Good news! The healthcare insurance market is showing the first signs of stabilizing – none too soon! Proposed 2019 premiums reflect the lowest increases since the 2014 implementation of ObamaCare – and in some cases they are actually lower.

After nationwide premium increases averaging 20% in 2017 and 34% in 2018, most insurers are now proposing only single digit increases for 2019. Single digit increases are being requested by major insurers in states like Florida and Mississippi while in some states, like Texas, Illinois, Arizona and North Carolina, insurers have proposed to actually cut some premiums for 2019.

Anna Wilde Mathews and Joseph Walker, writing in The Wall Street Journal, say the shift in premiums is particularly extreme in some states: like Wyoming where Blue Cross Blue Shield is seeking a 0.27% average decrease next year after a 48% increase this year. “The vast majority of our members will be seeing much lower rate increases this year,” said Mark Nave, a senior vice president at Highmark Inc., an insurer that is part of Highmark Health. The marketplaces “are stabilizing in spite of some of the challenges.”

Unfortunately, this good news will not apply to everyone everywhere. In Maryland, CareFirst Blue Cross Blue Shield proposed an 18.5% average increase for HMO plans and a 91.4% increase on smaller preferred provider organization (PPO) business. The insurer claims its rate proposals reflect the high health costs of enrollees in its plans.

Premium Increases 2018 v. 2019

Why are rates stabilizing?

In 2018, insurers over-reacted to the Trump Administration decision to halt payments to insurers that were being made by the Obama Administration even though those payments were not approved by Congress. They raised premium prices precipitously in anticipation of high costs. The lower rate increases in 2019 reflect the overestimation of those costs by insurers who can now live with little or no increases next year.

Liberals claimed the Trump Administration was determined to destabilize the market. In addition to halting the payments to insurers, the Trump White House pushed for more flexibility in short-term policies that are exempt from ObamaCare regulations. Congress also eliminated the Individual Mandate that forced everyone to purchase health insurance or pay a tax when they passed the Tax Reform Plan in 2017. Opponents claimed these moves would further undermine the ObamaCare exchange marketplace.

But these lower rates for 2019 prove that liberal claims of Trump destabilizing the market were unfounded. According to the Kaiser Family Foundation, last year insurers achieved their best financial results on plans sold to consumers since the ACA’s major market changes went into effect in 2014. The insurers’ improved finances have also led some to plan entering new ACA markets or expanding their footprints for 2019, after years of pullbacks.

These encouraging results certainly do not mean ObamaCare is thriving – nor providing the increased access to quality healthcare it was promised to provide. But it does mean there is some reason for optimism in the short-run while Congress considers ways to improve the system in the future. Most Americans can at least stop worrying about more major premium increases for 2019 – and that’s certainly good news!

Do you prefer your foods to be “organic?” If so, you’re paying a higher price for this preference – and you may not be getting what you think you’re paying for.

The U.S. Department of Agriculture (USDA) provides products with its organic seal. For a product to be certified organic, it’s required to meet specific standards:

• Organic crops cannot be grown with synthetic fertilizers, synthetic pesticides or sewage sludge.
• Organic crops cannot be genetically engineered or irradiated.
• Animals must eat only organically grown feed (without animal byproducts) and can’t be treated with synthetic hormones or antibiotics.
• Animals must have access to the outdoors, and ruminants (hoofed animals, including cows) must have access to pasture.
• Animals cannot be cloned.

According to a Market Watch 2015 study, prices at Whole Foods, a national supermarket chain specializing in organic foods, were 12 -15% higher than other supermarkets in the study. If you believe organic foods are actually better for you and you’re willing to pay the higher price, that’s your decision. But what if those higher prices are based on false advertising?

Dr. Henry I. Miller, physician and molecular biologist at Stanford’s Hoover Institution, says the organic food industry is lying to you – and the Food and Drug Administration (FDA) is letting them get away with it.

He says the organic food industry is a $47 billion-a-year market and “. . . the FDA gives a complete pass to blatantly false and deceptive advertising claims.” As an example, he notes the Whole Foods website, which explicitly claims that organic foods are grown “without toxic or persistent pesticides.” Miller says, in fact, organic farmers rely on synthetic and natural pesticides to grow their crops, just as conventional farmers do, and organic products can contain numerous synthetic as well as natural chemicals.

According to UC Berkeley biochemist Bruce Ames and his colleagues in 1990, “99.99% (by weight) of the pesticides in the American diet are chemicals that plants produce to defend themselves.”

Miller says pesticides are by definition toxic, and many organic pesticides pose significant environmental and human health risks. Copper sulfate is a widely used broad spectrum organic pesticide that persists in soil and is the most common residue found in organic foods. The European Union has determined that copper sulfate may cause cancer and intended to ban its use, but backed off because organic farmers don’t have any viable alternative.

Misleading Advertising

Food marketers are experts in subtly misleading consumers. One method often used is the “absence claim.” Their advertising asserts a meaningless distinction between products in order to make theirs seem better. The FDA is generally good at monitoring such advertising and punishing abusers. They would never allow an orange juice producer to market their product as “fat free” since there is no fat in any orange juice. To claim an absence of a certain ingredient, there has to be a “standard of presence” in that product to begin with, and no such standard exists for orange juice.

But Miller points out the FDA’s inconsistency. Tropicana labels its orange juice “Non-GMO Project Verified” and Hunt’s labels its canned crushed tomatoes “Non-GMO” even though there are no GMO (genetically modified organism) oranges or tomatoes on the market.

