Forbes | August 29, 2016
In Arizona’s Pinal County, for example, no insurers are offering coverage through the exchange. While decisions won’t be final until next month, people in other counties could face a similar fate.
Elsewhere, millions of Americans will have a “choice” of just one carrier, especially in rural areas. It’s likely that Alabama, Alaska, and Oklahoma will have only one health insurer selling individual coverage on their exchanges next year. South Carolina and most of North Carolina could join that list as well.
Nearly one-third of the nation’s counties are likely to have just one insurer offering health plans on the exchanges next year: Last year, 50 Texas counties had only one insurer offering individual plans, according to data from the Texas Department of Insurance. Next year, Texans in 57 counties will have only one choice. Exchange customers in many Florida counties will be offered only the Blues plans.
United Healthcare, Humana, and some Blues plans were the first start the exodus from the ObamaCare exchanges. But when Aetna CEO Mark Bertolini announced in mid-August that his company will dramatically reduce its individual public exchange participation to just four states, it created an earthquake.
Aetna had been all in for ObamaCare, investing billions to offer coverage through the ACA exchanges. But after losing $430 million in this market since January 2014, Bertolini had to answer to his shareholders.
Insurers are pulling out largely because the exchange risk pools are getting worse, not better as the White House had promised. They are losing money and see little or no prospect for the bleeding to stop.
The sicker risk pools mean coverage will be much more expensive next year with the carriers that remain.
According to ACAsignups.net, premium rate increases being requested by health insurance carriers nationwide for 2017 average 23% (much higher than a more selective Kaiser Family Foundation survey showing only a 9% increase).
Some consumers face even higher increases: BlueCross BlueShield of Tennessee received a 62% premium increase after documenting losses of $500 million on its exchange business over the last three years. Texas Blue Cross has filed for a 58% increase for its 603,000 exchange policyholders after reporting $1.2 billion in losses on these plans over two years. In Pennsylvania, High Mark Blue Cross is asking for an average 41% increase.
Tennessee’s insurance commissioner says the exchange in his state is “very near collapse.” Tennessee either had to approve the requested increases or see companies drop out.
ACA supporters say exchange enrollees will largely be shielded from these increases because their coverage is subsidized. But someone is paying, and it is the beleaguered taxpayer. Further, half of those in the potential individual health insurance market aren’t eligible for subsidies and would have to pay these exploding costs in full.
The higher premiums will drive even more healthy people away from the exchanges and leave costs even higher for the remaining (sicker) population. In the ObamaCare plan with the lowest premium—the Bronze plans—the average individual deductible for 2016 is $5,765. For a family plan, the deductible is $11,601. A growing number of healthy people figure they might as well be uninsured as pay high premiums for policies with such expensive deductibles.
The Obama administration has only itself to blame for the ObamaCare failures—first for jamming this bill through Congress despite warnings that the structure of the bill was an economic disaster, and then for exacerbating the breakdown through its regulatory dictates. The ACA was sold on the pretense that we could have a private, competitive market for health insurance, but the law and subsequent regulations put the industry in a straightjacket, with rules at every turn that undermined the industry’s ability to offer attractive, competitive products.
The president over-promised on what his law would be able to do—saying it would dramatically cut health insurance costs for middle-income Americans while assuring them they could keep their coverage and their doctors. His administration tried to patch over the serious political problems with the law—and cover for the broken promises—with whack-a-mole regulatory fixes that have only worsened them.
Now, exchange coverage is threatened because the costs of expensive, sick enrollees are not being offset by a greater number of healthy members.
Clearly, the president’s own policies are driving people away from ObamaCare.
The Congressional Budget Office expected ACA enrollment to reach 21 million this year, but the actual number likely will be only half that. That is one of the main reasons for the huge premium increases the remaining companies are forced to request.
The law required insurers to misprice risk—charging older, sicker people less and younger, healthier people more. Young adults have balked at paying up to 75% more than their actual cost so a 64-year-old can pay 13% less. No amount of regulatory tinkering can fix this unstable economic model.
The flawed and even illegal subsidies to insurers through reinsurance payments to insurers are not enough to make up for their losses, as documented in research by health policy experts Doug Badger, Brian Blase, Ed Haislmaier, and Seth Chandler.
Some critics say that insurers are happy with being the only player left in a state or county. But that means they are the magnet for all of the high-risk patients with no ability to spread the loss, leading to even larger losses and higher prospective premiums.
The next president will inherit this mess. Those who supported this disastrous and unworkable government intervention into the marketplace now say we need more government to fix the problems government has created. They believe the solution is to pour more taxpayer dollars into subsidies for individuals and insurers and to expand government even further through a "public option." More big government and more subsidies to insurers will not solve the underlying and fundamental problems with the law.
The reality is that if Republicans hold even one house of Congress, they will be very reluctant to pass any "fixes" to the program and will not create a public option, especially after the cascade of co-op failures built on the public-option model.
Instead, Republicans will look to advance elements of their own Better Way plan and will work to garner bipartisan support.There are areas of potential compromise: Reconfiguring ACA tax credits into advanceable tax incentives paid in monthly installments to health-care consumers themselves. The credits could be used to pay for health coverage that consumers want rather than policies they are forced to purchase by the federal government. Insurance would be regulated by states to give consumers more coverage options with more sensible regulations.
Instead of the highly-unpopular individual mandate in ObamaCare, Republicans would provide strong incentives for people to stay insured through “continuous coverage protection.” States could gain more control over Medicaid to give them an incentive to spend federal and state dollars on this program in ways that provide better access to care than the current balkanized program does.
We need to think more broadly about solutions, making sure that people getting coverage now are protected, that those not buying or obtaining coverage have greater incentives to participate, and that the program is financially sustainable.
Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free-market ideas for health reform. www.galen.org