As another major health insurance company exits the vast majority of Obamacare exchanges and many U.S. states are forecasting massive premium increases later this year, a leading health care expert says the Obamacare death spiral is already beginning.
Late Monday, Aetna announced it was pulling out of Obamacare exchanges in all but four U.S. states as a result of large financial losses. The company reported $200 in pre-tax losses in the second quarter of 2016 alone.
“As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision,” said Aetna CEO Mark Bertolini in a written statement.
Galen Institute President Grace-Marie Turner says Aetna’s decision to largely abandon the exchanges is a huge development.
“Aetna was all-in in not only trying to get the law passed but also to try to make this work. So with Aetna throwing in the towel, I think it really shows the way this law is structured, and particularly the way it’s been implemented, just does not work,” said Turner.
Turner says Aetna is hardly an outlier. She says health insurers are getting crushed with financial losses from the health care law.
“[Aetna] estimates they’ve lost $400 million through their exchange business. United Healthcare reported a week or two ago that they had lost $300 million. The estimates are that altogether insurance companies lost four billion dollars in both 2014 and 2015,” said Turner.
She says numbers like that leave insurance executives no choice but to get out.
“They are very likely losing the same amount in 2016. They are basically saying we can no longer justify to our shareholders participation in these failing exchanges,” said Turner.
The Aetna announcement also convinces Turner that we have now begun the Obamacare “death spiral.”
“That really is an indication we are in the death spiral. That means you wind up with fewer and fewer healthy people in the pools and more and more sick people. When that happens the premiums have to go up and up and up. We’re seeing that already in the requests for premium increases next year – in some cases 40, 50 or 60 percent increases,” said Turner.
As distressing as this is, Turner says the frustration is far deeper when realizing she and other Obamacare opponents predicted this exact scenario.
“In our book, “Why Obamacare is Wrong for America,” we said this is what was going to happen because we could see that the law itself and particularly the regulations that have been developed since then were designed to destabilize the functional mechanisms of insurance markets. That’s exactly what’s happening now,” said Turner.
And how did insurance companies go from being giddy about a law that required every adult to purchase health insurance to losing money by the hundreds of millions. Turner says ill-conceived ideas like letting young adults stay on their parents’ polices until age 26 robbed the market place of the young, healthy people needed to balance out the many sick people flooding the system.
“That meant that you were going to have older, sicker pools. Then they said you can buy health insurance basically at any time during the year with any of 30 different explanations and get in and out of the pool when you’re sick,” said Turner.
She says the law allows people to game the system in a very destructive way.
“People were going into the exchanges, purchasing coverage, getting this expensive treatment, dropping their insurance and then, if they felt like it, they’d get in the same pool the next year without having to pay any penalty,” said Turner.
Critics of Obamacare fear this predictable outcome will be used by big government proponents to contend private coverage cannot meet the health care needs of the American public and that a public option or even single-payer healthcare is the solution.
Turner says so long as Republicans control at least one chamber in Congress none of that will happen. But she says the public, which has never liked or wanted Obamacare, is not about to endorse more government control of their health care.
“People have had just about enough government with Obamacare. They realize that Washington is making the rules, taking away choices from individuals and doctors so that bureaucrats are making decisions, not only about what kind of health insurance they can have but what health insurance they must buy,” said Turner.
She says the American public will see the dire condition of the health care system at a very interesting time this year.
“This is really going to come home just before the November election, when people start to see their premium increases for next year,” said Turner. “People are going to see it when they see that their premiums have gone from $500 a month to $800 a month. That’s going to happen just before the election.”
