ObamaCare crashing: Insurers seek massive rate hikes . . . if they're staying in at all

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Published by: Dan Calabrese on Thursday August 11th, 2016

Gigantic losses put exchanges on the brink, send program careening into chaos.

Remember when everyone watching ObamaCare was focused on how many people had signed up? First they needed 7 million, then 11 million, and on it went as new targets replaced the old. These weren't meaningless - at least it didn't appear that way. The targets represented the critical mass the Obama Administration itself said the program needed to be economically sustainable. Insurance, they told us, is about risk pools. If you've got enough people in the risk pool, you'd have enough premiums being paid in to cover those who were sick.

Well, they got their numbers, although it wasn't easy. There are now more than 20 million people signed up for ObamaCare. So it must be a financial boon for the insurers participating in the exchanges, yes? After all, the insurers supported ObamaCare on the theory that the participation mandate would net them lots of new customers.

They've got the customers. But their losing their shirts, and facing a grim choice of either begging regulators to let them jack premiums to the sky . . . or just plain get out. It's not pretty:

While clear evidence that the law was expanding coverage, the soaring enrollment numbers have created a fiscal nightmare for insurers which, in turn, has serious consequences for customers.

A majority of new enrollees are considered high risk, meaning insurers will have to spend more money on people in poor health and requiring expensive  care.

One by one, the nation’s top insurers – Humana, UnitedHealth Group, Blue Cross and Anthem – have shifted their tone on the law. 

Once optimistic, each has reported struggles with plans sold on the exchanges. Many say they weren’t ready for the influx of customers that have generated more claims than predicted.

As a result, companies are scrambling to find ways to cut their losses and stop the fiscal bleeding. A few say they’ll be forced to pass on costs to customers.

Already, rates on the exchanges are skyrocketing. From 2013 to 2016, almost every state has seen an increase in monthly premiums. In Michigan they are expected to jump 17.3 percent this year. In Virginia, the average premium increase could hit 37.1 percent, Bryan Rotella, attorney and founder of the Rotella Legal Group, warns.

“In fact, two of three federal programs to manage this exact risk are due to expire in 2017,” Rotella wrote in an opinion piece for The Hill. “Without these programs to fall back on, many insurance companies likely will need to jack up their premiums even higher or bail out of the exchanges all together.”

Blue Cross reported losing hundreds of millions of dollars on its exchange plans across the country. In Tennessee, it took a $300 million hit; in North Carolina, $280 million and in Arizona, $135 million.

In California, the company is expected to raise rates 19.9 percent – more than triple the average annual increase.

All this comes from an excellent report by  at Fox News.

Anyone who is surprised by these developments has to be so ignorant about the nature of health, markets and economic incentives that they have no business ever being allowed to vote on a law concerning such things. And yet they - 100 percent of them Democrats - did just that.

First of all, when you offer a product at a reduced or subsidized rate that people can already buy for market rates, who is going to buy the product? Poor people who have previously not had any coverage. A disporportionate number of these people are going to have health issues. So far from a nice big risk pool with lots of healthy people to pay in and cover the costs of the sick, you've got a big pool of sick people, most of whom are going to use health care services at a cost greater than what they're paying in.

That's a guaranteed economic disaster.

Second, risk pools don't really work in health insurance the way they work with other forms of insurance, because it's not really about risk. When you get home insurance, auto insurance or renters' insurance, you're insuring against the risk of something terrible happening. Your house burns down. A tree falls on it. You get in a collision. You pay the premium and hope you will never file a claim. And most people never do file a claim.

In health insurance, just about everyone files claims because everyone seeks out the service. With ObamaCare mandating that insurers make routine office visits free (meaning they pay instead of the patient paying), the risk pool theory goes out the window because there are no premium-payers who pay in but don't take out, which is what makes real risk pools work.

If your only goal is to give poor people access to health care, then sure, ObamaCare did that. But if you want to do so with a model that's economically sustainable, ObamaCare is a disaster. In order to get the law passed, the Democrats mandated absurdly low premiums and required insurers to get HHS approval if they ever wanted an increase. Then they put the taxpayers on the hook to subsidize premiums that individuals couldn't afford.

Now the insurers are losing money and the taxpayers are going to have to shell out even more. Oh, and remember how Obama claimed that this would all work because of his vaunted "marketplace"? This is a classic example of a guy who doesn't even really believe in free market economics nevertheless trying to hawk a bastardized version of it - and getting a fiasco for his trouble. The mere fact that you have competition doesn't mean an entire industry will prosper if forced to do so under rules that defy all economic logic. The insurers tried competing on price, and now they're all losing money because ObamaCare forced them to provide a service in a way that makes no economic sense.

Those who can afford not to sign up for ObamaCare are not signing up because the plans are not attractive. They limit your choice of doctors and they exercise far too much control over what kind of care you can get and under what circumstances. People don't want that, nor should they. They want to make their own choices in consultation with their doctors, without a third party getting a vote on what can happen because the third party is paying the bills - and certainly not with the government getting any say whatsoever.

The Trump campaign must find a way to make this a campaign issue, and to overcome the media's determination to sweep it under the rug. The media are going to do their best to ignore this story until after the election because they know it won't help Hillary if Americans realize just how bad things have gotten with ObamaCare. She won't favor any solution unless it puts the federal government in complete control of everyone's health care, and her media servants don't want to force her to defend that position.

It's very difficult for any Republican presidential candidate to get traction on an issue when the media are determined to keep that issue out of the spotlight, but Trump has to find a way - and that has to involve more than just getting the attention of conservative news sites like this one. That won't influence enough of the independents who swing elections. I understand how difficult this is going to be. Trump could talk about the problems with ObamaCare all day every day, and eventually he's going to say something that provides fodder for a media hubbub of irrelevance. He'll accidentally say "titties" when he means to say cities, or he'll mention the Second Amendment and give the media an opportunity to pretend he wants Hillary assassinated.

He cannot force them to cover this issue no matter how much he tries, so he has to somehow go over their heads to the public and get them the truth about the disaster that is ObamaCare. If he doesn't, Hillary gets elected and this never gets fixed. And if you think America's in bad shape now - with $19 trillion in debt and more than $100 trillion in unfunded entitlement obligations - wait until you see what happens when the ObamaCare chickens come home to roost. It's enough to scare Jeremiah Wright.

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