monday morning gift, some meaningless but interesting information that you use to impress some youngster at your next meeting. 

The English word ‘dilemma’ dates back to the early 1500s, but was borrowed from Latin, which borrowed it from Greek.  ‘Di,’ meaning ‘twice,’ is joined with ‘lemma,’ which means ‘premise’ or ‘assumption.’  So, a dilemma, a double proposition if you well, is two lemmas.  Or to be more accurate with the Greek plural form, Two Lemmata.

So, to the youngster posing a complex choice between two difficult choices, you can now reply, ‘Ah, you’ve given me two lemmata.’

Hey, we told you the information was worthless.  

OK, enough goofing off.  Back to CMS and the dilemma.

Trump and his supporters campaigned to repeal and replace Obamacare.  Mitch and his GOP buddies in the Senate couldn’t make it happen.  Many people assumed Team Trump would systematically work to undermine the law and hasten its public failure, but it would be risky to blow up a plan that was, in spite of its flaws, increasingly popular with voters.

Two Lemmata.

[If you speak Greek and I have totally butchered this word with this gimmick, then Signómi.]

Ms. Verma is clear that she’d still like to scrap it all and start over but has been chipping away at making the ACA work.  With open enrollment for 2019 about to begin, she announced last week that premiums for the benchmark silver plans are going down 1.5% next year, this after years of double-digit increases.  She also noted that more insurers have gotten into the ACA market and many have expanded their coverage areas, given consumers more choice.

The administration is taking credit for bringing stability to these markets by allowing states more flexibility through their liberal granting of waivers for states.  We noted with Ms. Verma was nominated that this was her strong suit, so this is no surprise.

Some will rightly note a couple of things to tap the breaks on the celebration just a bit.  When the insurers lost their cost sharing reduction payments, the Trump administration allowed for some accounting flexibility to load all of their premium increases into the silver plans.  This ‘silver loading’ is obtuse, but it gave them back some of what they lost.  And since 9 out of 10 of the 11 million who get coverage through the ACA get a tax subsidy, there is more than a little moving government money from the right pocket to the left at play here.

Still, in a year when the Democrats are going to run hard on healthcare, expect Republicans who are not running hard away from Trump to tout the headline that Team Trump is actually running Obamacare better than Obama. 

It will be interesting to see how this story plays.

Separation of Powers

There for a while, news of Obamacare related lawsuits and court decisions seemed to come in regular waves, providing a much appreciated stream of topics for your faithful blogger.  Things have slowed a bit, but we recently got another ruling from the bench that will be interesting to watch.

A provision of the ACA required insurers to limit how much low-income individuals had to pay for their exchange-based health insurance.  For people with incomes of 250% or less of the federal poverty level, the plans had to keep premiums, deductibles and co-insurance low and the Feds would make up the losses with subsidy payments back to the insurers.

This was a central feature in getting lower income Americans who did not qualify for Medicaid into a health plan.  Without this subsidy, insurers would have either had to set premiums so high that no one would enroll or they would take serious losses. 

But, there was a little problem.  Congress never appropriated the money to pay for these subsidy payments to the insurance carriers.  After 12 million meaningless votes in the House to repeal Obamacare, someone hit on the idea of suing the Administration over this violation of the Constitution, for only Congress can appropriate funds.

Wa-la, we have the perfect object lesson for high school civics class, a situation involving all three branches of government: Legislative is suing the Executive with the Judiciary making the call.  Kids, take notes, this will be on the test.

Historically, the courts have been reluctant to get in the middle of disputes between Congress and the Administration.  Can you blame them given how much those two fight with each other?  So most observers believed this suit would get tossed out.

Half of it did.  The House Republicans charged that the Administration could not delay the employer mandate for a year because that was changing the law, but the judge said that was within the normal range for interpretation.

But she found that the second part of the lawsuit, the claim that the President can’t spend money not appropriated by Congress, had constitutional merits.

