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On Tuesday UnitedHealth Group reported a terrific first quarter, with strong performance across nearly all business lines. There was one exception: The conglomerate’s insurance exchange unit raised its projected Affordable Care Act losses for 2016 to $650 million from $525 million, after booking $475 million in red ink last year.
CEO Stephen Hemsley said ObamaCare’s instability, small market size and costly patient population “continue to suggest we cannot broadly serve it on an effective and sustained basis.” He said UnitedHealth will withdraw to “only a handful of states” in 2017.
Normally sedate insurance markets have been roiled by everything from the federally chartered co-op failures to enrollment well below projections. ObamaCare’s architecture also makes it economically rational for consumers to wait until they are about to incur major medical expenses to get covered, and administratively created “special enrollment periods” encourage such gaming.
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The Republican Study Committee submitted their recommendations for health reform to the House Republican Health Care Reform Task Force on Friday, pointing to several provisions of an already-introduced bill to guide its proposals.
“The Republican Study Committee has led the way on a comprehensive repeal and replace strategy for ObamaCare,” the group says of its recommendations. “Currently, the American Health Care Reform Act, H.R. 2653, is the most cosponsored ObamaCare alternative in the House. This bill relies on conservative principles and increased state flexibility to transform our top-down health care system into one that creates competition, growth and increased access for all Americans.”
United Healthcare’s announcement that it is pulling out of most of the exchanges established by the Affordable Care Act is one of many indications of the law’s continuing instability.
There are many other insurance plans in the same boat. Blue Cross Blue Shield plans have dominated the individual and small-group markets in most states for decades. If they were to abandon this market, they would have less ability than United does to grow their business elsewhere. But many of these plans are nonetheless contemplating such a move.
ObamaCare isn’t likely to enter an insurance death spiral; there’s too much federal money propping the whole thing up. But it isn’t on track to become a stable, self-sustaining insurance pool either, because very few middle-class families want to get their insurance through the exchanges. Which means the law is not only unstable financially, it is politically unstable as well.
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Presidential candidate Donald Trump has said he wants to repeal the Affordable Care Act and yet still “take care of everybody.” He has said repeatedly that he is different from other Republicans in this regard, implying that other GOP politicians don’t want Americans to get needed health services. Of course, Trump has never bothered to back up this slander with any evidence (and the media haven’t bothered to ask him for it).
Trump is apparently unaware of the plans to replace Obamacare sponsored by Rep. Tom Price and by Sen. Richard Burr, Sen. Orrin Hatch, and Rep. Fred Upton. These plans would insure as many Americans as are enrolled today under the ACA at a fraction of the cost.
Many health-insurance premiums rose again this year, sometimes by double digits. A lot of the increases were accompanied by higher deductibles as well. Insurers say the increases are justified because their costs have risen as more people with health problems have signed up for insurance in the wake of the Affordable Care Act.
Some policy experts see the higher out-of-pocket costs as a positive development. When patients have a bigger stake in the cost of their care, the argument goes, they can drive prices down by spurning providers and services that are overpriced and inefficient.
Others argue, however, that it’s unfair to put the responsibility for reducing health costs on patients—particularly those with lower incomes, for whom quality health care is increasingly out of reach.
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The Affordable Care Act is now six years old. Perhaps more important for Massachusetts, this month marks the 10th anniversary of “Romneycare,” making it a good time to review that law’s impact.
Governor Mitt Romney’s original proposal was simple: Stop subsidizing hospital care and redirect the money to ensure that all residents have “minimum coverage”—in his mind, catastrophic insurance. Individuals could choose and pay for anything beyond that. The premise was that taxpayers should not have to cover the cost of care for those unwilling to pay for it.
A Health Connector was to serve as an exchange where individuals could buy insurance directly and which would test-drive market reforms. Unlike President Obama, Romney did not implement his creation.
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Supporters of the Affordable Care Act have declared victory on health care reform: they proudly note the decline in America’s uninsured rate, as well as the sizable enrollment of lower-income adults on the new individual-insurance exchanges (“ACA exchanges”). Yet after a brief rise, the number of insured Americans is now plateauing well below the ACA’s goal of universal coverage—rather than pay the ACA exchanges’ exorbitant premiums, middle-income adults are overwhelmingly opting to forgo health insurance and pay the individual-mandate tax instead.
Key Findings of this report from the Manhattan Institute:
- Nearly 30 million American adults remain uninsured.
- After an initial surge, enrollment on the ACA exchanges has slowed dramatically: since March 2015, only 1 million additional individuals have signed up for coverage.
- By February 15, 2015—the end of the ACA exchanges’ second enrollment period—fewer than half of eligible middle-income adults had signed up for coverage.
Before the passage of ObamaCare’s 2,400 pages of coercive mandates and profligate spending, the federal government had already largely wrecked the market for individually purchased insurance, in three interconnected ways.
First, it had effectively established two different health insurance markets—employer-based and individually purchased—by treating them differently in the tax code. Second, it had given an attractive tax break for employer-based insurance while denying it for individually purchased insurance (except for the self-employed). Third, having effectively split the market in two while favoring the employer-based side, it had made it hard for people to move from the employer-based market to the individual market, as it had allowed insurers to treat previously covered conditions as “preexisting.”
A popular conservative alternative, then, would repeal every word of ObamaCare while fixing this longstanding inequity in the tax code.
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Amid rising drug and health care costs and roiling market dynamics, the spokesperson for the nation’s health insurers is predicting substantial increases next year in ObamaCare premiums and related costs.
Without venturing a specific percentage increase, Marilyn Tavenner, the president and CEO of America’s Health Insurance Plans, said in an interview with Morning Consult that the culmination of market shifts and rising health care costs will force stark increases in health insurance rates in the coming year.
The warning to consumers from Tavenner, the former administration official who headed the Center for Medicare and Medicaid Services and oversaw the disastrous launch of HealthCare.gov, the ObamaCare website, comes at a time of growing uncertainty about the evolving makeup of the ObamaCare health insurance market.
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