Friday, November 20, 2015

The Obamacare Smoke Signals From UnitedHealth

The great thing about yesterday's announcement by UnitedHealth that it might just close shop on Obamacare in 2017 is exactly how it brilliantly sends multiple messages to multiple audiences.
The biggest U.S. health insurer said it has suffered major losses on policies sold on the Affordable Care Act’s exchanges and will consider withdrawing from them, adding to worries about the future of the marketplaces at the heart of the Obama administration’s signature health law.

The disclosure by UnitedHealth Group Inc., which had just last month sounded optimistic notes about the segment’s prospects, is the latest sign that many insurers are finding the new business unprofitable, despite an influx of customers that has helped swell revenues.
UnitedHealth Group Chief Executive Stephen J. Hemsley said the company isn’t willing to continue its losses into 2017. UnitedHealth has already locked in its exchange offerings for 2016, but it is pulling back on marketing them during the current open-enrollment period to limit membership, which it said last month totaled around 550,000.

The company will make market-by-market determinations in the first half of next year about whether it will continue selling products on the exchanges.

“We can’t sustain these losses,” he said. “We can’t subsidize a market that doesn’t appear at this point to be sustaining itself.”
 What's useful to know here is the significance of 2017, the first year of a new presidency. While it pretty much amounts to putting words into Mr. Helmsley's mouth, it doesn't seem too difficult to read this as
  1. If a Republican wins in 2016, we're cutting these losses, with the help of changes to law (or discretionary executive enforcement).
  2. If Hillary (don't kid yourself, Bernie fans) wins in 2016, we're pursuing permanent and higher "risk corridor" payments.
The first will be politically hazardous for Republicans, as a large fraction of the electorate is still sold on Obamacare's perceived merits. The second has lower political costs for Democrats, for whom corrupt "public-private partnerships" of this type generally go unexamined and cost little politically when they inevitably go sour — but are unlikely to materialize in a majority Republican Congress. For insurers, Plan Hillary amounts to a step closer to the worst hazard of Obamacare: increased and permanent subsidies equal a much bigger say in how those companies are operated. (It's already being floated in bureaucratic circles [PDF].) That is, it is a prelude to a quasi-takeover by the federal government.

Unsurprisingly, Jonathan "Frankenstein" Gruber still thinks his undead mess will work out in the end (and works fine now), where National Review Online sees (reasonably) the UnitedHealth announcement as a sign that the death spiral has begun. Older, sicker, and poorer people signed up for the program — and these are not "customers" UH wants. The libertarian-leaning Mercatus Center has more details (emboldening mine):
Low enrollment figures have been driven, in large part, by the exchange plans’ failure to attract middle-class uninsured people. Most recently, CBO projected 3 million unsubsidized enrollees in 2015, when in fact there were only 1.6 million. In early 2015, the Urban Institute estimated that 25 percent of enrollees in 2016 would be earning more than 400 percent of the federal poverty line; at the end of the 2015 open enrollment period, only 2 percent of enrollees fell into that income class. Most strikingly, only 2 percent of eligible individuals earning more than 400 percent of the federal poverty line chose to purchase exchange plans.
Which gets back to something I've said all along about Obamacare: if your plan requires the cooperation and purchasing power of a group both notoriously poor or un-/underemployed, your plan will fail. While it seems likely Obamacare will continue to limp along in some capacity, the ones with the most skin in the game, the insurers, seem rather dour on their role in it.

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