Obamacare Deception: Insurers (and maybe others) Need a Nice Letter from the FTC

Via Kevin Drum, Paul Waldman presents a truly epic post demonstrating that many insurers’ claims that rates are going up because of the Affordable Care Act are misleading and deceptive.  The press seems to have been duped into thinking that thousands of people are seeing their rates go up because insurers are telling them so.  But in fact, Waldman writes, many of the so-called Obamacare victims will actually benefit from the law.

What’s happening, according to Waldman, is a classic insurer bait-and-switch:

I want to talk about the thing that spawns some of these phony Obamacare victim stories: the letters that insurers are sending to people in the individual market….There’s something fishy going on here, not just from the reporters, but from the insurance companies. It’s time somebody did a detailed investigation of these letters to find out just what they’re telling their customers.

….If the woman I discussed from that NBC story is any indication, what the insurance company is offering is something much more expensive, even though they might have something cheaper available. They may be taking the opportunity to try to shunt people into higher-priced plans. It’s as though you get a letter from your car dealer saying, “That 2010 Toyota Corolla you’re leasing has been recalled. We can supply you with a Toyota Avalon for twice the price.” They’re not telling you that you can also get a 2013 Toyota Corolla for something like what you’re paying now.

I’m not sure that’s what’s happening, and it may be happening only with some insurers but not others. But with hundreds of thousands of these letters going out and frightening people into thinking they have no choice but to sign up for a much more expensive plan, it’s definitely something someone should look into. Like, say, giant news organizations with lots of money and resources.

If what Waldman says is true, that is indeed grotesque behavior, and one that the press should be investigating instead of getting their stories from the Republican National Committee.

But there is another thing.  It also violates century-old federal law.  The press isn’t the only institutioin that should be looking into this.

Section 5 of the Federal Trade Commission Act (15 USC 45) prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce.’’  This is not an obscure law; it has been enforced for decades, despite conservative objections and more recent attempts by deceptive businesses to have it declared unconstitutional.  Any insurer claiming that a consumer must purchase a more expensive policy than what it also offered, and certainly claiming that a consumer must do so because of the Affordable Care Act, is violating the Federal Trade Commission Act.  This is not a close call.

When an insurer tells a consumer that his or her rates are going up because of the Affordable Care Act, and that is not the cause of the increase, it violates federal law.  This is also not a close call, although there is some ambiguity if the insurer can show that it had a reasonable belief that the ACA was the cause.  Insurers, however, know very well why their prices are going up.  Any insurer who says, “Gosh, we raised prices but we really didn’t know why, but we thought it was the ACA,” is essentially admitting that it doesn’t know what it is doing.  These claims should be treated with skepticism.

The trickier question is what happens when someone’s employer claims to its workers that their contributions to their insurance are going up because of the ACA.  Suppose Hobby Lobby (assuming it provides coverage) writes a letter to its employees telling them that they have to pay more because of Evil Kenyan Marxist Islamist Obama.  It knows that this is nonsense: it just wants to make its employees hate Obama as much as it does.  There are two questions here.  First, is this communication “in” or does it “affect commerce.”  If employees could change or alter their health plans because of it, then I would say yes.  If it is simple right-wing agitprop, I’m not so sure.  Second, at some point deception turns into a First Amendment issue.  If you couldn’t deceive people, then that would shut down the entire Republican media strategy over health care.  This is one reason why the connection with commerce is so important.

In any event, the Federal Trade Commission might want to send a letter to insurers participating in the exchange.  We are watching you.  Do not deceive people about this law.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

60 thoughts on “Obamacare Deception: Insurers (and maybe others) Need a Nice Letter from the FTC”

  1. The letters can be coming from insurers not on the exchange too, as mine was. There were savings available over the quoted price just by going to the exchange, even before subsidies.

  2. JZ: “When an insurer tells a consumer that his or her rates are going up because of the Affordable Care Act, and that is not the cause of the increase, it violates federal law.” I hear that many of the policies being cancelled are rubbishy ones below the ACA minimum standards. Any policy that meets the minimum standards is more expensive. What’s deceptive about saying all this is due to ACA?

    1. I read Zasloff to say that the deceptive part wasn’t precisely what you state (the policy you currently have will no longer exist because of the ACA), but one of two different things:
      1) You can keep the policy you currently have, but the premiums will rise sharply because of the ACA (when the rise in premiums is not largely caused by the ACA).
      2) The policy you currently have will no longer exist, and to replace it we propose this other vastly more expensive policy (where the recommended, vastly more expensive policy provides a much higher grade of coverage than the previous policy, despite the company offering other policies much more closely comparable to the previous policy; this is the Toyota example in the blockquote).

      1. Yes. This can be quite straightforward deception — your policy rates are going up because we can, and we will blame the ACA. That is still eminently possible, and in fact has been happening. Remember, the ACA does not cap rates. But if Anthem wants to raise rates and then blame the ACA for it, it violates the FTC Act.

