ObamaCare Reality Today – What We Know and Don’t Know – Part II


In this second of two posts on what we know and don’t know about the reality of ObamaCare, we’ll discuss things we don’t know. Doug Badger, writing for The Galen Institute poses four major questions about the future of ObamaCare that remain unanswered:

Things We Don’t Know

  1. Can insurers make money in the exchanges without corporate welfare? ObamaCare has propped up the insurance companies for the first three years with bailout provisions known as the “3 Rs”; reinsurance, risk adjustment, and risk corridors. These have enabled the insurance companies to participate on the exchanges with little fear of losing money since the government will bail them out. These provisions are set to expire, however, in 2017.


The risk corridors were expected to bailout those insurance companies that lost money out of funds taken from those insurance companies with excess profits. However, the losses have greatly exceeded the profits. Insurers’ “excess” losses amounted to $2.9 Billion in 2014, while “excess” gains totaled just $360 Million.

The Obama administration tried to pay off the full extent of the losses despite the fact that the law called for this provision to be budget neutral. Congress stepped in and blocked the excess payments to the insurance companies so they only received 12.5% of the money requested.

The reinsurance program also lost more money than expected. The federal government gave insurers $10 Billion in such payments last year. Despite all that free money, insurers managed to lose $2.5 Billion in the individual market in 2014, an average of $163 per customer, according to research by McKinsey and Company.

Badger wrote his comments on November 3, but since then this question seems to have been answered. On November 20th, The Wall Street Journal reported that UnitedHealth Group, Inc., the nation’s largest healthcare insurer, is now threatening to abandon the ObamaCare exchanges due to losses of $700 million in 2015. Other companies, including Aetna, Humana, and Cigna admit to large losses but are more hopeful than UnitedHealth Group that things will improve in the future.


  1. Will More States Expand Medicaid? More than 70% of the increase in the number of insured Americans has come from the expansion of Medicaid. Thirty states plus the District of Columbia accepted the ObamaCare terms for expansion. If the other twenty states agree to expansion, this would significantly decrease the number of uninsured Americans.


Badger does not attempt to answer this question but a recent post of mine does (Medicaid Expansion Causing Buyer’s Remorse). This post notes the unexpected enrollment of many more residents has busted the budgets of many states that expanded Medicaid. As the negative consequences of Medicaid expansion become more widely known, it is doubtful than any more states will agree to this fiscally irresponsible choice.


  1. Will Exchange enrollment continue to underperform? HHS Secretary Sylvia Matthews Burwell has already conceded that it will be “a challenge” to enroll ten million on the exchanges this coming year of 2016. This is less than half of the 21 million the CBO estimated earlier this same year, which was downsized from 24 million projected before. With three out of four eligible people refusing to enroll, it’s clear that Burwell was correct in describing increasing enrollment as a challenge.


These statistics make it clear that most people who have to pay for ObamaCare out of their own pockets think the price is too high and the value too low. They are choosing to pay the penalty for failing to purchase healthcare insurance rather than spend much more money for insurance coverage they don’t need or cannot afford.

Therefore, the answer to this question is almost certain to be continued underperformance of the exchange enrollments.


  1. How will ObamaCare affect the 2016 elections. . . and vice-versa? It is clear that the Democratic response will be the continuation of ObamaCare – with even more government regulations added to “fix” ObamaCare. This is the stated position of Democratic front-runner Hillary Clinton. Senator Bernie Sanders, Clinton’s only real challenger, would go even farther pushing his agenda of full socialized medicine.


Republicans, with the exception of Donald Trump, want to repeal and replace ObamaCare with a system of tax credits to subsidize insurance, increased marketplace competition, more freedom of choice of insurance plans, and expanded use of HSAs to increase patient control and responsibility for their healthcare.Trump believes in single-payer healthcare like Canada and Scotland.

The future of healthcare, and the direction of our country, will be decided by the election results. The choice is quite clear – more of the same government intrusion into healthcare – or the restoration of freedom of choice in picking your healthcare plan, your doctor, your hospital, and your treatment. As people experience more of the current healthcare train wreck, the decision should be more obvious as the November, 2016 Election Day approaches.

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