WHAT AETNA’S WITHDRAWAL MEANS FOR OBAMACARE
by James Suroweicki - The New Yorker
Few companies are as unpopular as insurance companies, and no tears were shed for the insurance giant Aetna when, a couple of weeks ago, it announced that it had lost more than four hundred million dollars on Obamacare policies since the Obamacare exchanges were set up, in 2014, and was going to pull out of most of them. The news, which followed similar announcements by United Healthcare and Humana, was greeted with talk of “whining” insurers who “put profits before patients’ health” and are “willing to deny care to make a few extra dollars.” But the recriminations are misplaced. Aetna’s decision reflects an awkward reality: the jerry-rigged, politically compromised nature of Obamacare has made the program unstable, and unable to live up to its lofty promises.
It’s not that Obamacare has failed. As Larry Levitt, a health-care analyst at the Kaiser Family Foundation, told me, “The main goal of the law was to reduce the number of uninsured people, and twenty million more people are covered today because of it. It’s hard to call that a failure.” The reforms that Obamacare put in place have guaranteed access to insurance for people with preëxisting conditions, and have done away with caps on how much insurance companies will spend. Access to health care is less precarious than it used to be.
Still, we’re a long way from the future that Barack Obama envisaged when, in 2009, addressing the American Medical Association, he called for “comprehensive reform that covers everyone” and provides “affordable health insurance to every single American.” Some thirty million Americans remain uninsured. Participants in the A.C.A. marketplaces are less numerous, and sicker, than anticipated: 8.3 million fewer people enrolled through the exchanges this year than the Congressional Budget Office had projected. As a result, insurers in much of the country are fleeing the marketplaces. Kaiser estimates that between twenty and twenty-five per cent of U.S. counties may have only one insurer offering coverage in 2017; there’s already a county in Arizona with no Obamacare insurer at all. And the insurers that remain in these markets tend to offer an increasingly narrow network of health-care providers.
Lack of competition is a recipe for high premiums or low benefits (or both), further deterring younger, healthier people from buying policies. Which means that the risk pool gets still older and sicker, which means that more insurance companies lose money and leave the market, which means that competition is reduced even further, which means: see above. The U.S. could well end up with a two-tier insurance market, in which people lucky enough to get insurance through their employers will get much better coverage and wider options than those on the individual market, even when both groups are paying the same amount in premiums.
Obamacare is being hobbled by the political compromises made to get it passed. The program’s basic principles were the right ones: everyone would be able to get insurance, regardless of preëxisting conditions, and everyone would pay the same price for a given policy, with upward adjustments made only for older people and smokers. In short, insurance companies were prohibited from managing risk by charging healthy, low-risk people less than frailer, high-risk people. Since managing risk is typically key to how insurers make money, it would have made sense to leave them out and just enroll everyone in a government-run program like Medicare. Politics, of course, ruled that out. Shoring up the private-side approach would require penalties stiff enough to get young, healthy Americans to buy health insurance, but politics ruled that out as well.
Conservatives point to Obamacare’s marketplace woes as evidence that government should stop mucking around with health insurance. In fact, government hasn’t mucked around enough: if we want to make universal health insurance a reality, the government needs to do more, not less. That doesn’t require scrapping the current system: the Netherlands and Switzerland both demonstrate that you can get universal coverage through private insurers. But their examples also show that to do so we’d need to make it much harder to avoid buying insurance, and we’d need to expand subsidies to consumers.
Alternatively, we could implement the public option, which Obama himself called for in that 2009 speech: a federal program, modelled on Medicare, open to anyone on the individual market. The public option would guarantee that there was always at least one good choice available in the marketplace, and would provide competition for private insurers. If it used the government’s bargaining power to hold down costs and expand access, it could offer good benefits at a low enough price to attract younger, healthier patients.
There are solid arguments for both of these models. Either would work, if there were a shift in the political mood and it were given a shot. Even if nothing is done, Obamacare will continue to limp along, probably turning into something akin to Medicaid. But the departure of big insurers like Aetna has made it clear that, if we don’t do more to help cover people in the individual market, the program will never make good on its original promise of truly comprehensive reform. So don’t hate the players; fix the game. ♦
As Obama’s term wanes, Obamacare needs checkup
WASHINGTON — With the hourglass running out for his administration, President Obama’s health care law is struggling in many parts of the country. Double-digit premium increases and exits by big-name insurers have caused some to wonder whether “Obamacare” will go down as a failed experiment.
If Democrat Hillary Clinton wins the White House, expect her to mount a rescue effort. But how much Clinton could do depends on finding willing partners in Congress and among Republican governors, a real political challenge.
“There are turbulent waters,” said Kathleen Sebelius, Obama’s first secretary of Health and Human Services. “But do I see this as a death knell? No.”
Next year’s health insurance sign-up season starts a week before the Nov. 8 election, and the previews have been brutal. Premiums are expected to go up sharply in many insurance marketplaces, which offer subsidized private coverage to people lacking access to job-based plans.
At the same time, retrenchment by insurers that have lost hundreds of millions of dollars means that more areas will become one-insurer markets, losing the benefits of competition. The consulting firm Avalere Health projects that seven states will only have one insurer in each of their marketplace regions next year.
Administration officials say insurers set prices too low in a bid to gain market share, and the correction is leading to sticker shock. Insurers blame the problems on sicker-than-expected customers, disappointing enrollment and a premium stabilization system that failed to work as advertised. They also say some people are gaming the system, taking advantage of guaranteed coverage to get medical care only when they are sick.
Not all state markets are in trouble. What is more important, most of the 11 million people covered through HealthCare.gov and its state-run counterparts will be cushioned from premium increases by government subsidies that rise with the cost.
But many customers may have to switch to less comprehensive plans to keep their monthly premiums down. And millions of people who buy individual policies outside the government marketplaces get no financial help. They will have to pay the full increases or go without coverage and risk fines. (People with employer coverage and Medicare are largely unaffected.)
Because the spigot of federal subsidies remains wide open, an implosion of health insurance markets around the country seems unlikely. More than 8 out of 10 HealthCare.gov customers get subsidies covering about 70 percent of their total premiums. Instead, the damage is likely to be gradual. Rising premiums deter healthy people from signing up, leaving an insurance pool that’s more expensive to cover each succeeding year.
“My real concern is 2018,” said Caroline Pearson, a senior vice president with Avalere. “If there is no improvement in enrollment, we could see big sections of the country without any plans participating.”
If Republican Donald Trump wins the White House, he’d start dismantling the Affordable Care Act. But Clinton would come with a long list of proposed fixes, from rearranging benefits to introducing a government-sponsored “public option” as an alternative to private insurers. Not all her ideas would require congressional action.
“She is going to find it important to continue to expand health care,” said Joel Ario, a former Obama administration official who’s now with the consulting firm Mannatt Health.
People in the Clinton camp say she recognizes that as president she’d have to get Obama’s law working better, and is taking nothing off the table.