        1. Remember, the ACA does not cap rates.

          The ACA caps spending by the insurance company (including capital expenses, overhead, advertising, and – critically – employee salaries and I think stock dividends) at a fixed percentage (25%, I think?) of so-called “medical losses”, which is to say spending on healthcare. I believe that in practice this mechanism should cap premiums, at least relative to spending on healthcare.

          1. Not quite. The more you can get your customers to spend on healthcare (ideally, predictable and non-essential stuff that doesn’t really have to be insured), the more you get to keep. I.e., insurances become the middlemen for such services and get to pocket the markup.

            Collusion between healthcare providers and insurance companies may also offer room for additional profit. Higher costs = higher permitted profits.

            Cost controls are the actual limiting factor, especially where insurers have to compete within exchanges with other insurers. But what we’re seeing here takes place outside the exchanges.

  3. BTW, the letter from the FTC should be a NICE letter not a nice one. NICE – The National Institute for Clinical Excellence – is the body of flinty medical commissars charged in Britain with telling hospitals and GPs that various expensive treatments dreamed up by the pharma and medical device industries are a waste of money. Example.)

      1. Thanks. Amazingly, the NHS in all parts of GB not only approved Kalydeco but didn’t negotiate a price cut from the eye-boggling $294,000 a year per rare patient (4% of cystic fibrosis victims).

  4. Bullshit. The linked article doesn’t demonstrate that those insurers issuing cancellations (cancellations which are very much driven by the ACA’s regulations of what coverage terms are allowable) themselves offer lower priced alternatives than the ones that they steer their policyholders to as replacements for their existing coverage. The article points out that different plans, from different insurers, listed on the exchange websites (which, FWIW, have been demonstrated to sometimes display inaccurate quotes), sometimes offer lower rates.

    “Comparable” plan isn’t a black and white distinction. Every plan has a different slate of covered doctors, hospitals, clinics and medical procedures. If I have a plan that I am very happy with but that is non-ACA-compliant (perhaps because it excludes prenatal and maternity care and either my wife or I is infertile), and that plan offers excellent network coverage in my home town including coverage of my preferred’s physician’s practice, and then this plan is cancelled as a result of the ACA, then I am harmed even if I can get a nominally cheaper plan with worse network coverage and that doesn’t pay for services with my preferred physician’s practice.

    This post is an argument for criminalizing inconvenient facts. Reality Based Community indeed. It is not the responsibility of private entities to shield their poor little customers from ideas that might be harmful to Dear Leader’s political fortunes. If it pisses off a lot of voters that the ACA requires that many people be kicked off of plans that they have been happy with then perhaps the architects of the ACA should have tempered their enthusiasm for bundling a healthcare financing law with a bunch of regulations on what constitutes an “acceptable” level of coverage.

    1. If a plan is cancelled it is due to a deliberate decision by the insurance company, not the ACA. The insurance companies are choosing to end the plans and using the ACA as an excuse, as they could have chosen keep the plans grandfathered status but decided against it.

      1. Um, no.

        The insurance companies could most certainly NOT have kept plans that are not ACA-compliant if those plans didn’t meet the narrow and highly restrictive criteria for grandfather status laid out in the ACA. Plan terms and conditions change all of the time. For a policyholder to be eligible for grandfather status he/she would have to have had continuous coverage under a plan that existed prior to 2010. But insurance companies move customers from one plan to another all of the time in the normal course of business. And policy turnover rates in the individual insurance markets are very high as customers drop and add coverage and shop their coverage around to get a better deal.

        1. None of that changes the fact the insurance company could have kept the grandfathered status of a plan if they wanted to. They decided it was in their interest to cancel the policies instead of continuing them.

          1. No – they could not have done so if the plans in question didn’t meet the criteria for being grandfathered under the ACA – criteria which are relatively narrow. You do understand that the ACA makes some types of health insurance – previously popular with at least some segments of customers in the individual health insurance market – illegal to offer? And you do understand that while the ACA allows some such otherwise illegal plans to continue in operation if they meet certain criteria, that not all such plans do in fact meet the criteria and thus it is not legally permissible under the ACA to continue offering policyholders coverage under such plans, regardless of whether the insurance company “wants” to do so.

        2. I think it is true that there are some people who will lose their preferred plan as a result of those plans no longer being legal.

          It is also true that they could have lost those plans at any time in the future and would most likely have also faced large, probably unjustified rate increases, absent the ACA. It is also true that there are lots of unplanned pregnancies, even among people who think they can’t get pregnant. The individual market was always going to s*ck, and kind of still does, frankly. (I am no huge ACA fan either.) And remember, once you get sick, they could *always* just dump you, pre-ACA. Or, I’m sorry, just have a low lifetime limit, which is the same thing.

          So I do have some sympathy for those people. I also think the administration did not in fact adequately tell individual planholders that their costs were going to go up.

