Bloomberg reports on some very disappointing news:
Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers that have pulled out of the government-run markets in the face of mounting losses.
Aetna will exit markets including North Carolina, Pennsylvania and Florida, and keep selling plans on state exchanges only in Iowa, Delaware, Nebraska and Virginia, according to a statement Monday evening. In most areas it’s exiting, Aetna will offer individual coverage outside of the program’s exchanges.
Humana, United and now Aetna are all significantly backing out of the exchanges.
The big issue is that there will be quite a few counties where there is now only a single insurer offering coverage. And given the late date of the withdrawal, very few incumbent insurers can re-jigger their offerings to allow for a Silver Gap strategy to maximize the advanced premium tax credit revenue and decrease the subsidized out of pocket expense. So less competition and an inferior array of offerings is on the menu in affected counties for 2017.
Long run this is a challenge. If we are to use a market like mechanism, we need carriers to be willing to offer plans on Exchange. Or we need a public option. In the shorter run, this could help some of the smaller insurers (although they might have risk based capital problems) as risk adjustment is getting a whole lot easier to project in single carrier regions and highly sophisticated data operations are getting out of the segment in some areas.
Overall, this is not good news.
Major Major Major Major
I know this is kind of a big ask, but could you break down the causes between:
1. Flaws in the law’s design
2. Flaws in the law’s implementation
3. John Roberts
?
Richard Mayhew
@Major Major Major Major:
On this case mostly #1, a touch of #2 and none of #3.
The biggest problem is that the risk pools are still very unstable because the subsidies are set up for low cost manipulators (Silver Spamming) and they are not big enough to get reasonably healthy people (at any age) on board in sufficient numbers. Those were the means that the goal of a “good” CBO score for the Senate bill was achieved. As far as implementation, risk adjustment has been a probblem, risk corridors have disappeared and the substantially different regulations are too weak.
Finally putting on my cynical bastard hat, this is a move of major insurers whose mergers are getting challenged. If someone was cynical enough to imagine a counter-factual where those mergers were going through smoothly, I would not be shocked if at least two of the major carriers stayed on Exchange in force. But that is me being cynical.
Elmo
So in the face of the inevitable RW scream that Obamacare is the most massive failure that ever failed, eleventy, how serious is this?
Ronnie Pudding
If there’s a public option, does that drive the private providers even further away? Can’t compete w/ public. Or do they just work different parts of the exchange.
Major Major Major Major
@Richard Mayhew: But that would just be you being cynical.
Re: #3, looks like I misread–I thought it said this was in non-expansion states.
So if we’d had more realistic subsidies, the bill never would have passed?
This sounds like something that ordinarily we would tweak about two years ago.
Kristine
@Richard Mayhew: They’re cynical, too: http://www.modernhealthcare.com/article/20160816/NEWS/160819937
Paul Wartenberg
It looks to be a combination of minor errors growing into a big one. There was the hope that the Medicaid expansion would be in all states, but they’re not, so there’s no help there in some markets. ACA was modeled to work with a Public Option, was it not? Lacking that, the private companies have little incentive to keep more markets in competition. There’s also the possibility of intentional sabotage, that the companies are making these moves to force the federal government to rewrite the ACA more to their advantage.
CONGRATULATIONS!
Non-ACA anecdote: this year, our insurer (UHC) is simultaneously raising our rates and downgrading coverage. I’m really not sure where we as a country can go from here – we threw the insurers the biggest government subsidy in history, and it gave us a few years of “reform” and now we’re right back to double-digit rate increases and, soon enough, the people who weren’t insured before won’t be again, because nobody will be left to voluntarily pick up the policies. At that point I guess we let a few hundred thousand people die and then institute some sort of shitty “Medicaid for all” last-resort/hospice policy.
catclub
Michael Hiltzik at the LA Times said that we need a change in the law to only allow them to service the medicaid expansion sector (Where apparently a lot of money is being made) if they also participated in exchanges. Also the anti-trust side.
WereBear
Teddy Roosevelt knew: they don’t want to be “in business.” They want to cheat.
I would love to see the insurers slowly go out of business and “forces” the country to go single payer; in a gradual way which will not disrupt the many people who work in that field.
They were used to insane profit and no accountability except sporadic bad press. Hard for them to scale back from those glorious days…
WereBear
On a personal note, Richard, did you ever blog about getting an insurer to pay for a rare, out of network coverage, condition?
Because, that’s where I am.
dedc79
Richard, are they enforcing the penalties yet for those who haven’t enrolled? Isn’t that supposed to prod folks who aren’t otherwise inclined to get insurance (because they’re young/healthy) to do so?
Major Major Major Major
@Paul Wartenberg: Given that the senate bill had no public option, I certainly hope it wasn’t built around one.
