RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: Good: The quiet unraveling of ObamaCare  Wed Nov 25, 2015 4:40 pm | |
| President Obama was hammered last week for his failure on ISIS. But there's at least one bright spot for him in that criticism: At least it deflected the spotlight from the unfolding catastrophe that is ObamaCare.
Indeed, last week brought arguably the worst news for the program since the healthcare.gov debacle: UnitedHealthcare, the nation's largest insurer, announced that it might quit ObamaCare's exchanges next year. Should UnitedHealthcare act on this threat, there may not be enough (red) tape in the desk drawer of even future President Hillary Clinton to put the ObamaCare Humpty Dumpty back together again.
United announced during an investor briefing Thursday that it was expecting a whopping $425 million hit on its earnings this year, primarily due to mounting losses on its ObamaCare exchange business. "We cannot sustain these losses," United CEO Stephen Hensley declared. "We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."
Avik Roy, who serves as GOP presidential candidate Marco Rubio's health care advisor, suspects United may just be the first domino to fall. Other commercial insurers, such as Aetna, Anthem, and Cigna, have raised premiums by double digits and still say they can't make the numbers work in their favor. Hence, they have withdrawn from counties where their losses were particularly acute.
For-profit companies that have shareholders breathing down their necks don't have much latitude to absorb losses. But even companies that don't face similar profit-maximizing pressures can't escape the basic dilemma confronting the industry. For example, state filings of the non-profit Blue Cross Blue Shield show that the company barely broke even in the first half of 2015. In Texas last year, BCBS collected $2.1 billion in premiums and paid out $2.5 billion in claims. If ObamaCare's condition worsens, such companies will have to scale back their participation too.
And ObamaCare's condition will worsen. Why? Because not only are far fewer patients enrolling in the exchanges than projected, but those signing up are too old or sick for anything resembling a balanced risk pool.
Even the administration has admitted that ObamaCare enrollment has essentially flatlined, with only 1.3 million new members expected to buy coverage next year, compared to the 8 million projected when the law was passed. This means that overall enrollment by 2016 will be somewhere between 9.4 million and 11.4 million. That's half — half — of the 21 million initially predicted. So much for universal coverage!
The reason for this pathetic take-up rate is that the lavish benefits — in-vitro fertilization for 50-year-old women, for example — that ObamaCare mandated for qualifying plans have backfired. This mandate was intended to make sure that the young and healthy would purchase full — not bare-bones, catastrophic — coverage so that they would offset the cost of sicker patients. Instead, it has forced companies to jack up rates so much that only those eligible for full subsidies (the relatively poor) or the sick find it worth their while to buy coverage. The relatively young and healthy are opting to pay the penalty and "go naked." This, in turn, is forcing insurers to raise prices even more, which is causing more healthy people to drop out, unleashing the dreaded adverse selection spiral.
ObamaCare tried to prevent this downward spiral by, ironically, insuring the insurers against losses until 2017 through something called the risk corridor provision. Basically, the plan was to shake down companies making higher than expected profits and handing their proceeds to companies with higher than expected losses. Setting aside the perversity of forcing successful companies to subsidize failing competitors, the program hasn't worked because the entire industry is confronting losses and Congress has barred the administration from dipping into general funds — aka taxpayer pockets — to bail it out. (United withdrew partially because it sees no relief in sight from the government. "We see no indication of anything actually improving," CEO Henley said.)
http://theweek.com/articles/589920/quiet-unraveling-obamacare |
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