          But you should blame the right, not the left, for the ACA’s flaws. We *could* have had a decent healthcare system. We already pay more in taxes for healthcare than any other comparable country, and cover fewer people. Unless you are a libertarian, in which case, I still feel mildly sorry for you, in a temporary it-would-have-happened-to-you-someday sense, but, I wouldn’t bother to talk about it. Libbies are so tiring.

          1. You know, I used a bad example, I should not have said that people who think they’re infertile could still get pregnant, b/c though true technically, it is kind of a loaded subject.

            So I take that back, I am sorry I said that. Instead, I will posit, they could get cancer or something else that isn’t emotionally loaded.

            And I still say, single payer already.

        3. What are these “narrow and highly restrictive criteria for grandfather status” that ACA lays down? Could they be, perhaps, that the plan actually be the same plan, and not a different plan with the same name? Any provision for grandfathering has to be very tightly drawn, or it creates a loophole that will destroy the principle of the scheme to which it is an exception, in this case, universal and effective health insurance. Which is what Stephen wants.

          1. Well, for one example, if a plan changes its co-pay amount by even $5 it is no longer grandfatherable. If a plan had a $30 co-pay for office visits in 2010, and raises it to $35 in 2013 (about a 5% annualized inflation rate – less than the overall healthcare inflation rate in that period) then the ACA defines the plan as “materially different” and thus not eligible for grandfather status.

          2. If Republicans had been the least bit interested in fixing problems with ACA, an indexation amendment to the grandfather clauses would have been a wave-through. But I’m not really sympathetic. Killing off substandard insurance was quite properly part of the scheme.

          3. Blame whoever you’d like. The original post by Mr. Zasloff specifically accused multiple insurance companies of criminal behavior. My comments here have largely been focused on demonstrating that that accusation is simply not supported by the facts. Whether one blames this party or that party for the fact that the ACA significantly restricts which insurance plans can be grandfathered is of no importance to the discussion. The fact is, the law as written and as it stands (given regulations drafted by the Department of HHS subsequent to the passage of the law and under the authority granted to the Department in the law) does so restrict. And given that, the hypothesis that insurers could have easily chosen not to cancel large number of policyholders is further eroded.

    2. Stephen –

      Your silly “Dear Leader” crack does real harm to your cause. I’m not sure what you think it adds to your argument, but for this reader it smacks of glib unseriousness and tends to make me take whatever follows with that much more incredulity.

      I only mention this because in my experience it sure seems that folks on the Right think this is a rather clever turn of phrase, but honestly, it’s just chimerical – as well as being a thinly disguised insult. Given the venue, I am left wondering who is your intended audience and what exactly did you hope to accomplish by adding that to what are otherwise reasoned assertions? “Obama’s” or “the President’s” or even “the Democrats” would have worked perfectly well.

  5. The entire argument of this post is a surreal, desperate-sounding attempt to find a bogeyman – any bogeyman – to blame for the emerging disaster that is the ACA rollout. This is classic conspiracy theory behavior. But to those who find this line of thinking persuasive, ask yourself the following:

    1) It is highly likely that insurance companies, which operate in highly regulated markets that are currently undergoing the biggest regulatory shift in our lifetimes, run every substantive piece of communication to policyholders through their legal departments (I know that many companies in far less regulated industries do this as a matter of standard practice). If it is such a cut and dried case that such companies’ citing the ACA as a justification for dropping policies is a violation of the law, how in the world did a large number of insurance companies simultaneously fail to notice this fact? Don’t you think it’s just a bit odd that the in-house legal departments of virtually every firm in an industry would miss an “obvious” legal issue that a random excitable blogger (who is not an expert in insurance law) surfaced? Believe that the industry is evil if you;d like – but you’d better have a good reason for believing that everyone in the industry is stupid.

    2) If I run an insurance company and have a current policyholder on a health insurance plan purchased on the relatively unrestricted pre-ACA market, then presumably that policyholder is a “good risk” in my risk pool (otherwise, I probably would have denied him/her coverage). Given that I am about to receive an influx of new policyholders who are on average “worse risks” in my risk pool,* why on Earth would I possibly think its a good idea to kick existing policyholders out if I don’t have to? If indeed I can easily slot a $200 a month customer into a $205 a month plan, why would I be so crazy as to tell them that they must switch to a $400 a month plan, thereby almost certainly triggering a large number of them to shop around on the exchanges? I might be convinced that one or two small regional insurance companies would be so stupid, but I’m supposed to believe that the entire industry – an industry run by executives as tempermentally conservative as any in the economy – would simultaneously pursue an incredibly risky commercial strategy at the precise moment that regulatory changes exposed them to new and unknown risks? Keep in mind that under the ACA the spread between premiums and expenses is tightly regulated, so there really isn’t a massive upside in switching customers to dramatically more expensive plans – if they don;t “consume” more healthcare next year then I’ll just give the excess away in mandated rate reductions in the next rate reset cycle. Believe that the industry is evil if you;d like – but you’d better have a good reason for believing that everyone in the industry is stupid.

