Red Tide

The insurance companies offering policies through the exchange are continuing to lose money. The editors of the Wall Street Journal provide what I presume is the expected commentary:

While Aetna reduced its ObamaCare losses from what it had previously predicted, the business remained unprofitable in 2015 “and we continue to have serious concerns about the sustainability of the public exchanges,” said CEO Mark Bertolini in a call with analysts.

“Specifically, we remain concerned about the overall stability of the risk pool, including enforcement of standards related to special election period enrollment,” he added. The Department of Health and Human Services has made some helpful changes, “but more needs to be done.” He’s referring, among other things, to the fact that to goose enrollment in the exchanges HHS made it easy for customers to wait until they were sick to buy insurance. This stocks the risk pool with sicker people and disrupts normal insurance actuarial calculations.

In some markets it won’t take a lot of insurance company defections to create havoc. We’ll see what materializes.

There seem to be two conflicting schools of thought on the PPACA: that it was incredibly stupid or that it was fiendishly clever. Both can’t be right. Those who believe it was stupid look at a structure that appears to have been designed to fail and think of it as a mistake. Those who believe it was fiendishly clever look at a structure that appears to have been designed to fail and assume it’s strategic.

14 comments… add one
  • Modulo Myself Link

    Or the cost controls that Obamacare put in place are screwing over the unlimited pit of money insurers relied upon. Anyway, what kind of predictions were they running if they couldn’t predict that people who were sick would take advantage of the fact that they could buy insurance at a decent rate? Money and health are both important to humans–who could have predicted that ?

  • The insurance companies’ problem has nothing to do with the loss ratio which I presume is what you’re referring to. You don’t have to take my word for it. Look at the statements from the insurance companies.

    Their problem is guaranteed issue.

  • Modulo Myself Link

    Then it’s their own fault. What did they expect would happen? Giving sick people the ability to buy good insurance was a basic cornerstone of Obama’s health plan. How did the insurance companies think this would not bite them in the ass?

  • jan Link

    How did the insurance companies think this would not bite them in the ass?

    Perhaps it had something to do with the risk corridors that went hand in hand with the PPACA, in which the government would cover insurance company losses for a certain period of time. It’s indeed short term planning, but what else is new in bureaucracies.

  • Guarneri Link

    Would you advocate, Modulo, that insurance companies must issue car collision policies to uninsured motorists at crash sites so “crashed people have the ability to buy good insurance as a basic cornerstone ?”

    This is exactly what the small penalties encourage. More ” free riding.”

  • Don’t confuse my remarks with sympathy for the insurance companies. Their plan was to take the money and run. What they didn’t bank on was the re-writing of the PPACA after the fact by the Obama Administration but that was baked into the legislation.

  • Guarneri Link

    They got into bed with the devil, Dave. But the American people shouldn’t suffer the consequences. And now the insurers very existence is in question.

    The right move, many years ago, would have been to establish a high risk pool product for persons with pre-existing conditions and lobbied for portability legislation. I still don’t know what to do about free riders except up the penalties significantly. Not sure we have the political will to do it. Look at Modulos reaction.

  • steve Link

    Drew- A lot of states had high risk pools. They didn’t work. My brother in law died while waiting over 3 years to get into one, so this is a topic i am quite familiar with.

    To the broad topic, I am shocked, shocked I tell you that the WSJ would make these claims. Anyway, the insurance companies helped write Obamacare. The fact that SOME of them are failing is not surprising, at least tome. Was the idea supposed to be that every insurance company would make money at this? That no business would fail? Why?


  • michael reynolds Link

    I said from the start that the details or even the viability mattered less than the fact that the matter had been moved from the in-basket of “Bidness” to the in-basket of “Gubmint.” What mattered was portability, pre-existing conditions and lifetime limits. Once those became seen as rights, (yes, using that term improperly, but you know what I mean) things would sort themselves out in the end, hopefully with some sort of universal coverage. But first that log-jam had to be broken. We had to get past the rather vile notion that American citizens should be allowed to die for lack of coverage, or be bankrupted by illness, merely to insure profit.

