The Death Spiral Begins

Nick Chase
As a retired computer systems manager, I am always fascinated by large, complex software systems that fail -- such as the Federal ObamaCare "insurance exchange" currently being rolled out at HealthCare.gov.

This software monstrosity is now in its second week, and most people trying to use it still can't get into the system, or else they can't create an account on it, or their account information is lost.  I, and you, can follow this unfolding disaster at any time in the comments section on HealthCare.gov's own Facebook page, at https://www.facebook.com/Healthcare.gov.  (You do not need a Facebook account to view this page.)

Here are a few recent comments I saw recently (on Monday evening, October 7):

Alicia Pasz: I waited but still CANNOT login. My security questions to create a new password are NOT MINE. If I cannot get SOMEBODY to clear this problem how am I going to login? I enrolled over the phone BUT I want to see what is going on with my account/app. I NEED HELP, I cannot create another account because I am already in the system. IS ANYBODY READING THIS REQUEST FOR HELP? (Nick's answer: No.)

Carole Corbin: I stayed away for a while hoping things would improve.... Hasn't Happened Yet.

Gateway Timeout

The proxy server did not receive a timely response from the upstream server.

Reference #1.7c611f45.1381173034.3dc6806

Paul Newman: UPDATE - As a person with two pre-existing conditions, I was hopeful this would give me decent coverage without the $3200/month high risk plan. Do not qualify for assistance because of my income. Unfortunately, having tried day, night, early (3am) mornings for seven days the system does not work. Was pre-registered but that ID never worked at all. On Thursday, registered a new ID successfully but a login has only resulted in the serverdown.html page or a blank page even on different browsers. Today, a Login tells me my new ID from Thursday is no good. Further it won't let me register a new ID anymore. Politics aside, without a known working system, this just gives ammunition to the argument that this healthcare system is Not Ready for Prime Time Players. (snip)

Lauren Pope: I've been trying to log in for 4 days. I lost my health insurance due to these new regulations, and can't even see how much I'll be paying to replace it. Completely ridiculous.

I could reproduce many more of these, but you get the idea.

The "exchanges" are essentially an insurance-quoting system.  To get a quote, you first must tediously provide all of your personal and financial information, without any guarantee that this information will remain confidential.  This is not how one typically shops for insurance, and a better approach would be for you to get an estimate for your personal situation using the Kaiser Family Foundation calculator at http://kff.org/interactive/subsidy-calculator/ before you ship your vitals off to the government.

For those people who do successfully enter their info at healthcare.gov, and get health-insurance quotes, the overwhelming response seems to be sticker shock:

Derrin Ray Smith: Wild... 300% increase in my projected healthcare insurance premium... AWFUL!!!!

David Bartels: It appears to my wife and I that the only way for us to comply with the Affordable Care Act is to legally divorce. Her employer no longer offers family insurance. Because she has employer coverage, myself and the kids cannot get subsidies from the exchange. I'm unemployed and the kids are under 26 yrs old. We cannot afford health insurance. To summarize; in order to comply with the law we believe that we must get a divorce and separate our income in order to qualify for low income substitutes for the three of us who are insured.

David Smith: Had to call the New York State Help desk...the average rate for a 25 year old is 400 a month!!! What a bargain. I will pay the penalty...

Maureen Crook: My insurance will be cancelled at the end of the year in PA. Now I am offered the 4 metal plan. My cost is going from 470 Bucks a month to 903 Bucks a months. Get out of my life.

Haywood Jablomie: WTF?? I thought Obamacare was supposed to be FREE! I discovered that it will cost me MORE money than my current plan for LESS coverage! I'm disabled and my current plan costs $398 a month. It pays 100% after I pay $1500 a year out of pocket. Obamacare will cost me $759 and I STILL have to pay 80% of all charges.... and I have a lot of charges. This is a complete SCAM!

