Obamacare Marketplace Expected to Shrink by 1.14 Million as Insurers Flee ACA; Lessons to Learn from Medicare?

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An increasing number of people in Obamacare are learning that their health insurance plans won’t be available under the program next year, forcing them to find alternative coverage amidst dwindling choice and prices increases.

More people in #Obamacare are learning their health insurance plans won’t be available Click To Tweet

At least 1.4 million people in 32 states will lose the Obamacare plan they have now, according to state officials contacted by Bloomberg. That’s largely caused by Aetna Inc. (Hartford CT), UnitedHealth Group Inc. (Minnetonka MN) and some state or regional insurers quitting the law’s markets for individual coverage.

Sign-ups for Obamacare coverage begin next month. Fallout from the quitting insurers has emerged as the latest threat to the law, which is also a major focal point in the US presidential election.

While it’s not clear what all the consequences of the departing insurers will be, interviews with regulators and insurance customers suggest that plans will be fewer and more expensive, and may not include the same doctors and hospitals, says Bloomberg.

It may also mean that instead of growing in 2017, Obamacare could contract. As of March 31, the law covered 11.1 million people; an Oct. 13 S&P Global Ratings report predicted that enrollment next year will range from an 8% decline to a 4% gain.

Bloomberg contacted officials in all 50 states and Washington, D.C., and the 1.4 million-person estimate includes 32 states and only plans sold on the individual “exchange” markets. In Texas, Arizona, Georgia and Missouri, insurers have pulled out, but regulators couldn’t or wouldn’t say how many people are affected. Three states didn’t provide sufficient data. Eleven states, plus D.C., said they weren’t affected.

The US agency that oversees Obamacare has said that some disruption is normal, and that choosing a new plan can help people get the best deal.

“It’s part of the normal business cycle for insurers to discontinue, change, and replace plans from year to year,” Benjamin Wakana, a spokesman for the Department of Health and Human Services, said on Oct. 5. “Such changes don’t prevent people from obtaining coverage. People can shop for new coverage through a transparent market.”

HHS said Thursday that it will contact people losing their coverage and encourage them to sign up with new plans. The law requires all Americans to have insurance or pay a fine.

Nationwide estimates of the number of people losing their current plans are higher. For example, Charles Gaba, who tracks the law at ACASignups.net, estimates that 2 million to 2.5 million people in the US will lose their current plans, compared with 2 million a year ago.

Gaba’s estimate is based on insurance company membership data. For the people losing plans, there are fewer and fewer choices. One estimate by the Kaiser Family Foundation predicts that for at least 19% of the people in Obamacare’s individual market next year there will be only one insurer to choose from.

In North Carolina, for example, a BlueCross BlueShield insurer will be the only option in 95 of the state’s 100 counties after Aetna and UnitedHealth said this year that they would leave. That will leave 284,000 people looking for a new plan, according to the state.

“Without any significant statutory and regulatory changes on the federal and state levels, we may face the crisis again,” said North Carolina Insurance Commissioner Wayne Goodwin, a Democrat who’s up for election this year. “There needs to be a wholesale re-evaluation by leaders in Washington.”

In Tennessee, UnitedHealth and the state’s BlueCross BlueShield plan are pulling back, and about 117,000 people will lose the plans they have now.

Amanda Page Cornett, a 34-year-old musician and athletic trainer in Nashville, is among them, according to Bloomberg. For 2015, Cornett was careful to pick a BlueCross BlueShield plan that covered specialists at Vanderbilt Health, to treat nerve pain stemming from a 2013 accident. Her condition worsened recently, she said, and she’s worried about losing access to her doctor.

“I’m hopeful that he’s going to be able to help me,” she said of her current physician. “I feel like now I have two and a half months to figure it out before they shut me out.” (Source: Bloomberg News)

Steve’s Take: After years of steadfastly defending Obamacare, I’m finally joining the ranks of people like former President Bill Clinton who, speaking at a Democratic rally in Flint, Michigan on Oct. 3, ripped into the Affordable Care Act (ACA) for flooding the healthcare insurance market and causing premiums to rise for middle-class Americans who do not qualify for subsidies.

