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The ACA insurance exchange model has failed

Obamacare Premiums Climb, But Insurers Struggle for Profit

By Zachary Tracer
Bloomberg Business, October 30, 2015

Many people shopping for health coverage this weekend on the websites created by Obamacare are going to see double-digit percentage increases in their premiums. That’s still not enough for some insurers.

Anthem Inc. says there remain competitors in the government-run marketplace offering premiums that aren’t enough to profitably provide the coverage patients will require. Prices in some areas probably will have to climb in 2017 and even 2018 to reach levels that make sense, according to Chief Financial Officer Wayne Deveydt. Meantime, Anthem will sacrifice market share to keep its plans profitable, he said.

“When you have fewer national enrollees and you have price points that we don’t believe are sustainable, we’ve just made a conscious decision we’re not going to chase it,” Deveydt told analysts on a conference call on Wednesday. “We are going to need to be patient until this works itself out.”

Deveydt’s remarks spotlight a problem for the Patient Protection and Affordable Care Act’s marketplaces as the third annual sign-up period begins Sunday. Set prices too low to lure customers, and losses can mount. Some smaller firms already have closed, and some bigger insurers have withdrawn from markets -- such as Aetna Inc., which will offer coverage in two fewer states this year.

The conundrum has led to this year’s price increases, which have been higher, on average, than last year’s hikes. But the danger is that premiums are now too expensive for some families to afford coverage, especially the uninsured people the Obama administration is trying to persuade to shop on the exchanges for the first time.

But the remaining uninsured are poorer and younger than those who’ve already signed up, and they’re more difficult to reach, Health and Human Services Secretary Sylvia Mathews Burwell has said. That may mean slower growth for the insurers.

Charles Gaba, who tracks the health law on ACASignups.net, estimates that the rate increases across the U.S. will average about 12 percent to 13 percent, based on a weighted average of current enrollment.

“Some of the large carriers are having pretty significant rate increases,” said Jeff Smedsrud, who runs the private insurance shopping site Healthcare.com.

Price isn’t the only challenge for insurers, according to Shawn Guertin, Aetna’s CFO. Membership levels are lower than expected, and some individuals are sticking with pre-Obamacare plans, cutting into the size of the market. There’s also been lots of churn -- customers signing up and then dropping their policies throughout the year.

Aetna hasn’t been turning a profit in Obamacare plans, the company has said. Guertin said its price hikes range from high single digits to the mid-teens, depending on the market. UnitedHealth Group Inc., the largest U.S. health insurer, has said its premium increases are in the double digits as well.

http://www.bloomberg.com/news/articles/2015-10-30/obamacare-premiums-jump-but-insurers-still-struggle-for-profit

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Comment:

By Don McCanne, M.D.

The performance of competing private insurance plans within the ACA exchanges is not much different from the performance of the pre-ACA private plans in the individual market. Trends in higher insurance costs, greater cost sharing, and narrower choices were already occurring, and they continue to grow progressively worse. Access and affordability can only suffer.

Higher premium credits and out-of-pocket subsidies are helping individuals with incomes near poverty levels, but, for middle-income families, they are inadequate to provide much benefit.

Higher premiums and more cost-shifting to patients are adequate to maintain profits for most larger insurers, but where even these measures are inadequate, insurers are pulling out of the exchanges, and some of the smaller insurers are even folding. Market manipulations create instability.

The insurers show their true colors through statements such as that of Anthem’s Chief Financial Officer Wayne Deveydt. Reporting to Wall Street analysts, Deveydt said about the market, “When you have fewer national enrollees and you have price points that we don’t believe are sustainable, we’ve just made a conscious decision we’re not going to chase it.”

Higher premiums, greater cost-sharing, narrower networks - the behavior of the private insurers is not changing in spite of the promise of higher value and lower costs through the ACA Marketplaces. The ACA exchanges are a creeping failure that is growing worse.  Congress enacted the wrong model of reform. We need single payer.