Richard Mayhew
@Elmo: nationally it is about a 3, in some regions and counties it is a 5 and counties where there are now no on-exchange sellers, a 9
Richard Mayhew
@WereBear: https://balloon-juice.com/2016/06/29/zebras-in-narrow-networks/
also e-mail me if you need help
Joel
So… who is most likely to be affected? (Non-expansion states, right?)
What do we do about it?
amk
Sounds like a collusion to repeal Obamacare and go back to the good ole days of looting and sniffing cocaine. Anti-trust law suits from justice department?
Cameron Ashby
Umm… Has anybody checked to see if they’re all pulling out of different states or counties, leaving most with one large insurer, as if someone behind the scenes were coordinating an anti-competitive market division plan?
JPL
How much of Aetna’s loss was due to the rising cost of prescription drugs?
WereBear
@Richard Mayhew: Awesome, thanks!
Knight of Nothing
Short of adding public option, which I assume would require an act of congress, are there legal and/or executive remedies for this (seemingly) growing issue with ACA?
nonynony
@amk:
They’re idiots if they think that’s where it’s going. They’re more likely to end up with a public option competing with them or a Medicare for all scenario. They only way the insurance market continues to work is if they play along. They can hope for Republican control of government for a while, but it won’t last forever.
They can stave it off by making the Exchanges work, but the Democrats are going to have the Congress again someday. And when they do the fact that the insurers colluded together to tank the Exchanges will be the narrative they have to deal with. And I suspect that the result won’t be pretty.
laura
Colorado bears watching.
California had a sound (structurally and actuarialy) single-payer plan that made it to the Governator’s desktwice in a Republican majority legislature, led by then Senator Sheila Kuehl and then by Senator Mark Leno.
Single-payer is the only realistic solution and it means actual care, varying levels of coverage.
And it has no role for the insurance industry.
Were-bear and similarly situated wouldn’t have the distraction and fears of networks, but focus on care and healing.
Profiting off the ill is inhuman.
Mai.naem.mobile
@nonynony: when recently has legacy american business looked at anything long term? Its always next quarter, next quarter. Beside, they figure they can bribe politicians out of any problems.
WereBear
I am fortunate that my condition, while congenital and chronic, will not actually kill me. Because I probably would be in trouble while waiting for the insurance company to get back to me.
Major Major Major Major
@laura: lots of counties have affordable universal coverage without single payer, and most (all?) single-payer places have premium private markets. It’s not a panacea.
@nonynony: are their profits actually that high though? I seem to remember they weren’t. It makes more sense to play along with a law enshrining them than to tempt fate.
Mike in NC
Greedy insurance companies are out to screw the consumer. Film at 11.
Chris
Public option it is, then.
My wingnut uncle had it all worked out, six years ago, that the ACA was a ploy to destroy the private insurance companies so that the terrorized masses would have nowhere to turn to but the Federal Government, which would then use the crisis to force through a Single Payer Plan. (At which point we become a totalitarian monstrosity like Cuba. Or France).
All I could think of at the time was “man, I wish.” But maybe he’ll get his wish after all.
WereBear
@Chris: That is going to be inevitable if they are restrained from not being greedy Cylons about it. Which they will. QED.
Chris
@CONGRATULATIONS!:
@WereBear:
Yeah.
This was always my main fear with the whole notion of a market-based insurance plan: it required at least some degree of good faith and cooperation from people who… based on their record, it seemed highly questionable that they were capable of that. I’m not knocking Obama and Pelosi and the others’ accomplishments – they got the best deal they could and it has made a huge difference (moving from a non-Medicaid to a Medicaid-expansion state this year, I absolutely felt it). But it’s beginning to look like a public option will be required at some point down the line.
NYCMT
Comment made this AM on NPR that the counties being withdrawn from are primarily rural – could it be a combination of bad underwriting and inability to find best rates with monopoly rural providers?
WereBear
@NYCMT: Seems like rural places would have a problem “fixing it with volume,” you might say.
daveNYC
And rural tends to be older, which isn’t helping anything.
Miss Bianca
@laura: I am wondering if allthis insurer news might actually be good news for Amerndment 69’s passing in CO. We shall see.
Brachiator
@Richard Mayhew:
Yeh, some of the news stories about the industry seem to bear this out. But I don’t see that mergers would make it better for the larger companies to be in the insurance business, if a big issue is in getting reasonably healthy people on board.
Beebop
My recollection of the Swiss system is that all health insurers were required to offer the state-defined plan at the state-set price. They can then sell those customers additional coverage and plans.
Could it be that the ACA is too trusting of the kindness of Big (for profit) Health?
burnspbesq
@laura:
There are about 100 million people in France, Switzerland, and the Netherlands who would disagree with you. They get affordable care and good outcomes, and their insurance companies make plenty of money.
