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Walls fall in on Obamacare

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The real problem with Obamacare is not legislative uncertainty, but the fact that insurers have been losing hundreds of millions of dollars each, and expect to continue doing so if they keep selling insurance under the law's regulatory structure. (Andrew Harrer/Bloomberg)

It's not just a Republican talking point that Obamacare is falling apart. Democrats' efforts to shift all blame to President Trump and his party are misleading. Obamacare is crumbling because it was poorly made.

Further proof of that arrived Thursday when Aetna said it would quit Obamacare in the last four states where it has been participating. Other insurers are abandoning the law's insurance exchanges or requesting eye-popping premium increases for next year. These facts demolish Democrats' insistence that the law is working just fine.

Democrats and their allies in the news media have pivoted to blaming President Trump for Obamacare's struggles. It would be closer to the truth to say that if Trump and the Republicans hadn't won the 2016 election, President Hillary Clinton and a Democratic Congress would currently be scrambling to find ways to prevent the program's collapse.

And it is really is a collapse.

This month Obamacare became extinct in 94 of Iowa's 99 counties, as a small insurer, Medica, which had been the last man standing, followed Aetna and Wellmark Blue Cross Blue Shield out of the program. This means there may be zero insurers on the state's exchanges next year.

Meanwhile, CareFirst Blue Cross Blue Shield has asked Maryland's insurance regulators to let them raise premiums by up to 58 percent next year. Invoking the dreaded phrase "death spiral," its CEO requested similarly enormous premium increases in neighboring Virginia and Washington, D.C., Anthem, an insurer that has enjoyed more success under Obamacare, has asked for a 38 percent increase in premiums in Virginia for 2018.

Bear in mind that these new, higher premiums are for year five of Obamacare. The law's authors were convinced insurers would have a good handle by now on how much they would need to charge customers to be profitable and fall within Obamacare's limits on how much they can make as a percentage of their revenue. These massive increases signal that the stabilization has not occurred, and isn't going to. The continued market exits, a phenomenon observed previously in states that had adopted Obamacare-like rules long before the program existed, are a sign of how deep Obamacare's problems go.

The real problem with Obamacare is not legislative uncertainty, but the fact that insurers have been losing hundreds of millions of dollars each, and expect to continue doing so if they keep selling insurance under the law's regulatory structure. As critics expected, too many of the people newly signing up suffer from expensive medical conditions, and too few are healthier customers who are needed to pay their bills.

As a result, Carefirst, which had long served the mid-Atlantic region before Obamacare, has lost a cumulative $600 million on its plans. Aetna has lost $700 million. UnitedHealth lost more than $1 billion before quitting nearly all of Obamacare's state exchanges. And Anthem, which lost money on Obamacare last year despite doing better than most other insurers, has signaled deep concern about the future with its requests for large premium increases, and its threat in late March (not carried out) to quit all of the exchanges in 2018.

Obamacare's defenders blame "uncertainty" about the law's future and its enforcement for this problem. Their insinuation is that Republicans are making the law fail by trying to change it. But "uncertainty" is neither alone nor even chief among Obamacare's problems, which were already getting worse long before it seemed Republicans would have a chance to decide the law's future.

Trump didn't cause the insurers' nine-figure and ten-figure losses in 2016. The realities of the individual insurance market under Obamacare caused those losses.

Many of the insurers' new rate hike proposals are not based on Obamacare's collapse and do not price in uncertainty. Instead, the insurers' requests assume that Obamacare will continue to be in place. Both CareFirst and Anthem, for example, assumed that Obamacare's cost-sharing subsidies would continue intact when requesting their premium increases, and may have to ask for even more if that part of Obamacare doesn't come through.

Uncertainty about the law's future isn't pleasant for insurers, and it plays some role in the exchanges' shakiness. But the Republican attack on Obamacare isn't the main cause of Obamcare's troubles. Obamacare is.

Republicans have an obligation to do something to save the individual insurance market, upon which many people depend. They cannot afford to leave consumers at the mercy of a system that is falling apart, and they will be judged harshly if they do.