This will be appealed, of course, and appeals being appeals, it could take some time. Let’s imagine for a second that Congress prevails.

The law would still require insurers the keep the cost sharing burden down for low income Americans.  Estimates are that would cost insurers $7 billion a year, now with no back door cash coming from Uncle Sam to make that up.  The already shaky exchange markets would get more volatile and unstable.

We’ve long argued that economic reality can only be suspended temporarily.  Granted, the government’s ability to print money can extend that suspension, but eventually, gravity wins. 

Stay tuned.

Proton Torpedoes

Which is the best order?

IV, V, VI, I, II, III, VII – as they were made? Or,

I, II, III, IV, V, VI, VII – according to the chronology?

Or do you just skip episode I all together because of that inane Jar-Jar thing?

Yes friends, as we head toward the December 18 debut of the latest installment in the Star Wars saga, this question must be asked.  People are online debating this, and yes, they also get to vote in elections.

For those of us who need to be reminded that Chewbacca, the walking shag carpet, is a Wookie; the things on the side of Leia’s head are hair and not Honey Bun cinnamon rolls; and that Harrison Ford was Hans before he was Indy, we might be a little out off by the hype and silliness. 

But even we must admit that the scene back in 1977 as Luke and the rebel fighters sped toward the Death Star, weaving their X-Wings down the trench was pretty cool.  Using the Force as Obi-Wan had trained him to do, Luke hit the one in a million shot, dropping two proton torpedoes into the tiny exhaust port, the only vulnerability of Vader’s planet-sized warship.  Boom! The crowd goes wild and George Lucas is consequently able to purchase a small island – New Zealand.

Let’s recast this using the Republican Congress and the Affordable Care Act as players, though any implied similarities between the Administration and evil Lord Vader are purely coincidental.

The House has voted to repeal ObamaCare more often than they sweep the place, all of which have been as effective as the little rebel bullets bouncing off the Death Star.  Multiple trips to the Supreme Court have been equally useless in their goal of thwarting the Empire (I am getting into the groove with this analogy).  But maybe they finally hit the exhaust port, at least a little bit.

Recall that one provision of the ACA was this thing call Risk Corridors, a program to mitigate losses the insurance companies might face during the initial years of offering plans on the exchanges.  See here, here and here for a refresher, but the short version is that if insurers paid out more in medical expenses than they planned, they would get a refund from the government.

For 2014, insurers collectively asked for $2.9 billion in risk corridor payments.  And the ACA clearly says they have a legal right to that money.  But Luke Boehner, Han McConnell and the Republican rebel forces snuck an explosive into the 2015 Omnibus Budget Bill  that says, ‘OK, we’ll pay your risk payments, but the government can only use the cash from refunds paid into the program by other insurance companies that made too much money from their exchange plans.’

Refunds paid in for 2014 were only $362 million, which means the government can only pay about 12.5 cents on the dollar for the $2.9 billion in claims.  The IOUs can be paid out of future year refunds, to the extent there are any.

We might not see a glorious explosion of the Death Star as the credits roll, but the failing co-ops have put this issue at the top of their list as to why they are not making it.  United Health has pulled back a lot from the exchange market and has intimated they may pull out entirely.  This issue may or may not be a contributing factor…yeah, right.

As we will be reminded in three weeks, the battle continues.



Shaving with Ockham

Billy, the English Friar, lived in Ockham in the late 13th and early 14th centuries, so it is hard to know whether or not he had a beard. But, boy, his razor is famous.

Ockham’s Razor, sometimes spelled Occam, is a well known problem solving principle. The ‘law of parsimony,’ it is called. While William of Ockham probably was not the first chap to conceive of this idea, he apparently used the argument frequently enough, and with cutting sarcasm, that it became called Occam’s Razor.

There have been adaptations, expansions and manipulations of this idea over the years, but if we go back to his original thought, we get a translation from the Latin of ‘plurality should not be posited without necessity.’

Stop your unnecessary plurality positing.

