3 Unanswered Questions In Covered California’s Bogus Premium Study

3 Unanswered Questions In Covered California’s Bogus Premium Study

Either the Exchange views is #resisting President Trump, or it wants to use the headlines to motivate Congress to pass a 'stability' package.
Christopher Jacobs
By

On Thursday, Covered California, the state’s health insurance Exchange, released a purported study providing estimates of premium increases over the next three years. The report itself provides precious little specificity regarding premium increases — not least because no one can know such details so far in advance. It seems purposefully designed around a blaring headline — “Premium Increases of Up to 90 Percent!!!” — with the rest largely window dressing.

The report also contains premium estimates for all 50 states. There seems little reason for the California state Exchange to commission a report on premium levels nationwide — particularly because the report does not provide anything more than a possible range of premium increases in each state. Either the Exchange views itself as part of the #Resistance to President Trump, it wants to use the headlines to motivate Congress to pass a “stability” package — or both. (Probably both.)

Beyond those obvious limitations, however, the report raises several other important questions:

Is Covered California’s Actuary Biased?

A footnote in the paper notes that “the leadership on the analysis” in the paper was “provided by Covered California’s Chief Actuary, John Bertko.” Bertko’s name came up in another document, one I received last summer, following a Public Records Act request to Covered California. In the September 2016 email exchange, Bertko forwarded an article to colleagues regarding the status of legal action on cost-sharing reductions (CSRs), along with a note stating that “I think the court case on CSRs is unlikely to go the wrong way.”

He was wrong factually, of course. Judge Rosemary Collyer ruled that the Obama Administration lacked a valid appropriation to make CSR payments in May 2016, and Judge Vince Chhabria last fall denied a motion by state attorneys general requiring the Trump Administration to make the payments.

But what exactly is an actuary doing making comments about a legal case in the first place? What does Bertko’s comment about the “wrong way” imply — that he sees his job first and foremost as defending Obamacare, rather than providing impartial information? And if Bertko makes such politically-loaded comments as claiming a court case is “unlikely to go the wrong way,” what does that say about the integrity of the analysis released today?

Why Did Covered California Not Prepare for Instability?

When it comes to the CSR issue discussed above, I wrote back in May 2016 that the incoming administration could withdraw the payments unilaterally, and that as a result, “come January 2017, the policy landscape for insurers could look far different” than it did under President Obama.

What did Covered California do regarding that warning? Exactly nothing. My Public Records Act request for all records relating to cost-sharing reductions and rates for the 2017 plan year yielded but two documents. The first, the Bertko e-mail chain referenced above, related solely to how the federal government had addressed the CSR issue. Bertko sent it two months after Covered California announced its rates for the 2017 plan year, and the Exchange’s model contract with insurers mentioned nothing about the federal government not funding CSRs — both demonstrating that Covered California failed to conduct due diligence about whether CSRs could disappear.

The second document Covered California disclosed is an e-mail chain starting on November 21, 2016, two weeks after the election. Covered California Executive Director Peter Lee requested an urgent legal analysis of the CSR issue, allowing Covered California to redact most of the email chain on attorney-client privilege grounds. (I separately removed personal contact information that Covered California left unredacted in the document sent to me.) That said, it doesn’t take a rocket scientist to understand the general context: “Oh ^!%^@#[email protected]—Trump actually got elected! What can he do about CSRs now…?”

Thursday’s Covered California paper talks about policy actions to stabilize insurance marketplaces. But given the way in which Covered California and Peter Lee made exactly zero preparations for a Republican Administration taking office — Did they not know there was a presidential election scheduled for November 2016? — they have little room to lecture other states on how to run their insurance markets.

Will Peter Lee Actually Enroll in Obamacare Himself?

The Covered California paper claims that regulatory actions taken by the Trump Administration “are expected to draw consumers out of the individual market, sowing market instability and raising the specter of large premium increases in 2019 and beyond.”

However, one person definitely won’t be drawn out of the individual market: Peter Lee, Covered California’s Executive Director — who never went into the individual market in the first place, because he refuses to buy the policies his own Exchange sells. As I have previously written, Lee lets taxpayers pay for his health insurance coverage, even though he makes a salary of $436,800 annually.

Lee has but two possible explanations for his actions. First, he has the state fund his health insurance because he cannot afford to purchase an unsubsidized Exchange policy himself. As someone with an income less than one-quarter Lee’s, who doesn’t qualify for an income-based Exchange subsidy (and I shouldn’t), I find that concept offensive. An individual with income nearly high enough to place him in the “one percent,” with much more job security besides, can afford to pay the full cost of health insurance if he wants to. Peter Lee just doesn’t want to.

Alternatively, Lee believes the Exchange coverage he promotes throughout California is good enough for others to buy, but not good enough for him—a similarly offensive concept. What exactly is the point of an Executive Director going on a bus tour promoting “quality, affordable coverage” if that individual won’t purchase that same coverage — either because he finds it unaffordable or of low quality?

Lee can release all the reports about increasing Exchange enrollment that he wants, but in reality, he has failed to put his money where his mouth is — quite literally. Unless and until he swallows his pride, joins the hoi polloi, and actually purchases the coverage he himself sells, the advice Covered California gives isn’t worth the paper it’s printed on.

Mr. Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm based in Washington. He is on Twitter: @chrisjacobsHC.

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