Hospitals See Rise in Debt Under Obamacare

[Dos Equis]

Another reason why this is a bad law.

Hospitals See Rise in Debt Under Obamacare

Image: Hospitals See Rise in Debt Under Obamacare
Tuesday, 23 Feb 2016

A type of pain that hospitals thought they had relieved has come back with a vengeance: it’s called bad debt.

Hospitals have long struggled to collect bills when patients aren’t covered by insurance -- creating delinquent accounts. The Affordable Care Act was supposed to relieve some of that strain by helping pay for coverage for millions of Americans and expanding Medicaid in some states to cover the poor.

Yet while millions of people have gained coverage since Obamacare became law in 2010, there’s also been an increase in insurance that comes with high deductibles and cost-sharing. Under those plans, the first few thousand dollars of annual medical expenses come out of patients’ wallets. That’s money that hospitals like Childress Regional Medical Center in the Texas Panhandle region are unlikely to collect.

“It feels like a sucker punch,” said John Henderson, the nonprofit hospital’s chief executive. “When someone has a really high deductible, effectively they’re still uninsured, and most people in Childress don’t have $5,000 lying around to pay their bills.”

The rate of uninsurance in the U.S. has fallen to 9.1 percent from 15.7 percent in 2009. Yet in the first nine months of 2015, about 36 percent of the U.S. insured were covered by high-deductible or consumer-directed health plans that can require considerable out-of-pocket payments, compared with about 25 percent in 2010, according to a CDC survey.

For-Profit Hospitals

Hospitals are feeling the pressure from those patients. Community Health Systems Inc. operates 195 hospitals in 29 states and is the U.S.’s second-biggest for-profit U.S. hospital chain. This month, it revised its fourth-quarter 2015 provision for bad debt up by $169 million -- and said that 40 percent, or about $68 million of that amount, was from patients being unable to pay deductibles and co-payments. Patient bankruptcies also contributed, the company said. A Community Health spokeswoman didn’t respond to requests for comment.

“I’m surprised it’s not bigger,” Sheryl Skolnick, an analyst with Mizuho Securities USA who rates the stock underperform, said of Community’s bad-debt figure. “They need to fill the beds and collect the cash.”

HCA Holdings Inc., the biggest U.S. hospital company, also reported increasing rates of bad debt in the second and third quarters of 2015, although the chain attributed the trend to dropped insurance coverage, rather than unpaid bills from insured patients. Another major chain, Tenet Healthcare Corp., reported fourth-quarter results Monday. Stocks of all three companies have struggled in the last year.

While higher out-of-pocket charges can lower what insurance costs up front, it means more costs for patients on the back end. Under individual Obamacare mid-level “silver” plans, the annual deductible was $2,556, and under less expensive, low- level “bronze” plans it was $5,328 in 2015, according to the Kaiser Family Foundation.

Outside of Obamacare, deductibles are becoming more common, as well. Last year, 81 percent of coverage people got through work came with a deductible, up from 70 percent in 2010, according to Kaiser. The average deductible in a high- deductible, individual plan gained through work was $2,099 last year.

Financial Threshold

Patients are unlikely to pay medical bills that are greater than 5 percent of household income, according to the Advisory Board, a consulting firm to hospitals. Median household income in the U.S. is at about $53,000, suggesting that when out-of- pocket charges exceed $2,600 hospitals can forget about collecting, said Spencer Perlman, an analyst with Height Securities in Washington.

“It’s a major issue,” said Chip Kahn, president of the Federation of American Hospitals, an industry group of for- profit chains. Patients expect to get care when they show up at the emergency room -- and they do -- yet consumers still need education in how to control their medical costs, Kahn said. Member companies have discussed solutions, including pushing for insurers to collect the payments, he said.

Focusing on deductibles alone gives a misleading picture of patients’ total out-of-pocket costs, and the share of health spending that consumers paid out-of-pocket reached its lowest level on record in 2014 at 10.9 percent, the U.S. Health and Human Services Department said in an e-mail. The agency is working on the issue and trying to educate consumers about how much to expect to pay for plans that provide needed services, the agency said.

Acquisition Risk

Community Health’s unpaid bills from patients may add to burdens the company has taken on to do deals, especially following its acquisition of Health Management Associates Inc. for about $3.9 billion in 2014, Mizuho’s Skolnick said.

Community’s net-debt-to-Ebitda ratio, a measure of how much the company owes from corporate borrowings compared to its cash flow, was 6.7 in the fourth quarter, more than three times the ratio on the Standard & Poor’s 500 Index, or 2.1. Ebitda stands for earnings before interest, taxes, depreciation and amortization.

Rural hospitals have been hit particularly hard. Minnesota has long had high rates of care coverage, and many employers have switched to high deductible offerings, according to Joe Schindler, vice president of finance for the Minnesota Hospital Association. Last year, bad debt rose by 20 percent to $425 million at the association’s 140 member hospitals.

“We have 39 hospitals that have negative margins and the majority of them are rural,” he said in a telephone interview. “They have less of a financial cushion to absorb the losses of bad debt.”

http://www.newsmax.com/Newsfront/hospitals-bad-debt-obamacare/2016/02/23/id/715734/#ixzz411QSHMIO

[Dos Equis]

Insurers warn losses from ObamaCare are unsustainable
By Peter Sullivan - 04/15/16

Insurers warn losses from ObamaCare are unsustainable
Inform

Health insurance companies are amplifying their warnings about the financial sustainability of the ObamaCare marketplaces as they seek approval for premium increases next year.

Insurers say they are losing money on their ObamaCare plans at a rapid rate, and some have begun to talk about dropping out of the marketplaces altogether.

“Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.”
While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.”

In the short term, there is a growing likelihood that insurers will push for substantial premium increases, creating a political problem for Democrats in an election year.

