Less than two months ago Democrats were declaring Obamacare an unequivocal success, one that would disarm one of Republicans key election-year strategies.
“Five years after its passage and a year and a half after the exchanges became operational, it has succeeded far better than anyone could have reasonably expected,” wrote economist Dean Baker in the New York Times.
“[T]he success of the ACA strikes at the heart of the dysfunction strategy employed extremely effectively by anti-government conservatives,” wrote for the Washington Post. “This is the self-fulfilling prophecy that campaigns on: ‘Washington is broken! Send me there and I’ll make sure it stays that way!’”
And then the bombshell dropped. Last week, the nation’s largest health insurer announced that it may stop offering coverage on the Obamacare exchanges after 2016.
“In recent weeks, the growth expectations for individual exchange participation have tempered industrywide, co-operates have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step,” Stephen J. Hemsley, CEO of UnitedHealth Group said in a news release.
Nathan Bomey and Jayne O’Donnell, writing for USA Today, explain why this is such a big deal:
The possible move by UnitedHealth Group raises new questions about the viability of President Obama’s signature health law and follows the departure of more than half of the non-profit insurance cooperatives this year. If UnitedHealth drops out, consumers would lose one of the lowest-cost plans available in much of the country, and some wonder how smaller insurers could fill the void. .
“If they can’t make money on the exchanges, it seems it would be hard for anyone,” said Katherine Hempstead, who heads the insurance coverage team at the Robert Wood Johnson Foundation.
The news follows a brutal “open enrollment” season–the time of year when consumers choose their insurance plan for the year–that saw insurance premiums rise by double digits. The significant rise was indicative of two things: (1) The exchanges failed to attract as many young, healthy people as needed to balance out the risk pool, and (2) insurance companies dramatically overestimated the health of their recipient pool. Now, with two years of actuarial experience under the belts, insurers have lost a lot of money, but also have better information with which to forecast rates for future years.
UnitedHealth must not like the forecast its looking at. That probably means that they are much less optimistic than the Obama Administration on the ability of the individual mandate (which requires people to purchase plans or be fined by the IRS) to drive coverage gains among healthier people. It also likely means that Obamacare regulations have tied UnitedHealth’s hands to such a degree that they feel they can’t innovate their way out of it with different plan options, or even pass the cost along to their policyholders with higher premiums.
As Philip Klein explains, there’s another problem lingering out their for insurers in coming years:
The year 2017 is significant for insurers, because that’s the year when several programs designed to mitigate risk for insurers through federal backstops go away. The hope was that those programs would act as training wheels for Obamacare in its first few years of implementation, but after that, the insurers were supposed to be able to thrive on their own. UnitedHealth’s statement suggests otherwise.
If UnitedHealth and other insurers decide to exit, remaining insurers will be forced to take on even more high-risk enrollees, prompting them to either raise rates further or exit themselves. That in turn would deprive individuals of choices and remove competition, a key purpose of the exchanges.
Of course, no one is going to shed a tear for the health insurance industry, which few people like, and even fewer people trust. But as health insurance consultant Robert Laszewski explains the real-world impact to consumers.
“Premiums after subsidies are still too high. Deductibles are up to the roof, networks [of health providers in plans] are narrowing,” Laszewski told CNBC.
“Fundamentally, the carriers have to be allowed to sell health plans that people want to buy.”
Sadly, it’s hard to expect that any of that changes under a Democrat president. Which means we either have to elect a Republican in the upcoming election–one who is willing to fundamentally change Obamacare–or we’re going to have to accept the coming insurance death spiral. Not much of a choice is it?