It was also expressed this way: ‘Entities are not to be multiplied beyond necessity.’

He clearly did not work in government, which gets us to today’s point.

I recently read a commentary, by some knucklehead who will remain nameless because he is a knucklehead and I am about to make fun of him, raising a warning about how the coming 2016 employer mandate that requires businesses with 50-100 employees provide health insurance for their workers threatens the financial status of said firms.

I agree with his premise that this ACA mandate poses what could be an onerous burden on small businesses, but it was his rationale as to why this is a threat that makes him a knucklehead. Prepare to weld the razor.

This author surmised that many small employers might decide to become self-funded insurers as a way to manage this mandated cost. They might, many large employers do.

But that could be dangerous because one or two really expensive claims could devastate a small self-insured employer. It could.

So they would buy stop-loss insurance to protect from that. Yes, they would.

But the stop-loss carrier would likely charge higher premiums and a higher deductible. Probably.

Worse, the carriers might drop them in year two if their stop-loss claims were too high. Maybe.

That would leave the vulnerable and in need of protection.

And here is where entities began to be multiplied beyond necessity.

He thinks Congress should amend the ACA to prevent this scenario. If not, then the states should do it. And for some reason, broker commissions should be changed by whoever dictates such things because somehow that might help. And the ACA exchanges should be modified in some way, the point of which was not entirely clear. And yes, government should ‘encourage’ small business owners to not self-fund.

William, there is no parsimony, no simple efficiency. Just multiplying governmental entities.

Though I don’t have it in Latin, here is an alternative:

How about we simply trust that a business owner who is smart enough to build an organization that employs at least 50 people can probably figure this out?

Or better, why don’t we just stop laying these government mandates on business of any size?

Unnecessary plurality positing, indeed.

More Kibble Commentary

I’ve got a few more thoughts on yesterday’s ‘the dogs don’t like the dog food’ bit. This is an allegory, so if you are offended by my comparing this policy to dog food, take some advice from Bill Murray in ‘Stripes.’ Lighten up Francis.

To be fair, dog food sales are not zero. The percentage of people under age of 65 who are uninsured has dropped from 17.5% five years ago to 10.7% now. That must mean that a lot of dogs like the dog food, right?

Well, the dogs eat the dog food if they can get it on a big, big sale. Almost all of the gains in getting people coverage have come through the expansion of Medicaid, where the individual’s portion of the premium ranges from very low to nothing.

But Mercer, the employee benefits folks, say that we’ve only seen a 1.6% increase in the number of people covered through their employer-provided insurance and that all of that gain is accounted for by growth in the workforce, not the ACA.

Can we tell the truth about the dog food here for a minute?

When Obamacare was passed, the mandate on employers to provide coverage was an absolutely critical part of the deal. Without it, this whole thing would have been exposed as one big fat new entitlement program. No amount of marketing could have sold that to the American people.

Well, the data shows the Medicaid expansion flavored food is selling, but the employer-provided flavor isn’t exactly flying off the shelves.

The ACA assumed that nearly every employee would take the employer-sponsored plan, but low wage workers aren’t biting. Low wage employees might not have a big pay check, but they can do math. In fact, because their paychecks are small, they are pretty good with checkbook math. They have to be.

ADP, the payroll processing company, found that it takes an employee making about $45,000 a year or more before almost all of them buy employer-provided insurance. That makes sense because when you run the numbers comparing the penalty for not having coverage against what most employees have to pay for their part of the premium and the deductible, you break-even only when you get to an annual salary of about $50,000.

Turns out your waitress or hotel housekeeper is better at math than our policy makers.

One final torture of the analogy before we close up for the week…

Part of the issue is that a lot of things got thrown into the dog food recipe. We mandated a laundry list of coverages, required guaranteed issue with no underwriting, outlawed denials for pre-existing conditions, and the like. That resulted in a bowl full of escalating premiums, higher deductibles and narrow networks.

The dogs don’t like it.