    *And I’m sure this will happen, because I’ve been assured by the IT Czar (appointed out of nowhere), who had been on the job and and studying the underlying issues for all of three days, that the federal exchange website will definitely be fixed by late November. I mean – how can you get much more certain than that!

    1. Assuming that insurance companies don’t have current plans they are losing money on or are less profitable is a fairly large mistake.

      1. I think we can be confident that they have existing plans which are less profitable than other existing plans, since the alternative is to believe that all of their plans somehow managed to be identically profitable. To believe that they had much in the way of existing plans which were actually unprofitable begs the question of why they weren’t going out of business from such manifest incompetence.

        Stephen has identified what is going on here: Having passed a law which made insurance much more expensive for a large segment of the population, you now want to order the insurance companies to not explain to their customers why their rates are going up. You want to order them to take the blame for your own legislation’s bad effects.

        I don’t see it working. As Stephen says, scarce a word passes from an insurance company to a customer without legal vetting. They’re on solid ground here.

        1. Is it possible that the purpose of the legal vetting is not to make sure nothing remotely deceptive is being said, but rather to make sure the letter contains enough weasel words to pass? We do not after all have the text of such a letter. Without that it’s hard to know exactly what it says.

          Does it matter at all to your theory that in the case Drum describes the claim of a massive required increase was just wrong? Does it even give either you (Brett) or you (Stephen) pause, or are your theories so good that facts don’t matter?

          1. The case that Mr. Drum describes proves no such thing. He describes a scenario in which a given insurer issued a letter to a policyholder stating that their current plan (which the policyholder was presumably happy with) would be cancelled because it was not ACA-compliant (and no evidence is provided that this is not the case). The insurer then offers up an alternative plan that is significantly higher priced. Mr. Drum’s correspondent then goes onto one of the ACA exchange websites (which again – have been shown in some instances to provide incorrect – and specifically incorrectly low – price quotes, but that’s neither here nor there) and find several alternate plans from different insurers that are ACA-compliant and that are priced much lower than the alternate plan offered up by the original insurer.

            But this does not in any way demonstrate that the claim of a massive required increase is wrong. The plans available on the exchange are with different insurers. Each insurer in the market has a different network of covered facilities and physicians, and (within the lattitude allowed by the law), a different set of covered conditions and procedures. It is entirely possible that the lower-priced options available through the exchanges have inferior networks of coverage, or are generally more difficult to deal with for the policyholder. Mr. Drum’s correspondent seems to think that “Health Insurance” is a commoditized thing – an article of nature – and that therefore any two plans are directly comparable, differing only in price. But “Health Insurance” is a category label that we give for convenience to an extremely wide range of products that differ tremendously in their real-world value proposition.

          2. It is entirely possible that the lower-priced options available through the exchanges have inferior networks of coverage, or are generally more difficult to deal with for the policyholder.

            It’s also entirely possible that this is not so.

          3. Of course that’s absolutely true. But I didn’t accuse a large number of people working across a wide range of companies of lying and breaking the law. Mr. Zasloff did (despite also not having access to any of the detailed information on this topic). I simply pointed out that there was a highly plausible explanation for the observed behavior that did not involve anyone lying or breaking the law. The burden of proof is generally on the prosecution, or so I’m told.

    2. If indeed I can easily slot a $200 a month customer into a $205 a month plan, why would I be so crazy as to tell them that they must switch to a $400 a month plan, thereby almost certainly triggering a large number of them to shop around on the exchanges?

      Because you think that enough of them will go with the $400 plan to make it worthwhile. If the policyholders claims are $100/mo then the $200 plan gets you $100/mo profit. The $400 plan will triple that profit, so as long as you lose less than 2/3 of those customers. Yes, you might lose some of th ebetter ones, but at the same time you’ve reduced your administrative costs by virtue of having fewer policyholders, claims, etc. In other words, you might do it because you decide it makes sense, given the numbers, which we of course don’t have.

      1. But insurance doesn’t work like that – it’s a highly regulated market in which the pricing of policies is not allowed to depart from the loss ratio (basically the cost) of those policies by more than a certain amount.

        And even that leaves aside the fact that under the ACA an insurer is required to treat all customers as part of the same risk pool (regardless of whether they are on plans inside or outside of the exchange system). By reducing the number of “good risk” customers (which on a relative basis, just about anyone who obtained insurance before the ACA was passed would be – in comparison to the average customer getting insurance after the ACA is in effect) I de-stabilize my risk pool at the precise moment that I expect to get a flood of new customers whose effect on the risk pool is unknown but likely to be unfavorable.

