Obamacare: The gift that keeps on giving to Republicans

Open enrollment for Obamacare begins November 1 this year, less than a week before the presidential election.  Industry analysts are warning consumers to be prepared for sticker shock; double-digit rate increases on premiums are likely.

For most of this summer, insurance companies will be asking state regulators for huge increases in Obamacare insurance premoiums.  States may not grant as much as companies would like, which leaves insurance firms with a decision.  Almost all companies are bleeding red ink, and it's up in the air whether many of them can afford to remain on the exchanges if they don't get the rate hikes they seek.

Politico:

“I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. "... A number of carriers need double-digit increases.”

In some ways, the turmoil is not surprising: Under the health law, plans are unable to choose who to insure, or how much to charge them based on their medical history. As a result, many plans enrolled a larger proportion of sicker people than they bargained for. But some of those losses were also a function of political wrangling after Republican lawmakers blocked payments that were supposed to help insurers get through the difficult first years.

The timing, though, is bad news for Democrats. Proposed rate hikes are just starting to dribble out, setting up a battle over health insurance costs in a tumultuous presidential election year that will decide the fate of Obamacare.

And the headlines are likely to keep coming right up to Election Day since many consumers won’t see actual rates until the insurance marketplaces open Nov. 1 — a week before they go to the polls.

“Any reports of premium increases will immediately become talking points on the campaign trail,” said Larry Levitt, senior vice president for special initiatives at the nonprofit Kaiser Family Foundation. “We’re in an election where the very future of the law will be debated.”

And that future may depend more on insurance companies being able to stem their losses than on the politics of the election.  At bottom, the reason companies are losing money is that not enough healthy young people are signing up:

One big reason is lower-than-expected enrollment of younger, often healthier people who balance the costs of those who require more costly care. Roughly 12.7 million Americans signed up for Obamacare plans during the most recent open enrollment period. That’s far below the 22 million projected by the Congressional Budget Office, and it’s certain to decline as some drop out.

“The pool is far less healthy than we forecast,” said Brad Wilson, CEO of Blue Cross Blue Shield of North Carolina, which says it lost $400 million on its exchange business during the first two years and is weighing whether to compete for Obamacare customers in 2017. “That’s an issue not just here in North Carolina, but all over. … We need more healthy people in the pool.”

'Not enough of a hammer'

There’s a growing realization the financial penalty for failing to obtain coverage is an insufficient cudgel to convince younger Americans to enroll. The fee for 2016 is $695, or 2.5 percent of income, whichever is higher. Just 28 percent of HealthCare.gov customers for 2016 were between the ages of 18 and 34, significantly below the 35 percent threshold typically considered necessary for a balanced marketplace.

“It wasn’t enough of a hammer,” said Kevin Fitzgerald, an insurance lawyer with Foley & Lardner. “You need a lot of healthy people to sign up to make the numbers work. Obviously that didn’t happen.

What a nightmare. Amid talk of "hammers" and double-digit rate increases, just about every prediction by critics for what would happen when Obamacare was implemented has come to pass.  Young and healthy consumers don't need all that coverage, so they don't buy in.  The belief that they would fear the tax penalty for not signing up was magical thinking all along.

And the idea that Obamacare would slow the increase in insurance premiums was laughable from the start.  The GOP sabotaged the administration's insurance slush fund that would have reimbursed companies for most of their losses, leading to the industry's only alternative to avoid disaster: massive rate increases. 

Obamacare will probably not go into a death spiral this year.  But five years from now, the odds that the law will still be around in its present form are slim.

Open enrollment for Obamacare begins November 1 this year, less than a week before the presidential election.  Industry analysts are warning consumers to be prepared for sticker shock; double-digit rate increases on premiums are likely.

For most of this summer, insurance companies will be asking state regulators for huge increases in Obamacare insurance premoiums.  States may not grant as much as companies would like, which leaves insurance firms with a decision.  Almost all companies are bleeding red ink, and it's up in the air whether many of them can afford to remain on the exchanges if they don't get the rate hikes they seek.

Politico:

“I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. "... A number of carriers need double-digit increases.”

In some ways, the turmoil is not surprising: Under the health law, plans are unable to choose who to insure, or how much to charge them based on their medical history. As a result, many plans enrolled a larger proportion of sicker people than they bargained for. But some of those losses were also a function of political wrangling after Republican lawmakers blocked payments that were supposed to help insurers get through the difficult first years.

The timing, though, is bad news for Democrats. Proposed rate hikes are just starting to dribble out, setting up a battle over health insurance costs in a tumultuous presidential election year that will decide the fate of Obamacare.

And the headlines are likely to keep coming right up to Election Day since many consumers won’t see actual rates until the insurance marketplaces open Nov. 1 — a week before they go to the polls.

“Any reports of premium increases will immediately become talking points on the campaign trail,” said Larry Levitt, senior vice president for special initiatives at the nonprofit Kaiser Family Foundation. “We’re in an election where the very future of the law will be debated.”

And that future may depend more on insurance companies being able to stem their losses than on the politics of the election.  At bottom, the reason companies are losing money is that not enough healthy young people are signing up:

One big reason is lower-than-expected enrollment of younger, often healthier people who balance the costs of those who require more costly care. Roughly 12.7 million Americans signed up for Obamacare plans during the most recent open enrollment period. That’s far below the 22 million projected by the Congressional Budget Office, and it’s certain to decline as some drop out.

“The pool is far less healthy than we forecast,” said Brad Wilson, CEO of Blue Cross Blue Shield of North Carolina, which says it lost $400 million on its exchange business during the first two years and is weighing whether to compete for Obamacare customers in 2017. “That’s an issue not just here in North Carolina, but all over. … We need more healthy people in the pool.”

'Not enough of a hammer'

There’s a growing realization the financial penalty for failing to obtain coverage is an insufficient cudgel to convince younger Americans to enroll. The fee for 2016 is $695, or 2.5 percent of income, whichever is higher. Just 28 percent of HealthCare.gov customers for 2016 were between the ages of 18 and 34, significantly below the 35 percent threshold typically considered necessary for a balanced marketplace.

“It wasn’t enough of a hammer,” said Kevin Fitzgerald, an insurance lawyer with Foley & Lardner. “You need a lot of healthy people to sign up to make the numbers work. Obviously that didn’t happen.

What a nightmare. Amid talk of "hammers" and double-digit rate increases, just about every prediction by critics for what would happen when Obamacare was implemented has come to pass.  Young and healthy consumers don't need all that coverage, so they don't buy in.  The belief that they would fear the tax penalty for not signing up was magical thinking all along.

And the idea that Obamacare would slow the increase in insurance premiums was laughable from the start.  The GOP sabotaged the administration's insurance slush fund that would have reimbursed companies for most of their losses, leading to the industry's only alternative to avoid disaster: massive rate increases. 

Obamacare will probably not go into a death spiral this year.  But five years from now, the odds that the law will still be around in its present form are slim.