qotd: The ACA insurance exchange model has failed

Bloomberg Business
October 30, 2015
Obamacare Premiums Climb, But Insurers Struggle for Profit
By Zachary Tracer

Many people shopping for health coverage this weekend on the websites
created by Obamacare are going to see double-digit percentage increases
in their premiums. That's still not enough for some insurers.

Anthem Inc. says there remain competitors in the government-run
marketplace offering premiums that aren't enough to profitably provide
the coverage patients will require. Prices in some areas probably will
have to climb in 2017 and even 2018 to reach levels that make sense,
according to Chief Financial Officer Wayne Deveydt. Meantime, Anthem
will sacrifice market share to keep its plans profitable, he said.

"When you have fewer national enrollees and you have price points that
we don't believe are sustainable, we've just made a conscious decision
we're not going to chase it," Deveydt told analysts on a conference call
on Wednesday. "We are going to need to be patient until this works
itself out."

Deveydt's remarks spotlight a problem for the Patient Protection and
Affordable Care Act's marketplaces as the third annual sign-up period
begins Sunday. Set prices too low to lure customers, and losses can
mount. Some smaller firms already have closed, and some bigger insurers
have withdrawn from markets -- such as Aetna Inc., which will offer
coverage in two fewer states this year.

The conundrum has led to this year's price increases, which have been
higher, on average, than last year's hikes. But the danger is that
premiums are now too expensive for some families to afford coverage,
especially the uninsured people the Obama administration is trying to
persuade to shop on the exchanges for the first time.

But the remaining uninsured are poorer and younger than those who've
already signed up, and they're more difficult to reach, Health and Human
Services Secretary Sylvia Mathews Burwell has said. That may mean slower
growth for the insurers.

Charles Gaba, who tracks the health law on ACASignups.net, estimates
that the rate increases across the U.S. will average about 12 percent to
13 percent, based on a weighted average of current enrollment.

"Some of the large carriers are having pretty significant rate
increases," said Jeff Smedsrud, who runs the private insurance shopping
site Healthcare.com.

Price isn't the only challenge for insurers, according to Shawn Guertin,
Aetna's CFO. Membership levels are lower than expected, and some
individuals are sticking with pre-Obamacare plans, cutting into the size
of the market. There's also been lots of churn -- customers signing up
and then dropping their policies throughout the year.

Aetna hasn't been turning a profit in Obamacare plans, the company has
said. Guertin said its price hikes range from high single digits to the
mid-teens, depending on the market. UnitedHealth Group Inc., the largest
U.S. health insurer, has said its premium increases are in the double
digits as well.

http://www.bloomberg.com/news/articles/2015-10-30/obamacare-premiums-jump-but-insurers-still-struggle-for-profit

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Comment by Don McCanne

The performance of competing private insurance plans within the ACA
exchanges is not much different from the performance of the pre-ACA
private plans in the individual market. Trends in higher insurance
costs, greater cost sharing, and narrower choices were already
occurring, and they continue to grow progressively worse. Access and
affordability can only suffer.

Higher premium credits and out-of-pocket subsidies are helping
individuals with incomes near poverty levels, but, for middle-income
families, they are inadequate to provide much benefit.

Higher premiums and more cost-shifting to patients are adequate to
maintain profits for most larger insurers, but where even these measures
are inadequate, insurers are pulling out of the exchanges, and some of
the smaller insurers are even folding. Market manipulations create
instability.

The insurers show their true colors through statements such as that of
Anthem's Chief Financial Officer Wayne Deveydt. Reporting to Wall Street
analysts, Deveydt said about the market, "When you have fewer national
enrollees and you have price points that we don't believe are
sustainable, we've just made a conscious decision we're not going to
chase it."

Higher premiums, greater cost-sharing, narrower networks - the behavior
of the private insurers is not changing in spite of the promise of
higher value and lower costs through the ACA Marketplaces. The ACA
exchanges are a creeping failure that is growing worse. Congress
enacted the wrong model of reform. We need single payer.