Linda Myers: I have called the call center and they told me to hang up and go to the web page. I did the calculator and I figured out that I am below 139% poverty level and I will have to come up with 4,500 a year? Even if I could come up with that kind of money, I won't be able to come up with the 30% of the bills that I owe, so I'll be paying 4,500. and getting NO HEALTHCARE at all anyway. Nice job Democrats! You finally figured out a way to get blood from a turnip and give nothing in return for it. And because of this new law my state's insurance program has been defunded and I'm being kicked off. This insurance I've been purchasing for $90. a month and gives me a $10. copay on meds and office visits and $50. emergency and 80% hospital. Thank You for TAKING my healthcare!!! Up YOURS TOO!

What you will not find on the HealthCare.gov Facebook page are people who have successfully purchased insurance through the website and are happy with it.

Recall that the main idea behind these exchanges was to mandate that young, healthy people who for the most part don't need health insurance sign up so that their premiums would cover the cost of subsidies for older people whose bodies are beginning to fall apart, and lower-income families with children, and for politically popular benefits such as maternity coverage for males and free contraceptives for sluts.

Many people -- many more than should be, which is zero -- were perhaps willing to suffer their loss of personal freedom in the interest of making insurance affordable to all.  But they probably weren't willing to lose their freedom of choice to be coerced into purchasing a product that's inferior to what they already had, and more costly.

Once the healthcare.gov website is actually working, who will sign up?  Not the young and healthy singles -- for them, the tax ($58 per month in 2016) is a good deal for insurance they can eventually obtain should they ever need it, since they can sign up at any time after a pre-existing condition develops.  Not families who would receive little or no subsidy, because they can pay a $174-per-month tax in 2016 (for a family of 2 adults and 2 kids with income below $94,200 in 2013 dollars) and cover their routine medical expenses out of pocket with that same promise of catastrophic coverage should the need develop, rather than pay $1,700-per-month premiums for what the IRS estimates the typical medical insurance plan will cost in 2016.

The people who will sign up for the exchange plans will be the relative few who have no employer-provided or employer-subsidized health insurance and for whom the subsidies work, and those who have or develop pre-existing conditions and would be bankrupted without these plans.

In other words, the exchanges will attract only very costly customers, and this is the "death spiral" the insurance companies feared, because there is little incentive for healthy people to sign up and pay into the system.  Paying the tax, and paying for your own family's routine medical expenses out of pocket, will be much cheaper.

If ObamaCare is not modified or repealed, in a few years the "exchanges" will be for sick people, and everybody else (not covered by employers) will be paying the tax to support it -- along with a serious drain on the Treasury to fill the financial void.

Contrary to popular belief, it will not be not "against the law" to fail to purchase health insurance.  The law provides a choice -- you can buy "acceptable" health insurance or pay a tax.  Either choice meets legal requirements (as adjudicated by the U.S. Supreme Court).

The tax to be paid in 2016 and beyond is a minimum of $695 per adult and $347.50 per dependent child per year for "household income" of $45,960 or less (in 2013 dollars) for individuals, and $94,200 or less (in 2013 dollars) for families (of 2 adults, 2 kids).  For incomes above $45,960 or $94,200 (2013 dollars), the tax will be 2.5% of household income with no maximum limit.

"Household income" is "adjusted gross income," as shown on Line 37 of IRS Form 1040, plus any "nontaxable" income shown on Line 8b, plus any income earned by your dependent children.  Note that when the 2.5% rate cuts in, ObamaCare taxes municipal bond and other income normally exempt from income tax, and it taxes Social Security benefits, which are generally income-tax-free to retirees on limited incomes.  The law also taxes "qualified dividends" which are income tax-free to families in the lower income-tax brackets.  And it taxes your working kids' incomes.

If this seem like a highly-regressive tax to you -- it is.

About the author: Nick Chase is a retired but still very active technical writer, technical editor, computer programmer and stock market newsletter writer.  During his career he has produced documentation on computers, typewriters, typesetters, headline-makers and other pieces of equipment most people never heard of, and he has programmed typesetting equipment.  You can read more of his work on the American Thinker website and at contrariansview.org.

