UnitedHealth — the largest insurance company in the country — recently announced that it might quit Obamacare’s healthcare exchanges in 2017. The CEO of another major insurer, Cigna, just made clear that his company hasn’t yet decided if it’ll stick around.
That’s what losing hundreds of millions of dollars on plans offered in Obamacare’s exchanges in just the last three months of this year will do.
Taxpayers should heed these examples. It’s time for the government to cut its losses on the exchanges — and move on as well.
UnitedHealth and Cigna are hardly the only insurers reassessing. Humana is dropping coverage for about 100,000 people on exchanges. Aetna also plans to pull out of two markets where it currently offers plans.
The fundamental problem for UnitedHealth and other insurers is the risk pool in Obamacare’s exchanges.
When the marketplaces opened, sicker people in need of immediate care flocked to get insurance on the 17 state-run exchanges or the federal exchange, healthcare.gov. But younger Americans, who tend to be healthier, largely refused to purchase policies. After all, why spend money on something they probably wouldn’t use?
According to the Department of Health and Human Services, half the uninsured who are eligible for subsidized coverage through the exchanges have refused to purchase it. Even the promise of federal dollars has been insufficient to convince the young to buy insurance.
As a result, those remaining in the insurance pool have tended to be sicker and older — and they’ve used more health services than insurers expected.
How much more? According to the consulting firm McKinsey & Co., insurers collectively swallowed $2.5 billion in unexpected medical expenses from exchange enrollees in 2014.
The federal government tried to offset expected costs by handing $7.9 billion in taxpayer money to insurers last year. The feds also gave insurers $362 million — though they asked for a whopping $2.9 billion — through Obamacare’s “risk corridors.”
But these bailouts didn’t work. According to the Heritage Foundation, insurers lost 12 percent in 2014 by selling on the exchanges.
In order to stay solvent, insurers have had no choice but to raise rates. Premiums are going up by an average of 7.5 percent this year for mid-level “silver” plans. Americans who live in major cities will see rate increases of 10 percent, on average.
As premiums are going up, so too are deductibles. In 2017, annual deductibles for “bronze” plans, which are the least comprehensive and most affordable available to most consumers on the exchanges, could reach as high as $7,150.
The Obama administration says that the lower premiums on bronze plans allow many more people to access insurance. But deductibles in the thousands of dollars for many families render that coverage effectively useless. How helpful is insurance if a patient still faces financial ruin when medical catastrophe strikes?
It’s no wonder that Obamacare is falling well short of its stated goal of getting Americans covered. Twenty-nine million Americans remain uninsured. The White House expects Obamacare to enroll no more than 10 million of them by the end of 2016 — half the number of enrollees the Congressional Budget Office projected the program would have by then.
Those dismal coverage figures haven’t made Obamacare any cheaper. Even the Urban Institute, a think tank sympathetic to the Obama administration, recently concluded that the law will cost an additional $559 billion over the next 10 years.
Americans are increasingly concluding that the Affordable Care Act’s name is nothing but a cruel joke.