Obamacare’s financial problems, umpteenth chapter

Health Overhaul Undercover Probe

Given that President Obama said ISIS was contained just hours before the Paris attack, and that John Kerry said al-Qaida was neutralized the day before its attack on a hotel in Mali, I can only assume someone in the Obama administration recently said something about the financial strength of Obamacare (via Bloomberg):

“The biggest U.S. health insurer is considering pulling out of Obamacare as it loses hundreds of millions of dollars on the program, casting a pall over President Barack Obama’s signature domestic policy achievement.

“UnitedHealth Group Inc. has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act in 11 more states next year, bringing its total to 34. The company also cut its 2015 earnings forecast.

“While millions of Americans have gained coverage under Obamacare since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth’s case they haven’t been the most profitable. Customers the company has added have tended to use more medical care. UnitedHealth also said today that some people are signing up for coverage, getting care and then dropping their policies.

“‘We cannot sustain these losses,’ Chief Executive Officer Stephen Hemsley told analysts on a conference call. ‘We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.’

“UnitedHealth said it expects as much as $500 million in losses on the Obamacare plans in 2016. The insurer will record $275 million of the costs in the fourth quarter. United also said Thursday it’s booking $350 million in losses tied to the 2015 performance of its ACA plans.”

This is not another insurance co-op going under, although that failure of a key Obamacare plank has been happening with alarming frequency, too. This is the largest insurer in the nation saying it will lose more and more money selling the kinds of plans Obamacare requires to be sold on the exchange.

That’s because the architects of Obamacare tried to force exchange customers into an overly large, overly expensive, one-size-fits-all type of insurance. The plans that meet Obamacare requirements are designed to be everything to everyone, but they have turned out to be what relatively few people actually want.

The basic economic failure of Obamacare-approved plans has been evident since before the exchange opened: You cannot restrict insurers from competing on the coverage they offer, restrict the ways they can charge different customers, and then expect meaningful price competition. Nor has the law’s focus on premiums — without any regard to other costs to consumers, such as deductibles — worked out in the real world, i.e. outside the offices of the Obama administration’s central planners. Reducing premiums by subsidizing the hell out of them with tax dollars does nothing for a consumer if his deductible rises so high that his actual out-of-pocket cost of having insurance and receiving medical care remains unaffordable. Those lower-premium plans that Obama described as worthless because they didn’t pay out anything were no worse than the plans that replaced them and don’t pay out anything until a consumer has racked up $2,000 or more in medical bills.

But the most worrisome thing here is what UnitedHealth said about people only paying for insurance during the exact moments they need insurance. The individual mandate was designed to prevent that, but that isn’t happening. Instead, exchange plans are becoming insurance that is purchased primarily by the sick, which isn’t insurance at all but a cost-shifting scheme. There lies the death spiral that has concerned the industry from the beginning, in which too few healthy people are in the risk pool, driving up costs and in turn premiums, which encourages healthy people to drop their insurance, which further drives up costs and thus premiums, and on and on until the market collapses. No wonder insurers are beginning to think they can’t make it in that business much longer — and we’re only two years into this grand experiment.

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40 comments
Paul David
Paul David

Creative commentary - I loved the facts ! Does anyone know if my business could possibly get access to a sample CA Form 275-321 document to use ?

RoadScholar
RoadScholar

Imagine that....people buying health insurance because they may get sick!

Seems like UHC set their rates too low. It's a private business despite the law. But I bet the upper mgmt gets their huge bonuses anyhow!

As for high deductibles, people make choices...some bad....some good.

Starik
Starik

@Lil_Barry_Bailout @RoadScholar So, when some thug gets shot, whether in the commission of a crime or not, the Fulton & DeKalb taxpayers get to pay for it?  Terrific system.

Lil_Barry_Bailout
Lil_Barry_Bailout

@RoadScholar Try reading the OP.  One of the problems cited is people buying insurance only after they're sick, and not paying the premiums after they're treated.

This is a feature, not a bug, of the math- and economically-challenged left's "reform"...legalized scumbaggery.

Wascatlady
Wascatlady

@Lil_Barry_Bailout @RoadScholar I'd not hesitate to guess that most of those who have fallen into this have chronic health problems, for which they got some treatment, but then were not able to sustain their required payment and have fallen off the list. We will see these folks continue to show up in the ERs now that they no longer have coverage.


People did not sign onto Obamacare for a cold or a cut finger, and then bag on the payments.

LilBarryBailout
LilBarryBailout

Any pain the insurance companies are feeling is well-deserved.  They unbelievably and unwisely supported this liberal fascist handout program.

stogiefogey
stogiefogey

@LilBarryBailout  And with legions of actuaries on their payroll you'd think they could've seen this train wreck coming from a mile away.

Stephenson_Billings
Stephenson_Billings

HHS: Bailing out Obamacare insurers an 'obligation' of the federal government


"The Department of Health and Human Services attempted to reassure private insurers on Thursday that they'll be able to recover losses from participating in Obamacare by claiming it was an "obligation" of the U.S. government to bail them out.


At issue is a provision within the law known as the risk corridors program. Under the program, which runs from 2014 through 2016, the federal government is to collect money from health insurers doing better than expected and use those funds to provide a federal backstop to other insurers who incur larger than expected losses from rising medical claims. The idea was to provide training wheels to insurers in the first years of Obamacare's implementation, and to take away any incentive for insurers to cherry pick only the healthiest customers."


http://www.washingtonexaminer.com/hhs-bailing-out-obamacare-insurers-obligation-of-the-govt/article/2576837


RafeHollister
RafeHollister

@Stephenson_Billings From each according to their ability to each according to their need.  A Communistic system for the insurance companies, who is next?

