Sunday, August 7, 2016
Has the Insurance Death Spiral Gone Viral?
Aetna has joined the other five big insurers - United Health, Anthem, Cigna, Humana, and Blue Cross Blue Shield – in withdrawing from ObamaCare exchange markets. All report billion dollar losses which they say are unsustainable and unpredictable.
The dreaded insurance death spiral has gone viral. The big insurers are following the rule of the inevitable - you cannot insure the sick if you don’t have a counterbalancing population of the well.
Another rule at play is: you cannot survive as a corporation in capitalistic society without profit, return on investment, investors, and a healthy stock market.
A third rule is: the compulsion to provide a comprehensive welfare state and personal economic security as a basic right comes at a price: erosion of profits, slow economic growth, and economic anxiety for the middle class (“A low-Growth World: One Key to Persistent Economic Anxiety,” NYT, August 7, 2016).
The basic problem with ObamaCare is that its policies have proven unattractive not only to the healthy and wealthy but to the subsidized well and chronically sick. That’s because premiums, deductibles, and co-pays keep going up, as insurers try to stem their losses. Insurer actuaries say they cannot estimate these losses because they must take on the uninsurable, those with pre-existing conditions who comprises 80% of costs (Holman Jenkins, Jr, “ObamaCare Death Spiral Update, “ WSJ, August 6-7, 2016).
There are other perversities as well.
For consumers with no skin in the game and no knowledge of what things costs, there is the incentive to avail themselves of care as long as someone else is paying. Increasingly, the only customers for ObamaCare are those who are already sick. This is a losing game for insurers.
For physicians, hospitals, and all those other providers, the incentive is provide as much care as possible as long as the government is paying for it.
For government, the incentive is to promise more care to gain and maintain political control. As yet, among the governing party, there seems to be no concern for the $19 trillion deficit, which may grow to $21 trillion by the end of Obama’s term. Debt may not tarnish his legacy, for his intentions were honorable. National debt is something best left to others to clean up. Others will have the unpleasant dirty job denying government benefits and rationing.