Friday, August 26, 2016

Insurance Companies Leaving Exchanges Makes Obamacare More Unsustainable

It wasn't bad enough when UnitedHealth Group announced earlier this year that it was leaving the Obamacare healthcare exchanges. Earlier this month, Aetna and Oscar joined the bandwagon of abandoning the health care exchanges. Proponents advocated for Obamacare as a way to improve the competition in the marketplace which offering more affordable healthcare. It was supposed to a panacea for the healthcare market, but we have seen that it has been anything but.

Should this really come as a shock? When looking at the exchanges earlier this year, I pointed out that high medical loss ratios would mean that it becomes more difficult for healthcare providers to make money, and Aetna continues to corroborate that notion. If providers are making a loss, it provides little, if any, incentive to stay in business. To deal with the lack of profit, insurance companies will either have to scale back services, continue to raise premiums, or leave the exchanges entirely. We are seeing a combination of all three taking place. Aetna and UnitedHealth Care are learning about self-induced adverse selection the hard way.

Part of the issue is that there are not enough younger and/or healthier individuals enrolling. As Left-leaning economist Dean Baker points out, "The people who are signing up on the exchanges are proving to be less healthy than the population as a whole." It's not as if this were an unpredictable outcome. I brought this up a couple years back, and it is no shock that incentivizing less healthier individuals to enroll while sticking healthier individuals with the bill ends up in disaster.

Since healthier individuals are less inclined to enroll, costs continue to rise while enrollment rates remain lower than initially predicted. This has been an issue from the onset, and continues to be an issue to this day. This is not simply a concern coming from the Right-leaning Heritage Foundation. The Kaiser Family Foundation is also finding that 2017 premiums are going to increase considerably. Obamacare premiums are going to continue to rise. It's as much as it is basic economics as it is observable reality. Healthcare cannot simultaneously be comprehensive, affordable, and accessible, yet its attempt at all three has done disservice to affordability, which in turn makes it more difficult for many to access healthcare. The incentives in the Obamacare system have made healthcare all the more unaffordable, and I would not astounded if more insurance providers abandoned Obamacare exchanges. Without an actual competitive marketplace that provides all individuals with the incentive to buy insurance, we'll just run into more of the same. When will we learn that we cannot regulate our way to prosperity? When, indeed?

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