Miller has researched the market and found the “Non-GMO Project” butterfly label is found on more than 55,000 organic and nonorganic products on supermarket shelves today – even though many have no GMO counterpart or couldn’t possibly contain GMOs. He says, “The clear purpose of these labels, as one peer-reviewed academic study found, is to ‘stigmatize food produced with conventional processes even when there is no scientific evidence that they cause harm, or even that it is compositionally any different.”

FDA guidelines are in fact stringent and explicit. These guidelines include statements such as this: “Another example of a statement in food labeling that may be false or misleading could be the statement ‘None of the ingredients in this food is genetically engineered’ on a food where some of the ingredients are incapable of being produced through genetic engineering (e.g., salt). They also state “GMO absence claims can also be false and misleading if they imply that a certain food is safer, more nutritious, or otherwise has different attributes than other comparable foods because the food was not genetically engineered.”

But Miller notes this is exactly what Non-GMO Project butterfly labels are all about. Its website describes certain foods as being at “high risk” of “GMO contamination.”

It is clear there is a disconnect between what the FDA says and what the FDA does. Consumers should be aware of this when reading food labels. They must ask themselves the question, “Is this organic food really worth the higher price I’m paying?”

Is the ObamaCare “Cadillac” Tax a good thing or a bad thing? That’s today’s question as Republicans continue to tinker with President Obama’s legacy healthcare system.

The ObamaCare “Cadillac” Tax was originally slated to begin in 2018 but thus far it has been delayed until 2022. House Republicans want to pass a bill further delaying this tax by another year to 2023. Is this a good idea? 

First, let me explain the ObamaCare “Cadillac” Tax. It is a 40% excise tax on high-cost employer-provided healthcare insurance plans. It applies only to those insurance premiums costing greater than $11,000 for individuals and $30,000 for families.

The tax is actually paid by the insurance companies, but the impact on the insured is ultimately the same as if they paid it themselves. As ObamaCare co-architect Jonathan Gruber famously noted, ““We just tax the insurance companies, they pass on higher prices that offsets the tax break we get, it ends up being the same thing. It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.” This was one of many deceptions of the American people Gruber bragged about in his candid remarks that were caught on videotape.

The Cadillac Tax Purpose

The pre-ObamaCare tax treatment of insurance policies has been unequal since the 1950’s. In the post WW II era of wage and price controls, employers were limited in their ability to attract new and better employees with higher wages. To offset these limitations, employers began offering health insurance benefits as an incentive to attract better workers. The IRS did not treat the cost of the insurance policies as extra income. Those who purchased their insurance as individuals apart from an employer did not enjoy this tax exclusion. This unfair and unequal tax treatment of insurance premiums has continued to this day.

ObamaCare imposed the Cadillac Tax as a method to discourage employers from increasing spending on insurance benefits as a means of avoiding higher taxes. By imposing the Cadillac Tax on amounts above the limits, the Obama administration hoped to lower expenditures on health insurance, which they falsely labeled “lower costs” to support their narrative that ObamaCare “bends the cost curve” of healthcare.

James C. Capretta, a healthcare economist at the American Enterprise Institute, writes in The Wall Street Journal that the ObamaCare Cadillac Tax is worth keeping. He explains the current tax system encourages employers to shift compensation toward generous health benefits. “Overly rich health plans encourage consumers to use more health services than they otherwise would, which drives up costs. On average, employer plans cost 35% more than they would if health benefits were fully taxed like cash compensation, according to a 2008 study.”

This issue has been a political football kicked around by both parties for years. President Reagan tried to cap the tax exclusion in 1983 and President George W. Bush tried in 2007. These efforts failed due to opposition by business and labor unions. In 2008, John McCain campaigned on a proposal to tax job-based health benefits to level the playing field but Barack Obama hammered him in political ads for “taxing health benefits for the first time in history.” Then Obama reversed himself, once he was president, when he supported the Cadillac Tax.

Pros and Cons

Capretta says the Cadillac Tax impact would be higher wages for workers as employers were forced to use savings on the expensive plans (which they would avoid) to raise wages in a competitive labor market. He says this tax is essential for a market-based approach to cost control. The current system, which is subsidized by the tax exclusion, undermines the incentive for employers and workers to seek out lower-cost options.

In 2015 I did a three-part series on the Cadillac Tax. (Understanding the ObamaCare Cadillac Tax – Part I, Understanding the ObamaCare Cadillac Tax – Part II, Understanding the ObamaCare Cadillac Tax – Part III) In that series I explained the impact of the tax using the work of Duke University economist Chris Conover. The conclusions of that series were:

• The Cadillac Tax would eventually affect nearly everyone
• The impact would be greater on larger businesses than smaller businesses
• The impact would be harsher for low-income workers than high-income workers

Capretta concedes that while the initial impact would affect only 4% of all employer plans, over time, more employer plans would be affected. But he believes the Cadillac Tax should nevertheless be retained. He says, “Many provisions in ObamaCare should be repealed, but the Cadillac tax isn’t one of them. Republicans should look past its origin as part of ObamaCare and leave it alone. They don’t have the will to replace it with something better, and killing it would help those who say the only answer to rising costs is more government regulation.”

Below is a chart put together by former Senate Majority Leader Bill Frist (R –TN) that projected the impact of the Cadillac Tax over time:

The chart shows that in 2018 only about 15% of employers would be impacted by the Cadillac Tax. But by 2029 the tax will impact 76% of employers.

The problem is the tax exclusion of health benefits paid by employers. The playing field must be leveled by some means. Eliminating the tax exclusion for everyone would be an obvious solution but it is politically impossible. The Cadillac Tax provides a disincentive for abusing the current tax exclusion but has drawbacks as we have discussed above. It’s a complex issue that deserves greater study and bipartisan compromise to achieve the greater good. Unfortunately, that’s unlikely to happen in Washington today.