Obamacare Continues to Collapse by Design, Not Because of President Trump

Obamacare_Protesters-Jason-Reed-Reuters
Jason Reed/Reuters

Obamacare continues to collapse into a “death spiral” by design, contrary to Democrats’ claim President Trump fostered “uncertainty” that led to skyrocketing premiums and health care costs.

Prominent mainstream news publications, including the New York Times and the Los Angeles Times, have repeated the Democrats’ talking point that President Donald Trump’s hesitancy on Obamacare subsidies and whether Republicans will repeal parts of Obamacare has led to “policy uncertainty” that led health insurers to hike rates.

Democrats ignore that Obamacare continues to implode thanks to unbalanced risk pools and crushing insurance regulations that have led to decreasing competition on the Obamacare exchanges.

Aetna announced this past May that they were leaving all Obamacare exchanges in 2018, citing significant losses. TJ Crawford, an Aetna spokesman, said, “Our individual commercial products lost nearly $700 million between 2014 and 2016, and are projected to lose more than $200 million in 2017 despite a significant reduction in membership.”

Crawford added that Obamacare’s structural issues “have led to co-op failures and carrier exits, and subsequent deterioration.”

Insurers, including Aetna, have frequently noted that the Obamacare exchanges remain unstable due to their unstable risk pool. Insurers lose money on the Obamacare exchanges because not enough young people sign up to offset the cost of older and sicker individuals.

Aetna chief executive Mark Bertolini said that Obamacare is on a “death spiral.”

American health insurance giant Anthem announced in August that they will exit the Obamacare exchange in Nevada and will stop offering plans in roughly 85 of Georgia’s 159 counties next year.

Anthem said that the individual market remains “volatile.” Anthem suggested in a statement that a deteriorating marketplace and uncertainty regarding the future of Obamacare fueled their exit from the state exchange.

“Today, planning and pricing for ACA-compliant health plans has become increasingly difficult due to a shrinking and deteriorating individual market, as well as continual changes and uncertainty in federal operations, rules and guidance, including cost sharing reduction subsidies and the restoration of taxes on fully insured coverage,” Anthem said.

In 2016, Anthem suggested that it had “serious reservations” about the future of the Obamacare exchanges far before Donald Trump became president.

Molina Healthcare announced this summer that they will exit the Obamacare exchanges in Utah and Wisconsin. Molina CEO Joseph White blamed the Obamacare exchanges’ unbalanced insurance pools, making it increasingly difficult to make a profit.

The Centers for Medicare and Medicaid Services (CMS) released an update to the Obamacare health insurer map, detailing the continuing collapse of Obamacare. The CMS estimated that two counties will have no insurers and that 1,486 counties, over 45 percent of counties across the country, could only have one health insurer next year. The CMS projects that in 2018 as many as 2.7 million Americans could only have one insurer and may not be able to receive the coverage they need on the individual health insurance market.

After Aetna and Wellmark Blue Cross Blue Shield announced that will pull out of the Iowa Obamacare exchange, Medica remains the only insurer left in it. Now that Medica serves as a monopoly on the state Obamacare exchange, they will hike premiums on the Iowa exchange by 57 percent.

Medica blamed President Trump’s ambiguity over whether he will continue funding the Obamacare subsidies for health insurers, otherwise known as the cost-sharing reduction program. Trump has decided to fund the subsidies for August and has yet to signal whether he will continue. Conservatives contend that the subsidies amount to a bailout of health insurers.

The Congressional Budget Office (CBO) estimates that the subsidies will cost roughly $7 billion in 2017, $10 billion in 2018, and $16 billion by 2027. The agency reported that if Trump were to discontinue the subsidies, premiums for “silver” Obamacare exchange plans might rise by 20 percent.

The Investor’s Business Daily, however, believes that Medica wants to abuse its dominance in the Iowa exchange and blame Trump instead.

The Investor’s Business Daily editorial charged, “Not surprisingly, Medica has used its newfound monopoly status to push for increasingly higher rates, while trying to pin the blame on President Trump for the increases.”

A study revealed that the primary reason for the increase in premiums relates to Obamacare’s insurance regulations, not Obamacare subsidies or Republicans’ efforts to repeal Obamacare. The Health and Human Services (HHS) Department commissioned consulting giant McKinsey & Co. to investigate what was driving Obamacare’s skyrocketing health insurance prices from 2013 to 2017. The 2017 premium rates would have to be set by health insurers before the November 2016 presidential election, so health insurers would not have any “uncertainty” created by Trump.

McKinsey and Co. found that the Obamacare regulations known as guaranteed issue and community rating were primarily responsible for the significant increases in premiums. Guaranteed issue requires that insurers have to offer a health insurance plan to anyone that applies, and community rating means that health insurers cannot vary health premiums based on one’s health status, use of services, age, gender, location.

McKinsey’s analysis revealed that these mandates were responsible for 41 to 76 of the premium increases over the four-year period analyzed. In Tennessee, these two regulations led to 73 to 76 percent of the 314 percent average monthly premium increase.

The consulting company also found that Sens. Ted Cruz (R-TX) and Mike Lee’s (R-UT) Consumer Freedom Amendment to the Senate’s Better Care Reconciliation Act (BCRA) could lower premiums substantially. The amendment would allow health insurers to offer plans that do not comply with Obamacare regulations as long as they offer plans that do follow the Obamacare rules.

McKinsey found that the Consumer Freedom Amendment could lower Obamacare-compliant plans for a 40-year old as much as 30 percent and premiums for non-Obamacare compliant plans could be 77 percent lower compared to Obamacare plans.

Jim DeMint, former U.S. Senator and now a senior adviser to the Convention of States, explained that the Cruz amendment remains a promising solution to the crushing costs of Obamacare.

“What Sen. Cruz and his allies would allow in his amendment would allow a private market to co-exist with a heavily regulated and subsidized federal insurance market,” he said. “This is not ideal by any means, but it would, perhaps, allow innovation, lower costs, a variety of product offerings to exist in many states.”

Read the rest of the report here.

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