April 15, 2016
Insurance companies: Obamacare losses are unsustainable
By Rick Moran
Insurance companies who offer policies on the Obamacare exchanges are worried about the financial sustainability of the Obamacare marketplaces and are looking for big increases in premiums next year.
If they don't get what they want, many companies will probably drop out of Obamacare altogether.
The Hill:
“Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.”
While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.”
In the short term, there is a growing likelihood that insurers will push for substantial premium increases, creating a political problem for Democrats in an election year.
Insurers have been pounding the drum about problems with ObamaCare pricing.
The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers.
A report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states.
“We continue to have serious concerns about the sustainability of the public exchanges,” Mark Bertolini, the CEO of Aetna, said in February.
The Aetna CEO noted concerns about the “risk pool,” which refers to the balance of healthy and sick enrollees in a plan. The makeup of the ObamaCare risk pools has been sicker and costlier than insurers hoped.
The clearest remedy for the losses is for insurers to raise premiums, perhaps by large amounts — something Republicans have long warned would happen under the healthcare law, known as the Affordable Care Act (ACA).
“The industry is clearly setting the stage for bigger premium increases in 2017,” said Levitt of the Kaiser Family Foundation.
The Kaiser Foundation has been Obamacare's biggest cheerleader even before it became law. If they're concerned about a collapse, you can bet there's a real possibility it can happen.
Why have healthy young people not signed up for insurance in the individual marketplaces? Surprisingly, the problem is the individual mandate that everyone has to be covered. The mandate has proven to be so unpopular that the administration was forced to carve out numerous exemptions, giving young, healthy consumers a way to avoid the fines for not being covered. Even with a healthy subsidy, most young people see no reason to pay for insurance when they won't need it for years.
Of course, opponents of Obamacare pointed this out before the law was passed, as well as predicting losses by insurance companies, the massive increases in premiums, and eventually the possible "death spiral" of Obamacare.
This is one case where there is no satisfaction to claim, "I told you so."
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