Thursday, April 21, 2016

The Canary in the Coal Mine: UnitedHealth Leaving “Unsustainable” ObamaCare Exchanges in 34 States
On April 19,  UnitedHealthCare announced it was abandoning ObamaCare exchanges in 34 states.  United  CEO, Stephen Helmsley,  told investors that United’s  losses - $475 billion in 2015 and a projected $650 million in 2016,  were “unsustainable.” He said as a for profit company ($1.6 billion on revenues of $44.6 billion in first quarter of 2016),  United could not afford more losses and at the same time satisfy  stakeholders.
UnitedHealth’s decision  was symbolic.  The company insures only 6%, 795,000 of the 12.7 million subsidized in ObamaCare exchanges.  
United as the Canary in the Coal Mine
But United  is the “canary in the coal mine,” a warning for other insurers -  for-profits, Anthem and Cigna,  and not-for-profits,  Blue Cross Blue Shield.  

No company, for-profit or not-for-profit, can stay in business with continuous  heavy losses.
In earlier days,  coal miners placed a canary, who were sensitive to methane gases and low oxygen levels, in the mine.  When the canary kept singing,  miners knew the air supply was safe.  A dead canary called for them to immediately evacuate.  
Is UnitedHealth’s exit a signal for an exodus for insurers?  

Is its exit evidence that ObamaCare is about to collapse,  that  the time has come  to evacuate or to proceed to  single-payer, where heavy losses in the name of compassionate care for all  are a given?
These questions will be fodder for debate in the 2016 election,   The GOP candidate will call for repeal and a market-based plan.  The Democrat will call for an ObamaCare fix, and more steps towards universal coverage.

What's Wrong
Between now and the election,  however, we can ask what’s gone wrong and what can be done about providing care for the ObamaCare subsidized patients.
What’s gone wrong is evident.   For political reasons, to juice up the numbers joining the exchanges,  the Obama administration had a weak mandate promoting the sick to join,  even after enrollment periods were over.  People were allowed to come in and out of the system when they needed someone to pay for their illness.    Then, too, there were those promises that the government would bail out insurers for losses.
But as the United CEO commented, “We cannot sustain these losses.  We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”

What to Do
So what to do until there is a political resolution? 
Avik Roy, a conservative policy maker,  in  April 19  Forbes  in  “Abandon Ship: UnitedHealth to Exit ‘Unsustainable’ ObamaCare Exchanges,” makes these suggestions to keep the canary alive.
One, make ObamaCare exchanges work like markets. Let people  be free to choose  health coverage that’s best for them. Deregulate them, something  President Obama and Hillary Clinton are ideologically opposed to doing.
Two,  stiffen the individual mandate.   Force people to buy costly insurance that they neither want nor need. Such a plan would never get through a Republican-controlled Congress, which would  rather repeal the mandate entirely.
Avik Roy's prediction?  “The stalemate is unlikely to change anytime soon. The most likely outcome is that the insurers who stay on the exchanges will have to jack their premiums even higher, leading to less affordable coverage and more people uninsured.”
The canary will  keep on singing until November, but the sound of its song will weaken. 

Either Democrats need to replace the canary with a federal vulture, or Republicans need to take the canary out of the mine and substitute a market-based machine to keep insurers and  subsidized miners alive.

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