Dec. 13--The bad news about the Affordable Care Act keeps coming, because, with each new headline, it grows less affordable.
A couple of weeks ago, United Health Group -- the largest health insurer in the U.S. -- dropped the biggest bomb on Obamacare in recent times, when the company's CEO, Stephen Hemsley, announced a $425 million downgrade to its earnings forecast for 2015, largely due to losses on Affordable Care Act exchanges. Hemsley said the company "cannot sustain" such losses.
"We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself ... we saw no indication of anything actually improving," he was quoted as saying.
United said it may pull out of the exchanges after 2016.
United bypassed the exchanges in 2014-15 but waited until 2015-2016, when it offered coverage on 24 of the 34 federal exchanges, including Iowa, according to the Wall Street Journal.
John Monaghan, president of life and health for PDCM Insurance in Waterloo, provided a bit of perspective on that, noting that only about 40,000 Iowans are enrolled in the state's exchange.
For 2016, Coventry and Medica offer plans statewide on Iowa's exchange; United covers almost the entire state, including all of Northeast Iowa. Wellmark Blue Cross and Blue Shield has committed to joining the exchange for 2017 enrollments.
Opting out of the exchange would not be unprecedented. In 2014, CoOppurtunity Health participated in the exchange and within a year incurred losses that drove them out of business.
"We saw this have an impact across the state as the high-cost participants then moved to other insurance carriers who then needed to increase rates," Monaghan said.
On the other hand, if losses pile up, other insurers might "second guess if the system sets them up for losses," said Monaghan, whose primary role is as a consultant and negotiator for employers with 50-2,000 workers.
United's difficulties with the ACA should come as no shock. It's basically the end result of not enough young, healthy and middle-income clients subsidizing older, sicker and poorer customers.
Indeed, Monahan said PDCM identified the exchange system as "one that was likely set for failure from the very beginning, and we have not invsted a great amount of time advising client or individuals to partake in it."
United increased its premiums by 9 percent, on average, for 2016,according to Morgan Stanley. Other insurers raised rates even higher in certain markets, Forbes magazine noted.
Now, a study released Dec. 2 by AgileHealthInsurance.com showed unsubsidized premiums could rise dramatically if UnitedHealth exited the exchanges.
In order to determine how United's exit could affect consumer options on HealthCare.gov, AgileHealthInsurance analyzed the costs for ACA plans from United and other insurers in the 38 states that use HealthCare.gov. Costs were examined for ACA plans in each price level -- they run from the cheapest "bronze" to mid-level "silver" to upper-tier "gold" (the study didn't include "platinum" plans, which United doesn't offer on HealthCare.gov in 2016).
AgileHealthInsurance.com concludes that if United drops out of ACA, then the least-expensive bronze, silver, and gold plans in many coverage areas will no longer be available on HealthCare.gov. In coverage areas where United sells the cheapest Obamacare plans, unsubsidized premiums for the least expensive bronze, silver, and gold plans would rise between 6 percent and 19 percent, depending on the coverage level.
"Most insurance carriers have found it is very difficult to operate in a structure that allows people to enroll in insurance 'after they need it' and then terminate the insurance once their need for it is over," Monaghan said. "Carriers have found that a percentage of people abuse this system."
That's because the health insurance reform law allows people buy insurance each January, have hip replacements, back surgeries, or any other medical treatment that is needed and, afterwards, they stop paying premium or cancel the coverage, he said.
The insurance carriers lose money and then ultimately shift those losses to the overwhelming majority of people who pay their premiums all year, Monaghan said.
"Imagine if, each January, you could buy a car insurance policy that was guaranteed to fix your car from the previous year's accidents, even though you were uninsured, and once the car is fixed, you could cancel the insurance policy," he said. "The result is a small percentage of people would make up huge losses for the insurance carrier, who then forces those losses to policy holders that pay premiums. This has happened in the health insurance system and is much of the reason that BC/BS (Blue Cross/Blue Shield) individual premiums went up 25 percent this year. This dynamic is occurring both in the exchange and outside of the ACA exchange system."
There will be other headlines in the next few weeks, particularly as the health insurance law fully embraces small businesses with 50 or more full-time employees, requiring those employers to provide insurance for their employees by Jan. 1.
When this law first passed on a strict party-line vote, it was accompanied by flowery promises that spiraling medical costs would finally be brought under control. As the reality of implementation set in, reports surfaced regularly of delays, extensions, exceptions, unilateral revisions and, of course, court challenges.
Five years in, we're waiting for the first good news about this law.
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