Our problems are fix-able if we can flip Congress.
Brachiator
@dedc79:
The penalty, or shared responsibility payment, is computed when a person files a tax return.
I ran across a news story a while back that suggested that for 2015, 6 million households or about 17 million people paid the penalty. The average amount was $190, I think.
If I have time later, I will try to find some of the references again.
Raven Onthill
A more-or-less guaranteed 15+% gross profit isn’t enough to keep insurers in the exchanges?
Capitalism is dead.
Patricia Kayden
This is awful news. Hoping that President Clinton is paying attention and figuring out how to address this problem.
burnspbesq
@Raven Onthill:
Gross profit isn’t the meaningful number. Tell me about EBITDA, then we’ll talk.
Brachiator
@laura:
If one of these plans was California Proposition 36 (and I am guessing on the Prop number), the plan was not well crafted at all, and was rightfully rejected.
As noted by other people here, there are people who falsely insist that a universal health plan must be single payer, when this is not universally the case.
dedc79
@Brachiator: Thanks.
Garm
How much of this is due to GOP killing co-ops?
Raven Onthill
@burnspbesq: Are perhaps your European insurers willing to accept good but not extraordinary profits?
Raven Onthill
@burnspbesq: You’re going to tell me insurance company can’t make a solid profit off a 15+% gross? What are they doing, using gold-plated pencil cups?
piratedan
seems like these guys are following in the footsteps of the banking brethren, playing chicken with the US Consumer indicating that THEY WILL make their profits and consequences be damned. Whereas, I could see a clamoring of single payer winning out and shitcanning these guys to the sidelines and niche markets and essentially telling their CEO’s that they have chosen poorly. I could also see some big changes coming Big Pharma’s way. Because if the Dems align with the consumer, what is the GOP going to do… why they’ll side with Pharma and the Insurance companies in the name of “profits!” because that’s what they do.
Gindy51
@JPL: They scored a huge profit this past year… http://www.wsj.com/articles/aetna-profit-rises-38-1454326988
gorram
@Richard Mayhew: I’m curious if the “easy” fix to this is creating a public option lite that’s purchasable in the exchanges – not just a subsidized private firm, but a publicly administered one, basically medicaid/medicare you can buy into if you’re young and well-off enough not to qualify for it. Ideally, it competes with the silver spammers and fragments the market enough that the big ones don’t pull back from quite as many states and smaller firms have a lot of opportunities for unexpected growth. It’s all rather Krugman – state intervention to move the needle towards more perfect competition.
You’re the expert on this though, why is that not possible or preferable under the current law? When people discuss a public option, they often imply something outside of the exchanges or after their dismantlement, but that only seems obligatory for a single payer system. You’re putting it on the table (and I want it there too), but why isn’t it currently built into the exchanges?
In a way, weren’t these exchanges designed to fall apart in a way that made clear the need for a public option? *puts on tinfoil* All is going according to plan!
Bess
As long as there is one provider, as long as there are standards for what must be covered, and as long as there are caps for the percentage of income that goes to health insurance is there a big problem?
All companies have to offer chocolate ice cream, made with the same ingredients, and sold for the same price per pint. Is it important if there are multiple carton designs in the store freezer when the contents are identical?
Major Major Major Major
@Bess: I would imagine the differences could be considerable once you get into things like network selection.
JPL
@Gindy51: Wow.. Aetna like the other companies, only want to insure the healthy and wealthy. Just wow!
True competition would occur only if there is a Medicare for all buy in.
Villago Delenda Est
@WereBear: THIS. They are parasites. Fuck them.
p.a.
@Bess: Yes, this. If regulation is not subject to capture, how much competition is really necessary? If competent regulation allows for profit with a buffer for catastrophics/one-offs, why wouldn’t there be insurers in a given market? Are we seeing cartelization?
Bess
@Major Major Major Major:
I live in a very rural area. Any network that an insurance company would create would include pretty much all the providers in the area. We haven’t had a choice of insurance companies since Obamacare kicked in. One insurance company. One rural health clinic. One hospital an hour away.
Perhaps there’s less choice among specialists. I haven’t had to deal with that.
Mnemosyne
@Bess:
That’s part of the difficulty in building a rational Exchange — urban areas have different problems than rural areas. Even rural areas of Canada have difficulty getting care delivered. Heck, even the rural parts of California are having trouble, because there’s not a lot of existing infrastructure.
Bess
@p.a.:
Some communities can’t support more than one restaurant or gas station. There simply aren’t enough customers to permit recovery of fixed costs.
