Just recently, the healthcare insurance giant, United Healthcare announced that it may leave the ObamaCare exchanges at the end of 2016; claiming losses as the reason. Now, ask yourself: If the nation's largest insurer can't operate successfully in the exchanges, then how can smaller companies survive? Well that question can be easily answered by something called the "Risk Corridors" provision of ObamaCare.
Under the Risk Corridors provision, insurers are given protections for extreme losses in the first three years of their operation in the exchanges (2014, 2015, and 2016). What this means is, if an insurer loses 3% in profits, that insurer absorbs those losses completely. However, if those losses exceed 3%, but are less than 8%, the federal government will compensate the insurer for 50% of the losses. If they are greater than 8%, the federal government will cover 80%. Similarly, if an insurer's profits are more than 3% but less than 8%, the insurer must hand over 50% of those profits to the feds. Over 8%, the insurer can only keep 20%.
This year, it was reported by Health and Human Services that, in 2014, the insurers are owed $2.87 billion dollars for losses, while the government is only owed $362 million in excess profits. This is a clear indication that insurance under ObamaCare is a losing proposition. The fact that United Healthcare is complaining about losses so late in 2015, means that the trend of 2014 had continued for United again this year.
A further indication of extreme losses comes from the fact that, of the 23 co-op insurers that were established by the Obama Administration at a cost of $2.5 billion dollars to provide competitive pricing and wider acceptance by doctors, 2 last year and 12 this year have gone belly up, leaving tens of thousands struggling to find new insurers who would include their existing doctors. For example 200 critically ill cancer patients who were being treated at Sloan Kettering, were left with no other insurer who would cover the cost that hospital was charging when their New York co-op went bankrupt.
Lastly, the fact that insurers are struggling to keep above water is reflected by the rate increases they submitted for approval by the state regulatory authorities. In July, the New York Times found that the insurers were asking for increases of between 20 and 40 percent. But, apparently, those increases had been disapproved and set substantially lower. That ls because Health and Human Services only recently announced that rates will only go up an average of 7.5% for next year. That means that the insurers might be exposed to losses of anywhere between 12.5% to 32.5% which will, again, be covered partially by the Risk Corridors provision.
Simply, as ObamaCare goes into open enrollment for 2017 and as the Risk Corridors support ends, there might not be an insurer left to sell in the exchanges. And, if any are left, it will be too expensive for anyone to afford to buy or maintain coverage unless the insurance is heavily subsidized by the federal government. At that point, ObamaCare will just implode.
Of course, you can expect Democrats to keep ObamaCare alive by wanting to extend or expand the Risk Corridors program. After all, you can't just leave millions of people without any further insurance. If that happens, it will just be a matter of time before a single-payer, fully government funded and controlled, health insurance program will come to be. Something the Democrats have wanted from the very beginning.
United Healthcare may pull out of the exchanges: What does this mean for Obamacare?: http://blog.chron.com/intheloop/2015/11/united-healthcare-pulls-out-of-healthcare-exchange-is-this-the-end-of-obamacare/
Risk Corridor Claims By Insurers Far Exceed Contributions (Updated): http://healthaffairs.org/blog/2015/10/01/implementing-health-reform-risk-corridor-claims-by-insurers-far-exceed-contributions/
Even If You Like Your Obamacare Co-Op Insurance, You Probably Can’t Keep It: http://www.govexec.com/management/2015/11/even-if-you-your-obamacare-co-op-insurance-you-probably-cant-keep-it/123719/
Health Insurance Companies Seek Big Rate Increases for 2016: http://www.nytimes.com/2015/07/04/us/health-insurance-companies-seek-big-rate-increases-for-2016.html
Obamacare premiums to rise an average of 7.5% for benchmark plan: http://money.cnn.com/2015/10/27/news/economy/obamacare-premiums/