        Again – it requires a massive leap of faith and lapse in logic to assume that a large number of insurance companies, acting independently, would simultaneously choose to pursue a strategy that was highly risky during a period of heightened uncertainty in the underlying market. Have you ever met the kinds of people who rise to senior executive positions in insurance companies? They ain’t exactly daredevils. Compared to the other possibility – that in fact ACA regulations require insurers to drop non-conforming plans and that a large number of plans in the individual insurance market are both non-conforming and ineligible for “grandfather” status under the law’s relatively narrow criteria for such – the hypothesis that more or less an entire industry woke up one morning and decided to risk the future financial viability of their enterprises and to flirt with violation of the law doesn;t seem especially “Reality Based.”

        1. Utter codswallop.

          it’s a highly regulated market in which the pricing of policies is not allowed to depart from the loss ratio (basically the cost) of those policies by more than a certain amount.

          You know where this comes from, right? The ACA. o to pretend it’s just a fact of life is disingenuous at best. Also: if we assume the costs of administering and advertising a plan are essentially fixed per patient, and we have two plans one costing twice as much as the other, then look at the result: the more expensive plan is more than twice as profitable as the first. Take Byomtov’s numbers, $200/month and $400/month. Say 80% “medical loss ratio”, the ACA-fixed amount: so, $40/month and $80/month available from each plan respectively to defray expenses (administering and advertising the plans) and provide profit. Let’s say the administration-and-advertising cost is $20/month; now, the first plan nets $20/month in profits, and the second plan nets $60/month – triple the profits, precisely as in byomtov’s numbers (if admittedly 5x lower in each case than byomtov’s – but the comparison he makes holds, and his logic remains sound).

          As to the rest of your stream of claims: it ignores (1) the Mandate; and (2) Massachusetts, a state of 6.5 million people including as it happens byomtov. You act as if the ACA is some airy-fairy liberal dream; in fact, it’s a deeply compromised 1990s Heritage Foundation proposal enacted a decade ago in Massachusetts by a Republican you might dimly remember having heard of. It’s not dissimilar to the regulated insurance markets of Germany and Switzerland. You insist it’s not “Reality Based” – but Massachusetts is real! I’ve been there and everthing!

          1. Health insurance rates were indeed regulated before the ACA, and rates are regulated today in almost every category of insurance apart from health insurance (life, home, auto, P&C, etc.). Indeed, actuaries spend as much of their time preparing supporting evidence for regulatory filings on proposed rate changes as they do determining analytically what those rate changes should be, and the sequence of exams that actuaries must pass to be fully professionally certified cover as much insurance law as they do statistical technique. The ACA changes the regulation of health insurance rates, but the idea that an insurer could consistently charge rates grossly out line with loss ratios in the pre-ACA environment is simply wrong.

            But leaving that fact aside – so what? With the ACA in place it is difficult if not impossible for an insurer to book extraordinary profits by raising rates to levels out of sync with claims. And the example (via Byomtov) that you cite is only compelling if administrative expenses don’t scale at all as medical expenses scale. But in the aggregate the only plausible reason why – at a population level – medical expenses would go up rapidly (i.e. within the 12 month rating cycle window mandated under the ACA) is if the volume of services consumed goes up, and if that happens there is much more for an insurer to administrate.

            Yes – I’m well aware that a program that shares many of the same features as the ACA has been in place in Mass. for some time. But are you aware that, at the time of the implementation of said program, Mass. had the lowest % of uninsured citizens of any US state? That the Mass. population was significantly better educated and higher income than the US population as a whole? That the Mass. population was significantly healthier than the US population as a whole? That the original targets set out under the program for reducing the number of uninsured citizens in the state were never met, despite a mandate penalty much higher than that in the ACA and a subsidy schedule much more generous than that in the ACA? That young, healthy males in Mass. were so much less likely to sign up for coverage than predicted that most participating insurers had to dramatically increase rates in the years after the program was put in place (and indeed that insurance rates in Mass. have been rising faster than the national average)? That the cost to the state of the program have over-run budget projections by a significant amount?

          2. You are ignoring Warren’s point. Even at the same loss ratio, the $400 policy is more profitable than the $200 policy. Hence the company can stand to lose some customers when it tries to get them to the more expensive plan.

          3. The interesting thing about Stephen’s posts is that he simply cannot believe that insurers would ever rip people off, take them to the cleaners, mislead them, tell about great products that they would purchase and then would be cancelled, etc. etc. He just can’t believe it. It’s an interesting insight into the Republican mind.

          4. bymotov: I’m not ignoring Warren’s point. I pointed out that if a medical losses in a plan grew, that the most likely explanation would be that the volume of services consumed would grow (possibly not true at an individual level, but almost certainly true at a population level). As the volume of consumed services grows, non-medical costs grow too (more procedures means more claims to process, etc.). Warren’s example assumes that as medical losses grow administrative costs stay flat. This assumption is almost certainly wrong.

