Wednesday, September 4, 2013

Fwd: qotd: Some big insurers leery of exchanges

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Some big insurers leery of exchanges
Date: Wed, 4 Sep 2013 12:00:04 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Financial Times
September 3, 2013
Big US health insurers wary of 'Obamacare' exchanges
By Stephanie Kirchgaessner

Some big US health insurers, including Cigna, Aetna and
UnitedHealthcare, are steering clear of most of the new state healthcare
exchanges amid uncertainty about the kinds of customers they might
attract: namely sick ones.

The three companies have said they are taking a cautious approach
because they need to evaluate how the markets – set up under the
"Obamacare" reforms – will work. They add that they are specialised in
providing insurance to big employers, not the individuals and small
businesses that will be served by the exchanges.

An Obama administration official said risk adjustment and reinsurance
programmes under the law were designed to offer incentives to health
insurers to make sure they do not avoid enrolling customers with the
greatest needs.

A spokesman for Cigna, which is participating in five of 50 new
exchanges, agreed that the provisions would help the company manage risk.

UnitedHealthcare said it would participate in about 12 exchanges
initially, but said the exchanges had the "potential to be a growth
market" over time.

A spokesman for Aetna said it would participate in up to 14 exchanges.
It emphasised that it planned to position itself "for the future".

Comment: UnitedHealthcare, Aetna, and Cigna - three of the largest
private insurers in the nation - have decided to not participate in most
of the state exchanges being established under Obamacare. Obama and his
health care architects had told us that it was better to build on the
system we had, expanding the prevalence of private insurance. With this
gift of a ready-made market for the private insurers, why are they
sneaking away?

America's private insurers have always welcomed the healthy and shunned
the sick. The greatest example is the largest insurance market of all -
America's workers and their families - not only the largest market in
the nation but also the healthiest.

In contrast, the individual and small group markets exposed insurers to
greater risks, so they countered by using underwriting to select only
the healthy while rejecting those who needed health care. In turn,
Obamacare now prohibits selective enrollment - cherry picking and lemon
dropping. Insurers rightfully fear that those with greater health care
needs will rush into the exchanges, creating high cost risk pools that
would price premiums out of the market.

About 31 million people will remain uninsured. They are healthier than
average since they will include young invincibles who would rather take
a chance, hard working immigrants and their families, many of whom are
prohibited from participating, lower-income workers who are exempt
because of lack of affordable plans for them, and families with incomes
high enough to disqualify them from subsidies yet low enough that they
will find the premiums to be unaffordable, especially for plans that
still leave them exposed to the out-of-pocket expenses of high
deductibles and other cost sharing.

These big insurers aren't dumb. If they are going to sell plans in the
exchanges, they want most of these low-cost individuals included in
order to dilute the high costs of the sick who will enroll, thereby
allowing the insurers to offer competitive premiums. Quite clearly, they
are not convinced that will happen.

Will delaying a year result in an influx of some of these healthy
individuals into the plans? Look at the list again. Likely some of the
previously healthy who develop medical problems will want in. But that
will increase the costs of the pools even more, causing the healthier to
disenroll because the premiums are driven up further - the classic
problem of the death spiral of skyrocketing health insurance premiums.

We should listen to UnitedHealthcare, Aetna, and Cigna. This is a highly
flawed method of financing health care. It just doesn't make sense from
a business perspective. But also we should give some thought to this
ourselves. Does it really make sense to to insert an administratively
wasteful insurance intermediary that has found great success in
manipulating the markets so that they can welcome the healthy and shun
the sick? Medicare Advantage has already proven to us that private
insurers will always find a way around risk adjustment and other
regulations in order to shift costs away from them and onto taxpayers.

Obama and friends crafted this program to take good care of the insurers
while depriving us of a less costly, more efficient and more effective
social insurance program - an improved Medicare for all - and yet the
insurers are still not satisfied. It's too bad that we are going to have
to wait until 2015 and 2016 to see premiums skyrocket and insurers bail

What will be our response then? Will we let the insurers continue to
cover the healthy while accepting for the rest of us the fact that
financial hardship is simply an inevitable consequence of facing serious
illness? Based on the lack of public engagement to this date, it seems
like that is where we are headed.

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