WereBear
@Bess: And then, like Wal-Mart, they will simply close up and tell people to drive.
acallidryas
@Major Major Major Major:
There are a few different parts of the ACA that need tweaking and, if we had two functioning parties living in the real world, would have been. Unfortunately, we have one party that wants to fix ACA and one that wants to use every potential flaw to show how ACA will kill us all with death panels, socialism, and higher premiums.
daverave
Every aspect of the insurance industry is slowly withering away and I’m not just talking health insurance. My wife works at an insurance agency (life, disability, group health) and the fact is that all of them are dying. Her small brokerage company has gone from 25 employees to 6 over the last ten years. The end is near for them. There are no new insurance salespeople coming along. Recruitment is impossible. Many, many consumers look at life insurance as a luxury that they can not afford. The companies are going through spasmodic changes, mergers, failures, etc. Business is going to an all internet based model while the companies get by through the denial of claims and by screwing the remaining agents out of commissions and residuals.
Richard’s mileage may vary but that’s what I’m seeing.
Bess
@WereBear:
What does that mean? The insurance company is not going to close the local health clinic.
We buy insurance online. There’s no “drive”.
Bess
@daverave:
Is it not the case that insurance if moving from local office to the internet?
It’s been a long time since I visited an insurance office. Or a travel agency. Or an electronics store.
Ampersand
@dedc79:
Keep in mind, some people are exempt from paying the fine. In my case, I don’t have insurance, but I don’t make enough money to have to pay the fine, either.
Chris
@acallidryas:
Unfortunately, this is basically the story of how politics in the modern United States works. We have one party that’s expected to be responsible for 1) keeping the machinery of government running and 2) performing the extensive repairs that the other party’s constant fuckups require simply to keep Goal # 1 achieved, while somehow still 3) coming up with all the innovations, expansions, and adaptations that will be needed if that machinery is to continue interacting with the constantly-changing world around it. Oh, and implementing all of these innovations, by itself, naturally.
It’s fucking insane. It’s too much. Some people sometimes speculate about whether at this point a one-party political scene where no one but Democrats wins elections might not be healthier than the current mess (I’m one of them, frankly). But another way of looking at it is that we already have a one-party system when it comes to actual governance – the other party has completely abdicated any responsibilities in that department. They just want to live high off of whatever they can scam from the system, rely on the maid (i.e. the Democrats) to clean up whatever they fuck up so they can continue to do so, and throw dodgeballs at her the entire time she’s cleaning because… it’s fun? Or something.
WereBear
@Bess: Your post referred to gas stations.
liberal
@Bess:
LOL
laura
@Brachiator: Nope. They were SB810 and SB840.
Propositions are voter measures, these were Bills proposed by CA Senators.
The Lewin Group did the actuarial and economic studies.
I’m a Union Thug by profession and these measures had and continue to have strong grassroots CNA and public sector labor supported it until 2013 when the focus and legislative attention shifted to the ACA.
RealityBites
Virginia hasn’t done the expansion. The smaller, rural areas are hurting and medically underserved. There are scary rumours that the hospital nearest to me is in serious financial difficulties. Next nearest hospital is 45+ miles away, depending what side of the county you live. I know several people who could not afford health insurance without the ACA. One, a hairdresser and cancer survivor, used to spend a huge chunk of her earnings for crappy insurance. Fortunately, her house was paid off or she would have really been in a bind. She will be old enough for Medicare soon. But what about her younger coworkers?
Bess
@WereBear:
My post referred to the size of customer bases.
Bess
@liberal:
What do you call a place like Best Buy or another store where one might shop for computers, phones and other electronics stuff?
Arclite
Is this an actuarial failure? Seems obvious that a lot of pre-existing conditioned people would be joining the exchanges skewing the applicants toward the sick.
IMO, this is just another reason for the need of single payer. And I say that as someone who makes a decent salary working for a BCBS nonprofit.
Brendancalling
@Chris: utterly predictable to anyone with a basic understanding of human nature. For-profit companies exist to make a profit. And among npos-in-name-only like Blue Cross, the same is true.
AnonPhenom
How very un-original. Healthcare insurance companies trying to do to healthcare insurance what cable companies did to cable TV decades ago. Time for a Medicare Buy-in/Public option for everyone in the U.S. and lets drown these nascent regional would-be-monopolies in a tea cup.
Prescott Cactus
@Richard Mayhew:
Now available at Balloon Juice USA.
@burnspbesq: Mario Gabelli fan? Early user of EBITDA.
Raven Onthill
Is it perhaps possible that the insurance companies did not understand that low-income populations are less healthy than middle-income populations?
Raven Onthill
@Richard Mayhew: Thank you. I see you already answered my question.
You know, I would like to see you gather these essays up into a $5 ebook. Even with minimal redaction, I think it would be a useful reference, and might even provide a way forward, if we can ever get Congress back on track.