Just as a meteorologist predicts the weather from studying scientific data, an insurance analyst watches trends in the industry in order to predict the future of insurance. The forecast is looking grim.
Bob Laszewski is a highly-respected health insurance industry analyst who writes a blog called Health Care Policy and Marketplace Review. His observations have earned him many awards including the Washington Post’s Wonkblog “Pundit of the Year” for 2013 for “one of the most accurate and public accounts” detailing the first few months of the ObamaCare rollout.
In his most recent post, he comments on the significance of the announcement by UnitedHealth to leave the ObamaCare exchanges in most states in 2017. He says those in the insurance industry are unconcerned, believing that the unpredictability of the market will “stabilize” by 2018, about two years later than previously anticipated.
The Past Is Prologue
Laszewski says they are missing the forest for the trees. Here’s why:
- He notes that in 2015, not-for-profit Blue Cross Blue Shield lost money in the aggregate for the first time since the 1980s because of their ObamaCare exchange losses.
- More than half of the ObamaCare Co-Ops are already bankrupt and most of those remaining are close to insolvency.
- Health Care Services Corporation (which includes Blue Cross in Illinois and Texas) says they lost $1.5 billion in 2015 and $767 million in 2014.
- Humana’s profits fell 30% in the fourth quarter driven by the $176 million reserve they set up on account of ObamaCare.
- Virtually every insurance company participating in ObamaCare is losing money three years after implementation.
Laszewski says the real headline is this:
“ObamaCare is not about the insurance companies, it is about the consumers that have nowhere else to purchase individual health insurance in the United States and are already finding the offerings – with subsidies or without – lousy deals.”
In other words, no matter what the White House tries to tell you – and no matter how much the insurance industry tries to sugar-coat the truth, the forecast is for very rough weather – which means there’s no end in sight for the rising healthcare insurance premiums and deductibles.
Laszewski expresses his alarm:
“Have any of these people considered what it will mean to the consumer once the insurance companies repeatedly raise the rates, tighten the networks more and increase the out-of-pocket costs in order to get themselves to a “stable” place in the years ahead?”
The cost of healthcare premiums and the out-of-pocket expenses of rising deductibles for those without eligibility for subsidies are already unaffordable for many people. The actual prices have been documented in previous posts (Family Healthcare Costs Rising, One Man’s ObamaCare Reality) so I won’t repeat them here. With prices forecast to continue their meteoric rise, only the rich and those with subsidies will be able to afford coverage, leaving the middle class with no acceptable choices.
Laszewski says even at current prices, only about 40% of those eligible for the ObamaCare subsidies are buying the program – which means that not enough healthy people are enrolling to cover the costs of the sick. Only about 20% of those making between 251% and 300% of the federal poverty level have signed up. That means the insurance plans offered are already unattractive even for those with subsidies.
Laszewski says the insurance markets may stabilize in two years, but only if the insurers raise their rates another 10% to 30% this year and even more the following year. But at those prices, the working poor and the middle class will be left with no choice except to decline the insurance – and pay a penalty tax to the IRS on top of living without insurance. This is not what they expected when President Obama promised them Hope and Change.