ObamaCare’s unloved exchanges

ObamaCare’s unloved exchanges
By: John Hayward
2/19/2013 04:37 PM

A number of Republican governors, including Bobby Jindal of Louisiana and Rick Perry of Texas, have made headlines by declining to set up the ObamaCare exchanges. New Jersey governor Chris Christie recently joined the refusal chorus, declaring that his state would comply with ObamaCare “only in a manner that is the most effective and efficient for the residents of New Jersey, and the businesses that will carry the costs of this new program.”

This option of refusal is not a rebellion; it was presented to governors by the Affordable Care Act. It was assumed that most of them would voluntarily create these exchanges in their states, but in the end, 26 states did not. This is a big problem for ObamaCare, whose absurdly rosy budget predictions assumed the states would cover these costs. The exchanges are Big Government’s inefficient, expensive, hyper-regulatory substitute for a health insurance market. Instead of competing with advertising in the free market, insurance companies and customers will find each other through government-managed “portals.”

But a potentially even bigger problem is highlighted by Forbes magazine, which notes that insurance companies don’t appear eager to participate in the exchanges, either:

“We will only participate in exchanges that we assess to be fair, commercially sustainable and provide a reasonable return on the capital they will require,” UnitedHealth Group Inc. CEO Stephen Hemsley said.

That’s ominous news for Obamacare. If insurers don’t participate in the law’s exchanges, then consumers who had hoped to secure affordable coverage through the new marketplaces will instead find few choices and high prices. Taxpayers could be hit hard, too, as higher premiums in the exchanges will require more public spending on subsidies.

What’s the holdup, insurance companies? State governments don’t want to get stuck in fiscal bear traps by joining the exchanges, and they’re not wild about shouldering big ObamaCare costs to help the federal government pretend the program is less expensive than it really is. What’s the insurance industry’s beef?

Obamacare’s supporters predicted that insurers would flock to the exchanges, where millions of potential customers would be waiting to buy coverage, per the law’s requirement that they do so.

But participating in government exchanges means playing by the government’s costly rules. Insurers will have to adhere to strict coverage standards that vary by state — and they’ll face restrictions on how they can price their products. Insurance companies will even have to pay a fee to sell insurance on the exchanges. That levy starts at 3.5 percent of every customer’s premium — and could increase from there.

Insurers may even need to put together a local provider network in each state exchange they join.

Well, so what? Everybody knows these companies are fat-cat exploiters who grew rich by milking big premiums out of hapless American workers. They can afford to kick in a few bucks to finance the People’s Great Health Care Leap Forward, right?

These factors will erode insurers’ slim profits. The Wall Street Journal recently reported that health insurers expect any potential profit margins from sales in the exchanges to be in the 3- to 5-percent range.

Sheryl Skolnick, an insurance analyst for CRT Capital Group, told the Associated Press, “There is a significant risk . . . that if the economics on the exchanges are not favorable, they’re simply not going to participate.”

Indeed, UnitedHealth Group has stated that it may participate in only 10 to 25 of the 100 or so markets in which it could be active. Aetna has identified 15 exchanges.

The cost of ObamaCare subsidies has already soared beyond every initial estimate – they’ll cost over $1 trillion in the next decade – so Forbes warns that “Congress may not have the political will – let alone the money – to subsidize the exchanges at levels necessary to ensure widespread participation among insurers or consumers.” And we’re not even talking about the cost of setting up the actual IT systems necessary to run the exchanges yet.

How did the Obama Administration respond to these multiple fatal flaws in the President’s tottering health-care bill? By renaming the “exchanges.” They’re called “marketplaces” now. You can see why central planning worked such wonders for the Soviet Union. No wonder the Democrats are starting to experience crippling pangs of buyer’s remorse over the health care boondoggle that bears their names… and not a single Republican signature.
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To read more about Obamacare, click here.
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To read another article by John Hayward, click here.