            Jonathan: A) I’m not a Republican. B) I’m perfectly capable of believing that in some circumstances insurance companies would “rip people off.” But I’ve pointed out that the specific scenario of ripping-off being proposed here is highly implausible, and that a far more plausible explanation exists for the behavior being observed. The proposed scenario is implausible in the instance of a single insurance company (not because the insurance company is run by angels, but because the actual incentives facing the company would not drive them to cancel grandfatherable customers carelessly. But in the case of multiple insurance companies acting independently and simultaneously the proposed scenario is almost laughably implausible. It may be a comforting conspiracy theory to folks who are troubled by the run of bad news coming out these days about the implementation of the ACA, but just because it makes you feel better to contemplate that a bogeyman is behind some phenomenon that troubles you doesn;t make it so.

          5. Jonathan: A) I’m not a Republican

            No-one ever is.

            Honestly, I’m just sick of this game at this point. The “Conservatives”, “Libertarians”, and whatever labels they lie to themselves about to console themselves over who they’ve stumped for, funded, and voted for are Republicans. They just are. Their claim not to be Republicans – and at least half of the people in the most fervent core of the Republican party, the sort of people who only ever vote for Republicans and woulk walk through fire to do so, insist they’re not “Republicans”. It’s tiresome, and frankly I no longer care whether it’s themselves or me that they’re lying to.

    3. “IT Czar (appointed out of nowhere)..”
      Jeffrey Zientz has twice been acting Director of the OMB. His CV shows him to be a very experienced public manager, un grand commis de l’Etat as the French say. He was clearly appointed because Obama and Sebelius judged that the problem with the website was basically one of poor management and supervision of the contractors, not their lack of IT skills. At the same time, a general coordinating contractor (QSSI) was hired to provide the specifically IT management skills – previously integration had been handled in-house. These decisions may turn out to be wrong, but they are not obviously stupid. What was the alternative? Google has better programmers, but they don’t know the health insurance business or how to work in a public-sector environment.

      Zientz has made a good start by only promising that the website will be running “smoothly” by the end of November. Lowering expectations externally is the right thing to do; realistic targets boost morale and get rid of destructive panic internally. Many reports indicate the website is steadily improving. My bet is that Zientz will keep his promise.

      1. I didn’t mean to imply that Mr. Zientz wasn’t a capable and intelligent man, nor that he doesn’t have an impressive track record of successfully managing things. I did mean to suggest however that given the enormous complexity of the federal exchange wesbite (the total number of lines of code is staggering), the number of outside contractors involved, the number of distinct legacy government and non-government systems that have to be successfully integrated for the exchange to work, the number of already obvious front end and back end issues that have surfaced (and the nature of complex systems is of course such that until the known problems are fixed you can never really be sure that there aren’t additional unknown problems to be fixed as well), and the fact that this has been a poorly managed process to date (which suggests that the paper trail is probably not stellar), that for anyone to suggest, 3 days into the job, that they have high confidence of a fix by a specific point in time just a few weeks out is madness. For all I know nobody in the world is more capable of delivering a good outcome here than Mr. Zientz. For all I know its possible that everything will be running sufficiently well by the end of November (though I’m highly skeptical). But it strains credibility to the breaking point to suggest that someone brought in from the outside can, after 3 days, understand a situation of this complexity sufficiently well to make near-in projections of when it will be fixed.

        1. Zientz took a week not three days, and he did not work alone. From a post on the website’s progress pages (I’ve not found an independent tracking site):

          Jeff worked over the last week with a team of expert engineers and technology managers from leading technology companies around the country to assess the overall state of the HealthCare.gov site.

          Ground zero was not a website that didn’t work at all, but one where it was very difficult to get through all the process and very few users managed it. That’s a huge difference; the basic design has to be OK. To get a flavour of what they are doing – I’m not competent to evaluate it as more than “energetic” – here’s part of Tuesday’s update:

          We can now process nearly 17,000 account registrants per hour – or five per second – with an error rate near zero.
          – We replaced the virtual database with a high-capacity physical one, which allowed more efficient, effective processing and significantly reduced the error rates, or account registration failures;
          – We added capacity by doubling the number of servers ….

          Does that sound to you like an organization flailing around with no sense of direction or confidence in its ability to meet its goals?

          1. Um, he was appointed on October 22, and made his announcement that the federal exchange website would be fixed by the end of November on October 25. But in any event, that’s a very minor point.

            The press release factoids that you reference sound like good progress against fixing the problems with account registration – one of the simplest of the front-end processes. They don’t address progress against identity verification, subsidy calculation or price quote generation, all much more complicated front end processes that will probably be more difficult to fix. And of course there is no reference to any progress on addressing the numerous problems with the various back-end processes (i.e. connectivity and transaction execution with multiple insurers, each operating on different systems), which are even more complicated still.

            Look, I’m sure that everyone involved is very smart and is working very hard. And I’m sure that most days end with a working system a bit closer to completion than it was at the beginning of the day. But the complexity of what is being undertaken is enormous, the number of known problems very large, the number of unknown problems by definition unknown and the number of relevant parties (multiple outside contractors, multiple government agencies and multiple outside insurers) vast. Major IT projects that involve connecting multiple legacy systems are notorious for running behind schedule and over budget, and the rollout of healthcare.gov is so far beyond the complexity of even the most daunting private sector IT projects that to suggest that it can be righted significantly faster than it typically takes to get such projects back on track after a significant implementation screw-up is wishful thinking of the very most magical variety. Most large corporations won;t press the go button on a systems overhaul without weeks, if not months, of testing. The administration is suggesting that it can fix a system and have it in field and functioning in just a few weeks.

