The cracks in the ObamaCare floor are widening. Soon, the earthquake is coming.
Insurance industry analyst Robert Laszewski put it this way:
“It’s official. The ObamaCare insurance company business model does not work.”
The latest evidence of the impending implosion of ObamaCare was the announcement by UnitedHealth, the nation’s largest healthcare insurer, that they are seriously considering abandoning the ObamaCare individual market exchanges. Who can blame them? They reported expected losses of over $700 million by the end of 2016.
The Wall Street Journal reports the insurer has already suspended advertising for its ObamaCare coverage and stopped paying commissions to insurance brokers for signing people up. In other words, they don’t want consumers to buy their products!
UnitedHealth CEO Stephen Hemsley was asked if he was willing to lose money again in 2017. His reply, “No, we cannot sustain these losses. We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself,” adding that “we saw no indication of anything actually improving.”
The reasons for UnitedHealth’s decision are obvious:
- Poor enrollment numbers
- Expensive risk pool full of mostly sick patients
- People “gaming the system” by enrolling when sick and dis-enrolling when healthy
- Community rating rather than actuarial rating causes faulty pricing
UnitedHealth is not alone in feeling the pain. Anthem said enrollment is less than expected, though they are barely making a profit. Aetna said it expects to lose money on the exchanges this year but hopes to do better next year. Humana and Cigna have both expressed their concerns. Blue Cross/Blue Shield found that their overall company wide results were “barely break-even” for the first half of 2015.
Goldman Sachs analysts projected Blue Cross/Blue Shield would post an aggregate loss for the full year of 2015. Their analysis reported medical-loss ratios of 99% in the first half of 2015 – up from 91% in 2014 and 82% in 2013 (before implementation of ObamaCare). A medical loss ratio of 99% means the company paid out 99 cents in medical expenses for every $1 of premium paid. That leaves 1 cent for overhead and profit.
Laszewski says “Every health plan I talk to tells me that they don’t expect their ObamaCare business to be profitable even in 2016 after big rate increases. That does not bode well for the rate increases we can expect to be announced in the middle of next year’s elections.”
With prices already too high to attract enough healthy Americans for a financially sound risk pool, the situation has no chance of improving when rates go even higher in 2016 and 2017. Change is certain to come after the elections of 2016. The only uncertainty is whether that change will be more government regulation (if the Democrats win) or less (if the Republicans win). More ObamaCare, or even single-payer healthcare like Canada/ Great Britain, or less ObamaCare – repeal and replacement with a better system that restores freedom of choice in healthcare, religious beliefs, and purchasing insurance. The election results will reveal the kind of healthcare the American people choose.