During the healthcare debate of 2009 and 2010, conservatives screamed a simple fact from the rooftops: Obamacare will not work. No one wanted to listen then, but their warnings are now coming into fruition.
Obamacare, as constructed, attempted to fix a dysfunctional health care payment system by creating an even more complicated system on top of it, filled with subsidies, coverage mandates, and other artificial government incentives. But its result has been a system that plucked Americans out of coverage they like and forced them to pay more for less.
Now the insurers are beginning to realize that in spite of all the subsidies and mandates working in their favor, and despite all of the cost-cutting they have had to do at the expense of consumers, they just can’t make money in this system.
In a Tuesday conference call with investors, the CEO of America’s largest insurer announced that his company would be hastening its pullout from the nation’s Obamacare markets, and will remain in just a handful of state marketplaces. UnitedHealth lost an estimated $425 million last year on its Obamacare marketplace activity, and it’s decided that enough is enough.
UnitedHealth is not the largest insurer within the Obamacare marketplace. But the loss of even just this one insurer, which currently covers only about 750,000 Obamacare customers — about 7 percent of the national total — will sharply reduce competition in several states’ insurance marketplaces. One study suggests that it could cause premiums to rise by $100 per month in some states before any other factors come into play.
And UnitedHealth isn’t the only insurer losing money, either. Bigger Obamacare insurers remain committed to the system for now — perhaps holding out for the insurer bailout for which they are now lobbying.
Heading into Obamacare’s first full year of implementation in 2014, millions of Americans who held individual market (non-employer) health plans received notices that they would have to switch, often to plans that were far more expensive. And the website that was supposed to allow consumers to purchase insurance with the same ease of buying airline tickets was initially barely functional.
But the real problems began only after the infamous computer problems were fixed. Those flocking to the online exchanges, as predicted by opponents of the law, turned out to be disproportionately sick and old. They brought with them massive costs, and the low-use, healthy young people needed to pay for the sicker and older clientele just didn’t show up to fill in the insurance pools.
Meanwhile, previous insurance customers discovered that this squeeze on the insurers was squeezing them, too, leaving them paying more for less. The networks of doctors and hospitals they could use were shrunk dramatically to keep costs down. Their deductibles were raised significantly, so that for the average health care consumer insurance had become a much worse deal than it had been previously. Yet the law required individuals to carry it, under penalty of fine.
With Congress rightly refusing to provide a federal insurance bailout, premiums have risen sharply in many states to better reflect the real costs of this system. There will be more pain this summer as premiums rise yet again, in contravention of Obama’s promise that the average family would see its premium decrease by thousands each year.
Taxpayers and insurance customers alike should demand replacing Obamacare with a system that reduces costs and improves quality by injecting actual choice and competition into the insurance market.