          2. Tuesday’s update was explicitly limited to the registration issues. What evidence do you have that the healthgov teams are not addressing the other ones you mention, and making progress there too? I repeat, they are not starting with a fundamentally broken system, but a badly working one. So all the problems are identifiable. Zientz was advised by people who know a lot more about this sort of thing than you (or a fortiori I) do.

  6. Meh. I’m sure they can get away with it. I find it hard to believe what’s going on violates any law or even regulation.

    The response should be: hey, check out your exchange. Of course, this is hampered by the fact that states who refused to set up their exchanges, leaving it to the Feds, don’t really have functioning exchanges right now because of the Federal IT mess. Which means the response “hey, check our your exchange” isn’t problematic in a lot of cases (in states where things work, this should be effective).

    My reaction to the politics of this is: calm down. This will get sorted out. The Right will get some mileage from all this. They were going to no matter what (no matter how well-designed and implemented the law was, there was always going to be at least a few who were losers not winners under the law, and I always expected they’d gin up some more. It’s what they do.), and the federal website clusterf*ck handed them a golden opportunity to make extra hay. In fact, it would have been worse had they not engaged in their ridiculous shutdown/debt ceiling hostage drama. However, once the problems get fixed, the good will outweigh the bad and all the screaming and yelling will fall on increasingly deaf ears.

  7. I think it says something about our current state of affairs that lying to customers (or even telling-an-untruth-that-you-might-possibly-not-be-sure-is-an-untruth) is considered the unsurprising way for large companies to do business. And the same people who brush that off will lament the decay of our national morals.

  8. I doubt that the FTC has jurisdiction of insurers. McCarran-Ferguson. This is probably a matter for state regulators.

    1. That’s not my reading of McCarran-Ferguson. My understanding of it is that it says that federal ANTITRUST law doesn’t apply to insurers. It doesn’t say that NO federal law applies to them.

      1. I don’t defend these letters in any way– it sure looks like the insurance companies are acting in a slimy fashion– but I don’t think you can just declare that they are in violation of a 100 year old vague statute without looking at the caselaw and administrative interpretations of the statute. Does this sort of thing fall within caselaw definitions of false and misleading? I don’t know.

  9. All I see here are yet more reasons why we’d all be better off if we treated healthcare as a right, instead of a government-assisted marketing opportunity for profit-seekers.

    ACA is nothing more than corporate capture of state authority to sell insurance. Healthcare is tangential to its real purpose, which is to subsidize insurance companies.

    What we need? One nation – one healthcare plan. You get medical care as needed. Cut out the vast army of corporate paper-shufflers and we can afford all the healthcare anyone would require, given costs here are more than twice elsewhere, with far lower percentage covered even with ACA in place and up to speed — whatever year that will be.

    1. Yes.

      Now what I’d like to see from all you smartypantses on here is this — how do we get from here to there?

      And why didn’t “they” just stick all the individuals into a new “group,” and get them optional group coverage? Why is there still an individual market at all? It seems quite stupid to me.

      1. What is your conception of the individual policy? Do you think a policy is constructed for each individual from the ground up? Of course individual policyholders are part of a “group” – the “group” of policyholders. They can’t buy into a group policy analogous to an employer-provided plan because they are different. Already there is artificial flattening of the range of premiums paid (so young people are paying more, and older people less, etcetera) – an actual “group” plan would have everyone paying equally. There are arguments to be had about that, but they involve a lot of shouting and there’s a reason a middle ground was sought in the ACA. An employer can handle paying the same price for everyone because the employer doesn’t care whether same number on the check it writes is the sum of identical or dissimilar individual premiums – and the copay the employer asks for typically isn’t different by age, gender, and other factors affecting likely healthcare cost.

        I’m all for single-payer, or single-provider (though how we’d get there from here quite escapes me, even if a tiny fraction of the political will existed). But it’s possible to understand what the ACA is rather than just denouncing capitalism, dude.

        1. Just fyi, I’m not a dude.

          I understand what you’re saying about why employers may or may not care about paying a flat rate for employees. What I was asking is, why didn’t the government just put all the individual people into a group, as if they were workers at a company. I’m not sure why this seems like a dumb question to you. Surely such a group would have been able to get a better rate than what’s on the exchanges.

          Or even if not, people would probably feel better about the whole thing, because at least you’d have the illusion that you weren’t just all on your own anymore. It just seems very odd to me that we are making everyone get insurance, but not allowing them to have the option to coalesce themselves into a group. For instance, say everyone who picks a Silver plan, or whatever, could call themselves a group. Why wouldn’t that be more attractive to an insurer? (Well, unless it just added another layer of b.s., that is. Which maybe it would.)

