Obamacare is Failing and Democrats Don’t Know How to Fix It

There was once a day when Obamacare was going to be everything to everyone. Sarah Kliff writes for the Washington Post:

Three years ago, health economists believed Obamacare’s soon-to-launch marketplaces would grow to replace much of America’s fractured, complex employer-based health insurance system.

Predictions for the employer-sponsored insurance system’s collapse ran rampant. The question around companies shifting workers to the new public marketplaces was often framed not as if but when. University of Pennsylvania’s Zeke Emanuel pegged it at 2025. MIT’s Jonathan Gruber estimated 2050.

These days, you don’t hear those predictions anymore.

You also don’t hear President Obama talking much anymore about the law that colloquially bears his name. You certainly don’t hear him talk like he did back in 2013, just as healthcare.gov went live.

“You enter some basic information, you’ll be presented with a list of quality, affordable plans that are available in your area, with clear descriptions of what each plan covers, and what it will cost,” Obama said in a press conference. “You’ll find more choices, more competition, and in many cases, lower prices — most uninsured Americans will find that they can get covered for $100 or less.”

In many ways the law seemed doomed from the start. The website, which was supposed to be as easy as shopping “for a plane ticket on Kayak or a TV on Amazon,” turned out to be a buggy disaster. But worst of all, the myriad regulations stripped insurers of the ability to create plans that appealed to the wide ranging interests and needs of consumers. The chief offender was a rule that limited age banding, which meant that healthy (and relatively poorer) young adults had to subsidize sicker (and relatively wealthier) older adults. This pushed the price of health insurance beyond the value it presented to many young people, especially in the face of a weak tax penalty for simply opting to go uninsured.

The Obama Administration hoped that young adults would make up 38 percent of Obamacare enrollees, but in reality that number was closer to 28 percent, a 10-point deficit that could be the difference between the bill’s success and demise. Greg Ip writes for the Wall Street Journal:

Barack Obama’s signature health-care law is struggling for one overriding reason: Selling mispriced insurance is a precarious business model.

Aetna Inc. dealt the Affordable Care Act a severe setback by announcing Monday it would drastically reduce its participation in its insurance exchanges. Its reason: The company was attracting much sicker patients than expected. Indeed, all five of the largest national insurers say they are losing money on their ACA policies and three, including Aetna, are pulling back from the exchanges as a result.

The problem isn’t technical or temporary; it’s intrinsic to how the law was written. By incentivizing insurers to misprice risk, the law has created an unstable dynamic. Total enrollment this year will be barely half the 22 million the Congressional Budget Office projected just three years ago. Premiums, meanwhile, are set to skyrocket, which will further hamper enrollment. It isn’t clear how this can be fixed.

Three of the nation’s largest insurers weren’t sure how they could fix it. Aetna is pulling out of 11 of the 15 states where they offered policies. UnitedHeathcare, the nation’s largest insurer, is quitting 31 of the 34 states where it sells ACA policies. And Humana is pulling out of 1,200 counties in eight states, maintaining a presence of just 156 counties. The reason isn’t greed, it’s math. According to Bloomberg, UnitedHealth expects to lose $850 million on Obamacare in 2016, while Aetna, Anthem and Humana are on track to lose $300 million each.

Contrary to the president’s promises, that leaves a dearth of options for many would-be consumers. As of now, one county in the country currently has no insurers selling policies on the exchange, four whole states only have one insurer operating Obamacare plans, and almost every state has significant areas with no competition.

Even if you are one of the consumers blessed with choices, insurance premiums continue to rise dramatically.

“As Charles Gaba of the pro-Obamacare but generally careful website acasignups.net has calculated, if people renew their current policies where possible in 2017, their gross premiums will increase an average of 23% (assuming insurers receive their desired increases),” Seth Chandler writes in Forbes. “In five states, Illinois, Montana, Oklahoma, Arizona and Tennessee Gaba shows that these increases will average more than 40%.”

This is no longer a debate about whether Obamacare is going to be a resounding success that will spur competition and reduce prices. It’s not even a question about whether it will eke out a place in the health insurance landscape by providing coverage options for an underserved population. It’s an issue of whether Obamacare will utterly collapse and take a fragile insurance market down with it.