Letters: ‘Obamacare’ model bleeding red ink


by Scuddy LeBlanc

Source: The Advocate

Many insurance policies sold through the Affordable Care Act government exchanges were underpriced in 2014. Insurance companies paid out about 24 percent more than anticipated, and some experienced huge losses. Insurance companies are asking for premium increases of 20 percent to 40 percent in 2016 for policies sold through the government exchanges.

For example, Blue Cross Blue Shield of Minnesota lost more than $135 million on its individual insurance business in 2014 under ACA and expects to lose even more in 2015. Blue Cross Blue Shield of Tennessee lost $141 million on its marketplace insurance in 2014.

In Oregon, insurance companies collected $703 million in premiums and paid out $830 million in 2014. An Oregon insurance actuary warns that insurance companies could go out of business midyear, leaving claims unpaid.

Overall, Assurant Health lost $64 million in 2014 and left the ACA exchanges. Assurant paid out $104.30 for every $100 collected in premiums. Because of “Obamacare,” they are getting out of the health insurance business.

Twenty-three of the taxpayer-funded consumer operated and oriented plans (COOPs), established by ACA, lost about $244 million through nine months of 2014. One made a profit. They paid out $117 for each $100 in premiums, and some 20 percent of all COOP enrollees were forced to shop for another plan. At least one expert suggests that the COOPs deliberately underpriced their policies to gain market share:

“Going forward, state insurance regulators and other government regulatory bodies need to be on the lookout for COOPs that employ strategic plans premised on losing money while gaining market share, expecting taxpayers to bail them out. This strategy will likely play out again and again until most of the COOP health insurers lose all their taxpayer financing and go bankrupt,” said Devon M. Herrick, of National Center for Policy Analysis.

Will the federal government approve massive increases in premiums? Will more insurance companies bail from the ACA exchanges or get out of the insurance business? Will the administration bail out the 23 insolvent COOPs, or will they increase premiums to make up their losses?

Critics predicted that “Obamacare” needed to enroll about 40 percent young, healthy adults for the ACA pricing structure to work. The Obama administration disputed it. The government exchanges did not enroll enough young, healthy adults, and some insurance companies and almost all of the COOPs experienced losses in 2014. The critics were correct, and the Obama administration was wrong.