          I could be wrong, of course, but my impression was that insurers did in fact make policies for each individual person — essentially, they would make you give a bunch of info, and then they’d charge you a nice huge markup on whatever their actuaries told them to expect. And they put all these individual plans into a separate pool from their big employer groups. Well, I thought that was the problem we were trying to get away from! That they were robbing individuals and providing cr*p plans. And generally jerking people around.

          Anyway, maybe I already know why this didn’t happen — it was Congress. I just thought someone here might have something new to say about it. In fact I’m not sure it would even matter to the premiums. There’s just something about all this that really bothers me.

          1. No. The bulk-purchasing savings, to the extent they exist, are indeed already realized by purchasing through the exchanges; this is indeed the very purpose of the exchanges. “Group Insurance” has a specific meaning, which I attempted to convey. A critical part of that is people paying the same flat rate, and contrary to your assertions the flattening already imposed by the ACA is hugely controversial; people would not welcome complete flattening, certainly not with anything approaching unanimity. And I certainly can’t help with your unformed sense of dread.

            As to “calling you a dude”; that was me (unkindly, I suppose) responding to the tone of your comment, its content-free anti-capitalist message – not an imputation of gender.

          2. We seem to be talking past each other. It sounds like I thought you were talking about the individual market, not the group market. I used to be in the individual market and am *very familiar* with how it works, thank you very much.

            Not sure what makes you think I’m anti-capitalist, but I think we can just let this little thread go now. Have a nice day!

  10. prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce.’’

    LOL. Looks like Obama is going to jail then.

    Seriously, did you think that insurers, many of whom are non-profit (Blue Cross/Blue Shield, Kaiser Permanente) are actually able to extend coverage to the sickest people, and expand the package of coverage for all, without raising premiums? If you did, I’ve got a bridge…

    1. Kaiser is not-for-profit.

      Blue Cross-Blue Shield used to be not-for-profit. Now most (not all) BC/BS entities are for-profit.

  11. A few comments on the above dialogue. Stephen, you are way too sensible to be wasting time on this blogsite (I have long since removed it from my favorites). Mr. Zasloff’s silly post was a perfect example of why I did. All the other progressive apologist who post comments are equally sufficient cause. Mr. Young, you are quite correct in your humorous observation and in a fair and just world, Mr. Obama would reap the harsh punishment he deserves, but such world does not exist in our experience.

    As for the site proprietor, Mr Kleiman, it should now be perfectly obvious to those few readers you have who aren’t brainwashed who the real liar was in the 2012 campaign (and in the 2008 campaign for that matter). As the WSJ editorialized yesterday, his promise that you could keep your coverage if you like it was well known by him to be false when he and his supporters first floated it. In fact their own estimates were that 7 million Americans would have to give up their plans, an estimate that is clearly on the low side as it turns out.

    Finally to NCG, it is a pleasure to meet a lefty with integrity. It was always the game plan that the ACA would fail and would be replaced by single payer, so I am gratified to see you say it. However, if it fails too quickly it will simply be dismantled and we will go back to what we had. That is the dilemma for the left. Their really big problem will be that as a result of this experience, no politician will want the liberal label attached (it will resume its status as the dreaded “L Word). And forget about “progressive,” which will enjoy roughly the same status as “communist” or even “terrorist.”

    1. Umm, nice try, redwave! I never said that. Also, I am quite obscure (and happy that way!!!) and in no way privy to any conspiracies. Plus, as you probably knew, other libbies like myself have been *quite open* about our desire for single payer. It’s not a secret. I also think it could be voluntary, and that pretty much everyone would join it, but that’s for another day.

      I was just asking, how do we get there *now,* given that the blue dog Dems and the GOP dragged us down this byway. So, right back at you, sport, if you’re going to talk about what kind of people are to blame.

      I do not agree that the ACA was put in with any bad intent whatsoever, on the part of the prez or any of his people. I’m not saying they are saints, but, come on. They were just trying to get people some healthcare. That it is proving complcated in the short term is a) the fault of the right, and b) totally predictable.

      So, I almost think you are a double agent, trying to get Mark some sympathy. (Like Ted Cruz, with the ACA?) Good on you.

      However, I do still retain sympathy for the people whose applecarts are getting turned over by this thing in the short term. It sucks. It’s also true that this would have happened to them in the next few years, if you know anything about medical cost inflation. Rock and hard place.

  12. My sister just went to her company’s benefits fair (she is a nurse). She says that she asked (thinking of her partner) which Exchange plans corresponded to the ones offered to her at work. The answer was uniformly, “None of them.”

    One company, Medica, told her that they intentionally made the Obamacare plans unattractive to limit the applicant pool.

    1. Even assuming both those things are true, as an overall group, people in the individual health care market are still better off after Obamacare. It’s not even a close contest.

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