“So you’ve got this crazy system where all of a sudden 25 million more people have health care and then the people, who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world,” Clinton said.

The following day, he tried to clean up his criticism.

So what is the primary problem leading to the above story’s assertion that at least 1.4 million Americans will lose the Obamacare plan they now have when they try, soon, to sign up for health coverage again next year. That’s a lot of people. Too many for this development to be swept under the Oval Office rug.

Almost from its inception, critics have claimed that Obamacare inevitably would face a “death spiral,” wherein price increases would chase away the healthiest Americans, driving prices ever higher.

But because the government will in effect absorb the extra cost for those it gives subsidies, such a scenario seems unlikely. Price hikes are problematic because shoppers might need to swap plans they simply cannot afford, possibly interrupting their necessary treatment. But the government subsidies should buttress the other plans so that remaining on the exchange makes sense for them.

Without subsidies, however, it’s not the same situation for plans purchased directly from insurers. These are getting harder to afford. The mechanism for keeping healthy people in these plans supposedly is the fines they would have to pay if they went “bare.”

Right now, the fine for a single adult his $695 or 2.5% of gross income, whichever is higher–up to a ceiling. But that might not be disincentive enough, since plans with big annual deductibles can cost $2,000-$3,000.

Still, the announced exit of several of the leading insurers from next year’s exchanges poses the biggest threat to Obamacare. To put this in perspective, this year, one in 50 prospective exchange shoppers lived in a county with just one insurer, says McKinsey.

But due to the desertion by the insurers, next year up to one in six will be in such position. According to The Economist, some entire states will be served by only one insurer; and in Arizona, Pinal County is facing an exchange bereft of any insurers.

Quite clearly, if the exchanges included more customers–especially healthy people–the ACA would function in a manner much more like it was originally intended. Getting more Americans to shift from employer-sponsored health insurance would be the best way to accomplish that goal.

If that were to happen, however, it would mean more people shopping on the exchanges. Theoretically, the government could force people with individually purchased plans to buy them on the exchanges, a la Washington DC. That might stem the flight of insurers from the exchanges where they could still market directly to the more affluent shoppers.

Because most Republicans dream of the law’s death spiral, well-intentioned ideas put forth to remedy the economic shortcomings are not politically viable. Democrats, on the one hand, espouse a publicly run plan that competes with other insurers–which Republicans loathe. Donald Trump on the other hand, calls The Affordable Care Act an “incredible economic burden,” to be replaced, under his presidency, with “something much better.”

The private market is desperately in need of cost-controls. Private health-insurance spending (including employer-provided plans) is forecast to grow by 5.6% a year over the next decade, driven by pharmaceutical spending, according to The Economist. Overall spending on health care will rocket to a bizarre 20.1% of the American Gross Domestic Product by 2025.

I get a lot of email from my conservative friends and relatives, basking in the supposedly established fact that Obamacare is dead. After all, big private insurance companies bailing out of a government-sponsored healthcare program, complaining about huge financial losses. Hundreds of thousands of customers lose their health plans. Terminations are especially severe in rural counties, leaving virtually no competition. Total enrollment drops.

This is Obamacare, 2016, right? Wrong; actually Medicare, 1998-2002. I was living and working in Washington, DC, at that transformational occasion on July 30, 1965 when LBJ, at the helm of The Great Society, signed Medicare into law.

During that shaky period, insurers canceled nearly half of their contracts to participate in the managed-care program then known as Medicare+Choice and now called Medicare Advantage. Between 300,000 and 1 million customers lost their plans. Total managed care enrollments fell to 4.6 million from 6.4 million. The future of the program was very much in doubt. Sound familiar?

And yet, enrollments in Medicare Advantage today number 17.2 million.

Steve's Take: #Obamacare can be fixed by learning from #Medicare's past Click To Tweet

For more about the stunning parallels between the evolution of Obamacare and Medicare, go to my post “Medicare’s Forgotten History Shows How to Rescue Obamacare,” dated Sept. 12. Quite possibly there are some constructive lessons to be learned from that era which reside in historical fact, not in today’s political rhetoric.