Insurers are raising the 2017 premiums for a popular and significant group of health plans sold through HealthCare.gov by an average of 25 percent, more than triple the typical increase for this year, according to new government figures.
The steep increase in rates serves broadly to confirm what has become evident piecemeal in recent months: Prompted by a burden of unexpectedly sick [Affordable Care Act] customers, some insurers are dropping out while many remaining companies are struggling to cover their costs.
While it was no doubt unexpected for the Obama administration, conservative critics predicted this precise turn of events. Yes, the percentage of Americans covered has increased, but the “affordable” part of the Affordable Care Act was an empty promise. By subsidizing fee-for-service medicine and allowing the sickest patients latitude to game the system (exiting and entering the system to pay the least amount in premiums), Obamacare attracted the sickest patients, who use the most services.
One of Obamacare’s core failings is its overt reliance on young or healthy consumers to sign up for health insurance under the law and thereby subsidize the costs of the old and sick. That generally hasn’t happened, so everyone’s premiums have risen to compensate for this mismatch of risk. Hillary (and Bill) Clinton’s solution to the problem is to offer everyone the opportunity to buy into a “public option” for health insurance — essentially, a health plan underwritten and operated by the government that would be more affordable than private plan options currently available on the law’s marketplaces.
But such a proposal only shifts risk away from the private sector and into the hands (and wallets) of taxpayers. If the old and sick continue to sign up for health insurance at a more rapid pace than the young or healthy, it’s not insurance companies who will be left to pay the bill — because government is the insurer in a “public option” health plan. That means taxpayers are the ones ultimately on the hook if the plan fails or doesn’t operate as expected.
House Speaker Paul Ryan (R-Wis.), in his “Better Way” plan, suggests a tax credit and health spending account system for those who don’t get employer-provided coverage. This at least would have the benefit of encouraging cost-conscious consumers to shop for value. By allowing a variety of plans, including a bare-bones catastrophic option, more affordable coverage could be more widely available. Praising Ryan’s ideas, Chen argues that “policymakers should turn the page on Obamacare by pursuing fundamental health reforms that empower citizens to make health care decisions, migrate government subsidies for health care toward defined contribution payments, and incentivize innovation and payment for performance in the provision of heath care.”
Moreover, Obamacare, as many conservatives anticipated, has contributed to huge consolidation in the health-care industry — among hospitals, providers and insurers. The result, unsurprisingly, is higher costs.
Scott Gottlieb of the American Enterprise Institute writes that one way to rein in skyrocketing premiums would be to increase competition among insurers:
For the 2017 plan year, the three largest insurance carriers — Aetna, United Healthcare, and Humana — have largely exited Obamacare. Among the challenges posed by Obamacare are rules that create costly adverse selection, and lackluster adjustments for risk. But equally key are regulations that make it hard for brand new health carriers to get started.
Gottlieb recommends modification in the caps on health-plan operating margins as a way to encourage more insurers to get into the system. “So long as consumers have transparency (and reliable metrics) on the value of the benefits that different plans offer, the exchanges would benefit from giving new health plans far more flexibility on how they allocate their capital,” he writes. “Such reforms would make it easier for new health plans to attract capital to enter these markets. It’s one step toward enabling more competition on the beleaguered exchanges.”
If only the GOP had nominated a policy-proficient, competent candidate who could have explained why Obamacare needs major renovation and spoken coherently about alternatives. Unfortunately, Republicans nominated Trump, whose understanding of the problems and capacity to offer solutions are virtually nonexistent. Hillary Clinton therefore was allowed to skate by without answering hard questions about the long-term viability of Obamacare. Trump essentially gave Clinton a pass on this topic — and one major policy issue after another — that could have worked against her. A candidate — practically any of the 16 other Republicans who originally ran — who had even a rudimentary grasp of policy might have used the issue to great success. At least we would have had an informed debate about the topic.
When Clinton takes office, she is going to have a tough challenge: Can she make the Affordable Care Act affordable?Republicans will never go for a single-payer system, so she had best start chatting with Ryan about whether there is some common ground for reforms. Otherwise, yes, the system will be in the long-anticipated death spiral.