Insurers have been pounding the drum about problems with ObamaCare pricing.

The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers.

And a report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states.

“We continue to have serious concerns about the sustainability of the public exchanges,” Mark Bertolini, the CEO of Aetna, said in February.

The Aetna CEO noted concerns about the “risk pool,” which refers to the balance of healthy and sick enrollees in a plan. The makeup of the ObamaCare risk pools has been sicker and costlier than insurers hoped.

The clearest remedy for the losses is for insurers to raise premiums, perhaps by large amounts — something Republicans have long warned would happen under the healthcare law, known as the Affordable Care Act (ACA).

“The industry is clearly setting the stage for bigger premium increases in 2017,” said Levitt of the Kaiser Family Foundation.

Insurers will begin filing their proposed premium increases for 2017 soon. State regulators will review those proposals and then can either accept or reject them.

Michael Taggart, a consultant with S&P Dow Jones Indices, pointed to data from his firm showing per capita costs for insurers are spiking in the ObamaCare marketplaces. 

“We made a significant change in the rules with the ACA, and we're still working through the process to see how that market stabilizes,” Taggart said at a panel on Wednesday. “Is [a death spiral] a possibility? Sure it's a possibility. I wouldn't attempt to put a probability on it, because I think there are a lot of things going on.”

One factor helping to prevent a death spiral is ObamaCare's tax credits, which cushion the impact of premium increases on consumers.

“What we're likely to see is more of a market correction than any kind of death spiral,” Levitt said. “There are enough people enrolled at this point that the market is sustainable. The premiums were just too low.” 

Dr. Mandy Cohen, the chief operating officer of the Centers for Medicare and Medicaid Services (CMS), said in an interview that there is “absolutely not” a risk of a death spiral or collapse in the ObamaCare marketplaces.

While acknowledging that “companies are needing to adjust” to the new system, she pointed to the 12.7 million people who signed up this year, 5 million of whom were new customers, as a sign of success.

“What brings us the most confidence about the long term stability and health of the marketplace is its growth,” Cohen said.

Another risk, should regulators reject large premium increases, is that insurers could simply decide to cut their losses and drop off the exchanges altogether. 

“Given that most carriers have experienced losses in the exchanges, often large losses, it only makes sense that most exchange insurers will request significant rate increases for 2017,” said Michael Adelberg, a former CMS official under President Obama and now a consultant at FaegreBD.

“Market exits are not out of the question if an insurer is looking at consecutive years of losses and regulators are unable to approve rates that get the insurer to break-even.”

The most prominent insurer eyeing the exits is UnitedHealth, which made waves in November by saying it was considering whether to leave ObamaCare in 2017 because of financial losses. The company last week announced that it is dropping its ObamaCare plans in Arkansas and Georgia, and more states could follow. 

The Department of Health and Human Services argues that the attention on UnitedHealth is overblown, given that the insurer is actually a fairly small player in the marketplaces. 

It’s more important to watch what happens with Blue Cross Blue Shield plans, which are the backbone of the ObamaCare marketplaces.

There have been some rumblings of discontent from Blue Cross plans. The plan in New Mexico already dropped off the marketplace there last year after it lost money and state regulators rejected a proposed 51.6 percent premium increase. Now, Blue Cross Blue Shield of North Carolina says that it might drop out of the marketplace because of its losses.

Blue Cross of North Carolina CEO Brad Wilson said in an interview that the company had lost $400 million due to its ObamaCare business. 

“We're not alone, and I think that that also is evidence to suggest that there are systemic and fundamental challenges that we all need to have a civilized conversation about,” Wilson said.

He said a key factor in the decision on whether to stay in the market next year will be whether regulators approve whatever premium increase the company ends up proposing so as to try to make up for its losses.

Asked about the risk of a death spiral, Wilson said he is not worried about that happening “tomorrow,” but has concerns if the situation does not change over time.

“There’s not going to be something magical happen that will cause this to turn around,” Wilson said. He is pressing for changes like further tightening up extra sign up periods that insurers say people use to game the system and repealing the Health Insurance Tax, which could help lower premiums.

Cohen of the CMS said that her agency is in close touch with insurers and Blue Cross Blue Shield of North Carolina in particular. But she pushed back on talk of Blue Cross of North Carolina dropping out of the marketplace, stating flatly, “I have no concerns about them leaving the market.”

She referred to problems the company has had with its computer systems that have led to some people being enrolled in the wrong plan, along with other issues that have added to the company’s administrative costs.

“I know that they have struggled with some of their internal operations … but that is not related to anything to the health of the market itself or the risk pool,” Cohen said.

Overall, while the system set up by ObamaCare itself might be resilient, premium increases are sure to fuel Republican arguments that the law simply isn’t working.

“There's more political risk here than anything else,” Levitt said.

http://thehill.com/policy/healthcare/276366-insurers-warn-losses-from-obamacare-are-unsustainable

[GigantorX]

Could it be that the point of this disaster of a bill was to have to fail so spectacularly that the systems collapses?

Conspiracy theory?

I think not!

[SOMEPARTS]

This trainwreck was always intended to usher in single payer.

[tonymctones]

Could it be that the point of this disaster of a bill was to have to fail so spectacularly that the systems collapses?

Conspiracy theory?

I think not!

This trainwreck was always intended to usher in single payer.

Correct and correct, they pushed a crap bill through knowing it would force hands.

This is the first part of the admin doctrine, we've all heard of "never let a crisis go to waste"...this is create the crisis and then use it...

[SOMEPARTS]

I have a friend who has an entire family of doctors in it....all are MSNBC leftist re-broadcasters....how do they look this monster straight in the eye everyday and still not see it?

It's going to be like watching a boa constrictor squeeze the life out of something for small practices.