As a retired computer systems manager, I am always fascinated by large, complex software systems that fail -- such as the Federal ObamaCare "insurance exchange" currently being rolled out at HealthCare.gov.

This software monstrosity is now in its second week, and most people trying to use it still can't get into the system, or else they can't create an account on it, or their account information is lost.  I, and you, can follow this unfolding disaster at any time in the comments section on HealthCare.gov's own Facebook page, at https://www.facebook.com/Healthcare.gov.  (You do not need a Facebook account to view this page.)

Here are a few recent comments I saw recently (on Monday evening, October 7):

Alicia Pasz: I waited but still CANNOT login. My security questions to create a new password are NOT MINE. If I cannot get SOMEBODY to clear this problem how am I going to login? I enrolled over the phone BUT I want to see what is going on with my account/app. I NEED HELP, I cannot create another account because I am already in the system. IS ANYBODY READING THIS REQUEST FOR HELP? (Nick's answer: No.)

Carole Corbin: I stayed away for a while hoping things would improve.... Hasn't Happened Yet.

Gateway Timeout

The proxy server did not receive a timely response from the upstream server.

Reference #1.7c611f45.1381173034.3dc6806

Paul Newman: UPDATE - As a person with two pre-existing conditions, I was hopeful this would give me decent coverage without the $3200/month high risk plan. Do not qualify for assistance because of my income. Unfortunately, having tried day, night, early (3am) mornings for seven days the system does not work. Was pre-registered but that ID never worked at all. On Thursday, registered a new ID successfully but a login has only resulted in the serverdown.html page or a blank page even on different browsers. Today, a Login tells me my new ID from Thursday is no good. Further it won't let me register a new ID anymore. Politics aside, without a known working system, this just gives ammunition to the argument that this healthcare system is Not Ready for Prime Time Players. (snip)

Lauren Pope: I've been trying to log in for 4 days. I lost my health insurance due to these new regulations, and can't even see how much I'll be paying to replace it. Completely ridiculous.

I could reproduce many more of these, but you get the idea.

The "exchanges" are essentially an insurance-quoting system.  To get a quote, you first must tediously provide all of your personal and financial information, without any guarantee that this information will remain confidential.  This is not how one typically shops for insurance, and a better approach would be for you to get an estimate for your personal situation using the Kaiser Family Foundation calculator at http://kff.org/interactive/subsidy-calculator/ before you ship your vitals off to the government.

For those people who do successfully enter their info at healthcare.gov, and get health-insurance quotes, the overwhelming response seems to be sticker shock:

Derrin Ray Smith: Wild... 300% increase in my projected healthcare insurance premium... AWFUL!!!!

David Bartels: It appears to my wife and I that the only way for us to comply with the Affordable Care Act is to legally divorce. Her employer no longer offers family insurance. Because she has employer coverage, myself and the kids cannot get subsidies from the exchange. I'm unemployed and the kids are under 26 yrs old. We cannot afford health insurance. To summarize; in order to comply with the law we believe that we must get a divorce and separate our income in order to qualify for low income substitutes for the three of us who are insured.

David Smith: Had to call the New York State Help desk...the average rate for a 25 year old is 400 a month!!! What a bargain. I will pay the penalty...

Maureen Crook: My insurance will be cancelled at the end of the year in PA. Now I am offered the 4 metal plan. My cost is going from 470 Bucks a month to 903 Bucks a months. Get out of my life.

Haywood Jablomie: WTF?? I thought Obamacare was supposed to be FREE! I discovered that it will cost me MORE money than my current plan for LESS coverage! I'm disabled and my current plan costs $398 a month. It pays 100% after I pay $1500 a year out of pocket. Obamacare will cost me $759 and I STILL have to pay 80% of all charges.... and I have a lot of charges. This is a complete SCAM!

