Insurance Companies Ready to Bolt Obamacare Exchanges Due to 'Unsustainable' Losses

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It’s more than poetic justice that insurance companies are now complaining about losing money at a rapid rate on the Obamacare exchanges. It is a reckoning for their shameless promotion of a federal program that promised so much and delivered so little.


They were promised a trillion dollars in new business from customers forced to buy their product. And now, they face ruinous losses as the promised “young and healthy” customers have not materialized. And next year, the insurance companies will go hat in hand to state regulators and beg for massive premium increases just to keep the Obamacare exchanges afloat.

The Hill:

“Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.”

While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.”

In the short term, there is a growing likelihood that insurers will push for substantial premium increases, creating a political problem for Democrats in an election year.

Insurers have been pounding the drum about problems with ObamaCare pricing.

The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers.

And a report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states.

“We continue to have serious concerns about the sustainability of the public exchanges,” Mark Bertolini, the CEO of Aetna, said in February.

The Aetna CEO noted concerns about the “risk pool,” which refers to the balance of healthy and sick enrollees in a plan. The makeup of the ObamaCare risk pools has been sicker and costlier than insurers hoped.

The clearest remedy for the losses is for insurers to raise premiums, perhaps by large amounts — something Republicans have long warned would happen under the healthcare law, known as the Affordable Care Act (ACA).

“The industry is clearly setting the stage for bigger premium increases in 2017,” said Levitt of the Kaiser Family Foundation.

Insurers will begin filing their proposed premium increases for 2017 soon. State regulators will review those proposals and then can either accept or reject them.


How serious a problem is there? The Kaiser Foundation has been one of Obamacare’s biggest cheerleaders. For them to even mention a mass  pullout by insurance companies, you know it’s more than a possibility.

The “young and healthy” are not signing up for Obamacare largely because they don’t have to. The individual mandate has proven to be so unpopular that the administration felt it a political necessity to carve out numerous exemptions. Even with big subsidies, the “indestructibles” don’t feel the need to purchase insurance.

When the end comes, it will come rapidly. The tipping point will come when all insurers pull out of some states completely, setting off a chain reaction that will throw millions of individuals off of their insurance plans — and the companies who are left will be unable to handle the number of sick people buying their plans. Costs will far exceed income and Obamacare will sink below the waves.

This would be an incredibly disruptive way to get rid of the law. There are alternatives that would ease the transition back to a private insurance market without the massive numbers of people losing coverage and insurance companies going belly up. That’s a desirable goal once Obamacare is history.





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