Starik
Starik

Obamacare passed by a single vote; we'll eventually end up with a civilized single-payer system, but first the political power of the medical-pharmaceutical complex has to brought under control.  Basic medical care should be provided by the government.

LilBarryBailout
LilBarryBailout

@Starik

Single payer failed in deep-blue Vermont.  Why?  Because, unlike the federal government, Vermont wasn't going to be able to print money to pay for it.  Tax payers were going to have to pay for it, and they said a collective "NYET!!"

Lil_Barry_Bailout
Lil_Barry_Bailout

@Starik @LilBarryBailout

As long as you define "works" as longer wait times and lower quality.  Leftists say Obamacare is working, so I'm not optimistic you understand the usage of that word.

Starik
Starik

@Lil_Barry_Bailout @Starik @LilBarryBailout Obamacare works only in that some working folks have insurance now, so I don't have to pick up the tab for their Grady bills. It also keeps the doctors in Porsches and the hospital/pharma CEOs in Ferraris.

RafeHollister
RafeHollister

Any plan whose survival depends on people being honest, responsible, thrifty, and morally committed to doing their part is doomed to fail.  This country has spawned an entitlement mentality in our citizens, wonder why.  Scamming the system has become a way to support your family it seems.  Getting care and dropping payments sounds like pretty typical behavior, based on what we have seen happen with the SocSec disability explosion.


Just about every reason this regime used to justify taking over the healthcare industry has been proven false.  The biggest selling point was that ER visits were costing the country tremendously, so what happens, ER visits go up after Obamacare.  The justification for the subsidies were that taxpayers were paying anyway, as we had to reimburse the hospitals for these visits.   Well now we are paying for both, the ER visits and the healthcare subsidies.


I think you will see more insurance companies abort the exchanges as the customer base they were promised doesn't seem interested. Young health individuals prefer to gamble on their health and wait to get sick, so the pool is those with preexisting conditions and middle age folks in poor health. No money to be made for the insurers, it seems, just another expensive Government boondoggle for the taxpayers.

JeffreyEav
JeffreyEav

The first days are the hardest days . . .

Obamacare is still in it's infancy. No need to throw out the bath water much less the baby.

LilBarryBailout
LilBarryBailout

@JeffreyEav

Tax payers are subsidizing health insurance companies, which was supposed to alleviate any initial difficulties.  It isn't working, just as Real Americans told you beforehand.

Wascatlady
Wascatlady

Part of the problem seems to be that many people who now have insurance through Obamacare are used to getting their care for free (for them)--at the ER.  So having insurance, with its requirements for copays and deductibles, is foreign and comes as a shock.  My frustration is--this is how it is.  ALL of us (except those on Medicaid or CHIPS) have to deal with copays and deductibles, and most have to strain to pay them.


To make this go away, go to single payor.  Or, find a way to get folks OUT of the ER for basic care, and make the cost of basic care reasonable.

LilBarryBailout
LilBarryBailout

@Wascatlady

United is losing money on Obamacare policies.  That means that the COSTS are even higher than the sum of the premium, the subsidy, the copay, and the deductible.  Single payer does nothing to change that equation.

Honestly, aren't you leftists supposed to own math or something?

Wascatlady
Wascatlady

@LilBarryBailout @Wascatlady Single payor gets rid of the middleman markup.  You don't pay for insurance company executives' astronomical salaries with single payor.

Doomy
Doomy

As an insurance agent I'm seeing it firsthand Kyle. Premiums are indeed going up. I've got folks who paid a penny a month 2 years ago, then paid $100 this year, and next year will be paying $200-300$. And most of the people signing up are indeed sick or heavily subsidized people. Not many healthy people signing up. 

Caius
Caius

As several said on day one of Obamacare, if the insurance companies are making a profit Obamacare is here to stay. If not, its not.



JFMcNamara
JFMcNamara

Well, instead of trying to repeal it hundreds of times, fix it. Oh yeah, Republicans want America to fail so they can win elections...

This idea is a Republican idea from the nineties, and every other developed nation has a variant of socialized healthcare. Why is America different? Are we too dumb to do what is successful everywhere else, or simply unwilling to help people for political gain? Any failure of Obamacare affects millions of Americans no matter their political persuasion.

bu2
bu2

@JFMcNamara We have the best healthcare in the world.  People from around the world come HERE for treatment.  Its very successful here.  Just very expensive.

Starik
Starik

@bu2 @JFMcNamara The best healthcare in the world?  Only for the wealthy, who get first-class care.  The rest of us get by, paying our insurance costs and covering the cost of medical care for the poor and working class through taxes.

Wascatlady
Wascatlady

@bu2 @JFMcNamara People here go to places like Costa Rica for top health care at low prices.  How does Costa Rica do it?


We aren't ALWAYS the greatest on Earth.

Lil_Barry_Bailout
Lil_Barry_Bailout

@Starik @bu2 @JFMcNamara The wealthy pay the vast majority of the cost of medical care for the moochers, who are on Medicaid.  Sure, your premiums have been jacked up to subsidize some other moochers, but that's just a small part of it.