Linda Myers: I have called the call center and they told me to hang up and go to the web page. I did the calculator and I figured out that I am below 139% poverty level and I will have to come up with 4,500 a year? Even if I could come up with that kind of money, I won't be able to come up with the 30% of the bills that I owe, so I'll be paying 4,500. and getting NO HEALTHCARE at all anyway. Nice job Democrats! You finally figured out a way to get blood from a turnip and give nothing in return for it. And because of this new law my state's insurance program has been defunded and I'm being kicked off. This insurance I've been purchasing for $90. a month and gives me a $10. copay on meds and office visits and $50. emergency and 80% hospital. Thank You for TAKING my healthcare!!! Up YOURS TOO!

What you will not find on the HealthCare.gov Facebook page are people who have successfully purchased insurance through the website and are happy with it.

Recall that the main idea behind these exchanges was to mandate that young, healthy people who for the most part don't need health insurance sign up so that their premiums would cover the cost of subsidies for older people whose bodies are beginning to fall apart, and lower-income families with children, and for politically popular benefits such as maternity coverage for males and free contraceptives for sluts.

Many people -- many more than should be, which is zero -- were perhaps willing to suffer their loss of personal freedom in the interest of making insurance affordable to all.  But they probably weren't willing to lose their freedom of choice to be coerced into purchasing a product that's inferior to what they already had, and more costly.

Once the healthcare.gov website is actually working, who will sign up?  Not the young and healthy singles -- for them, the tax ($58 per month in 2016) is a good deal for insurance they can eventually obtain should they ever need it, since they can sign up at any time after a pre-existing condition develops.  Not families who would receive little or no subsidy, because they can pay a $174-per-month tax in 2016 (for a family of 2 adults and 2 kids with income below $94,200 in 2013 dollars) and cover their routine medical expenses out of pocket with that same promise of catastrophic coverage should the need develop, rather than pay $1,700-per-month premiums for what the IRS estimates the typical medical insurance plan will cost in 2016.

The people who will sign up for the exchange plans will be the relative few who have no employer-provided or employer-subsidized health insurance and for whom the subsidies work, and those who have or develop pre-existing conditions and would be bankrupted without these plans.

In other words, the exchanges will attract only very costly customers, and this is the "death spiral" the insurance companies feared, because there is little incentive for healthy people to sign up and pay into the system.  Paying the tax, and paying for your own family's routine medical expenses out of pocket, will be much cheaper.

If ObamaCare is not modified or repealed, in a few years the "exchanges" will be for sick people, and everybody else (not covered by employers) will be paying the tax to support it -- along with a serious drain on the Treasury to fill the financial void.

Contrary to popular belief, it will not be not "against the law" to fail to purchase health insurance.  The law provides a choice -- you can buy "acceptable" health insurance or pay a tax.  Either choice meets legal requirements (as adjudicated by the U.S. Supreme Court).

The tax to be paid in 2016 and beyond is a minimum of $695 per adult and $347.50 per dependent child per year for "household income" of $45,960 or less (in 2013 dollars) for individuals, and $94,200 or less (in 2013 dollars) for families (of 2 adults, 2 kids).  For incomes above $45,960 or $94,200 (2013 dollars), the tax will be 2.5% of household income with no maximum limit.

"Household income" is "adjusted gross income," as shown on Line 37 of IRS Form 1040, plus any "nontaxable" income shown on Line 8b, plus any income earned by your dependent children.  Note that when the 2.5% rate cuts in, ObamaCare taxes municipal bond and other income normally exempt from income tax, and it taxes Social Security benefits, which are generally income-tax-free to retirees on limited incomes.  The law also taxes "qualified dividends" which are income tax-free to families in the lower income-tax brackets.  And it taxes your working kids' incomes.

If this seem like a highly-regressive tax to you -- it is.

About the author: Nick Chase is a retired but still very active technical writer, technical editor, computer programmer and stock market newsletter writer.  During his career he has produced documentation on computers, typewriters, typesetters, headline-makers and other pieces of equipment most people never heard of, and he has programmed typesetting equipment.  You can read more of his work on the American Thinker website and at contrariansview.org.