    I don’t believe even Ted Cruz can get us back to the bad old days. Mission Accomplished. Or at least First Mission. Whatever comes next whether it’s O-Care 2.0, Son of O-Care, single-payer or national health, we will not go back to letting people die or be forced into destitution for the crime of being poor and sick.

    This is how liberals re-shape society. Conservatives can rant and fume all they like, but we aren’t going back on civil rights, women’s rights, gay rights or health care rights. Conservatives can fiddle at the edges, but the basic ground has been taken and will be held.

    Perfect solution? No. The best we could get given that we are afflicted with Republicans? Yes. If Republicans weren’t assholes we could have gotten it right on the first go-round, but they are, so we got what we could get, and it will prove to be irreversible. Like Social Security, which Republicans also fought.

  • Guarneri Link

    Please, Michael. Civil rights are different in kind than the right to have other people pay for your stuff. Your hysteria aside.

    That said, If the nation wants to subsidize people for certain things, fine. That can be done with income supplementation. Portability could probably be accommodated through some permitting legislation and a system of settling up along the lines of what banks do every night. Pre-existing conditions could be partially subsidized and then phased out over time, weening over to premium paying consumers. Free riders can only be dealt with by harsh penalties or restricted care. That requires a concept of responsibility which seems anathema to liberals. These objectives are not really met by ObamaCare, which is an indicator of true intent.

    A cost ineffective entitlement like this is not to be sloughed off as a minor problem. Assurances aside, SS and Medicare are so structurally flawed that the promises made will have to be broken. We don’t take that seriously because it takes so long to come to pass. But it’s just arithmetic. And it does come to pass. Witness the Chicago public employees pension system. ObamaCare looks like it will go to death spiral much faster.

  • ... Link

    Both can’t be right.

    But you outlined how both can be right. It’s entirely a matter of one’s perspective, both in how one views the situation, and in how one believes the authors of the legislation (including the changes made by the Administration after the PPACA had been passed) intended it to work.

    At the time it was being debated I stated my belief that it was intentionally designed to crash the system. Pretty sure I have that in print somewhere, or probably several places, but I don’t care enough to look it up. Now I’m still convinced it was designed to crash the system, I just don’t think the authors of the legislation or the Administration’s regs knew that at the time. Basically, I’ve become convinced that the people in charge are even more incompetent than I had thought.

    Oh well, not my country anymore. I’m still having trouble making myself not care, though – it’s a hard habit to break.

    Several systems may break apart all at once, though. Obama & Congress have been playing games with the debt levels the last few years while ignoring the ever growing problems in things like the disability insurance programs, as well as Medicare more generally. And the longer they kick those down the line, the more likely those systems will pop apart at the same time the healthcare system does, and by then the Social Security system proper will be in bad need of repair.

    All of this will happen when the US has probably passed the point of having over 20% of its then current population having been born somewhere else, with a much higher percentage being in the first couple of generations being born here, and a total lack of any social cohesion whatsoever.

    And given the nation’s propensity in recent presidential elections to elect people of less and less competence and greater and greater levels of corruption….

    It’ll be funny as Hell watching all the people that cheered this on claiming they had no idea it would happen and that it isn’t their fault. Funny so long as you don’t expect to live much longer and have a very, very black sense of humor, but I’ve got all that covered already. So I’m expecting some good chuckles as my life winds down in the next decade. Bad times are good for black hearts!

  • ... Link

    Perfect solution? No. The best we could get given that we are afflicted with Republicans? Yes. If Republicans weren’t assholes….

    Don’t worry, when your party gets to invite another 50 million or so Third Worlders into the country you’ll get the single party rule you dream of. I’m sure you’ll dream up a final solution for us recalcitrant white people then.

  • CStanley Link

    I choose (C): It was neither planned to succeed nor to fail, but to convince Democratic partisans that their leaders cared. This is just like every other problem they take on: gun control (no assessment of whether the existing legislation has any positive effect, let alone their propsed changes), education, business regulation, environmental regulation, etc.

    I’m convinced that the actual program’s workability and cost effectiveness isn’t even a concern for these politicians, because they have voters who are either too stupid to notice or they’re willing to believe that the failure comes about because of the GOP.

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