Everyone interested in healthcare, and particularly the Affordable Care Act (“ACA,” “Obamacare”), is waiting anxiously for the Supreme Court’s announcement in King v. Burwell which is expected before the end of the month. That ruling may very well determine the future of Obamacare since it will dictate whether subsidies for health insurance premiums can be granted to those who have purchased their insurance from the federal exchange (Healthcare.gov) and not an exchange established by a State. This outcome then, determines how insurance companies will get paid in order to continue offering coverage.
This, along with the underwriting guesses made by the insurance industry when trying to properly price their ACA offerings, have left the market in a daze. We’ve already seen preliminary premium rates for 2016 coming in with 20-30% increases on average, including many health plans seeing 50-60% increases. The market as engineered by the ACA has created a recent feeding frenzy between a number of the major health insurers. In the last two weeks we’ve seen Cigna pursue Humana; Aetna pursing Humana; Anthem chasing Cigna and United Healthcare with an appetite for Aetna!
Why all the action? If subsidies stay in place with an affirmative vote by the Supremes, then the same challenging underwriting guesses remain. The carriers have seen lower-than-expecting enrollments from the young and healthy and emergency room utilization has not abated, but actually risen under Obamacare. Left to its on devices in the current environment, the market is fraught with uncertainty. When in doubt, there is strength and comfort in numbers which creates the “tingle to mingle” and consolidate assets (lives and premiums). If the court rules against subsidies, then it’s “Katie bar the door!” Enrolled members will be dropping out (it has been estimated that 90% of those enrolled in an exchange plan are receiving a subsidy) because they won’t be able to afford the premiums without the premium credit. Those remaining will be the sicker patients, the ones that create the often-predicted “death spiral” in healthcare financing For more details, see my new book, Killing Healthcare: How the ACA is Murdering the U.S. Healthcare System.(https://www.wbcbaltimore.com/books/)
Consolidation creates fewer players and with a reduced number of carriers comes fewer options for insurance buyers. Instead of more competition (one of the promises of the ACA) we wind up with less. In most instances, fewer choices leads to higher prices and the much-desired cost-containment aspects of healthcare reform is allowed to spin out of control!
Some of my more cynical colleagues have postulated that this outcome is exactly what the central planners behind the ACA had intended. They start with the underlying objective of moving the country to a single-payer system. In order to wind up there, you must first begin to incrementally dismantle the current system of health insurance financing through the use of private insurance companies (Readers can refer to the infamous video of then, private citizen Barack Obama, addressing a 2003 AFL-CIO conference and describing his support of single-payer healthcare that will require 10-15 years of incremental change.) Additionally, the agents of change must create uncertainty and chaos in the market. As more insurance carriers drop out of the market and more people become displaced, the federal government remains as the one entity that can step-in and restore order. We may be well on our way to that conclusion. Stay tuned!