Health Reform: ObamaCare was supposed to be on a roll by now, promising 20 million signing up, low cost and stable premiums. Turns out it’s on a roll all right. It’s rolling towards the cliff.
Insurance giant Aetna (AET) has joined a growing number of insurers warning that the ObamaCare exchanges are failing in just the way critics said they would. This year’s anemic enrollment won’t help.
This week, Aetna CEO Mark Bertolini warned that “we continue to have serious concerns about the sustainability of the public exchanges.” Aetna lost more than $100 million last year on the 750,000 enrollees it has through ObamaCare exchanges.
Bertolini’s warning comes after UnitedHealth Group (UNH) announced that it might pull out of ObamaCare entirely next year, after getting hit with a $475 million loss in 2015. It expects to lose another $500 million this year. Last fall, CEO Stephen Hemsley said that “we can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.” That, he said, “basically is an industry-wide proposition.”
Anthem (ANTM) CEO Joe Swedish said on his earnings call last week that “we aren’t experiencing the overall market growth on the public exchange that we projected when we laid out our five-year plan.”
And Blue Cross Blue Shield of North Carolina, meanwhile, expects to lose $400 million on its first two years of ObamaCare. It was able to get rate increases in the state that averaged 32.5%.
That’s not to mention the fact that more than half of the non-profit insurance co-ops that ObamaCare created have since failed.
Turns out that not only is ObamaCare failing to attract enough young and healthy, it has also encouraged others to game the system by waiting until they get sick to sign up for coverage, outside the three-month open enrollment window.
Aetna and UnitedHealth say that these people use more health care than those who sign during open enrollment and in many cases drop coverage once their medical bills get paid.
This, by the way, is precisely what ObamaCare critics predicted would happen. Guaranteeing insurance coverage to everyone, no matter how sick, and charging those with preexisting illnesses artificially low rates, provides an enormous incentive to cheat. States that had tried these reforms ended up creating premium “death spirals” and wrecking their individual markets.
ObamaCare’s designers knew this was a risk. But they figured that the limited enrollment window, plus the mandate penalty, would take care of it. Clearly, they were wrong.
So the administration is now promising that it will get tougher on those trying to exploit the “special enrollment” exemptions built into the law to avoid buying insurance until they need it. Whether it will do so is debatable, since the administration is clearly more interested in goosing enrollment numbers than it is program integrity.
If there’s any good news in all this, it is that ObamaCare’s unraveling is happening now, just as voters are trying to decide whether to elect someone who promises to “build on” ObamaCare, or someone who wants to end the misery.