Tuesday, October 25, 2011

Kathleen Sebelius: Just Another Insurance Salesman

Amidst all the attention given to the CLASS Act since HHS’ decision to shelve the program, one interesting element not drawing much attention is what all the possibilities HHS explored to make the program solvent have in common – they all represent insurance industry tactics condemned by Democrats.  Given that Secretary Sebelius frequently alleges that Obamacare ended “the insurance industry’s worst abuses,”* it’s worth pointing out that the Department’s report on the program revealed just how HHS and Secretary Sebelius proposed reinstating each and every one of those “insurance industry abuses” with respect to the CLASS Act:

Pre-Existing Condition Exclusions:  Page 39 of the report talks about proposals that would “impose a fifteen-year waiting period for the receipt of benefits on enrollees” with pre-existing conditions at the time of enrollment.  By point of comparison, health insurers can only impose a pre-existing condition waiting period of only 18 months – not the fifteen years proposed by HHS.

Limited Benefits:  Page 40 of the report talks about a proposal to “provide a very low benefit amount to individuals who become eligible for benefits in the first twenty years after enrollment.”  Only after two decades would enrollees qualify for the $50 daily benefit provided for in the statute.

“Unreasonable” Premium Increases:  Much of the report discusses imposing annual premium increases on enrollees, even though that is not explicitly provided for in the statute.  The memo to Secretary Sebelius accompanying the CLASS report notes that modeled premiums ranged “between $235 and $391 dollars [sic] a month, and may cost as much as $3,000 per month.”  Additionally, page 44 of the report notes that “the Secretary and the Board might conclude that…the reasonable premium increases…are inadequate to avoid insolvency.”  In other words, premiums would start out at a high level, increase every year – and an “unreasonable” premium spike would be possible, even probable.

“Cherry Picking:”  The former CLASS actuary told the Associated Press that the program could be made solvent.  However, the actuary’s ideas “would involve marketing the plan first to groups of primarily healthy people, and also possibly requiring those in poor health to wait longer before they could receive benefits.”

In other words, in an ultimately futile attempt to make CLASS solvent, the Obama Administration attempted to employ the exact same types of “sleazy” insurance industry practices Democrats have so frequently, and vociferously, derided – throwing up obstacles so that the sickest patients would not be able to benefit from CLASS.  These developments raise some interesting questions for HHS:

  • Does Secretary Sebelius plan to give her own Department an Obamacare waiver, for trying to sell limited benefit policies under CLASS?
  • Will HHS put CLASS on the “naughty list” of insurance plans with “unreasonable” or “unjustified” premium increases, given the way in which premiums were virtually guaranteed to skyrocket under the program?
  • Given that CLASS was subject to spiraling premium increases, will HHS stop accusing carriers who need to raise premiums due to Obamacare’s costly insurance mandates for spreading “misinformation?”

It’s not a surprise that HHS had to go to such lengths to salvage the CLASS program; the non-partisan Medicare actuary knew from Day One the plan wouldn’t work, and even Budget Committee Chairman Conrad called the program a “Ponzi scheme of the first order.”  But the larger point is this:  Whether due to self-righteous indignation, political posturing, or both, liberal Democrats have always found it easy to criticize health insurers – which is why Secretary Sebelius’ biography claims that Obamacare will end “the insurance industry’s worst abuses.”*  However, having now proposed engaging in every single one of those “abuses” herself, perhaps the Secretary and the Obama Administration will act with a bit more humility when it comes to having politicians criticize, and bureaucrats micro-manage, private sector actors in health care.


* Other commentators have noted that Obamacare did not actually end these “abuses,” at least not with respect to offerings made by some of the President’s key liberal allies.  The above analysis ignores the validity of those claims for purposes of this e-mail only.